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					CONSOLIDATED FINANCIAL STATEMENTS,
  STATUTORY FINANCIAL STATEMENTS
       AND ANNUAL REPORT
C O N T E N T S




ADMINISTRATIVE BODIES                                                           4

LETTER TO THE SHAREHOLDERS                                                      7

MANAGEMENT REPORT                                                               9
1.  PERFOMANCE OF THE GROUP                                                    14
2.  PERFORMANCE OF THE PARENT COMPANY                                          18
3.  CHART RECONCILING THE FIGURES OF THE PARENT COMPANY WITH THOSE OF THE
    CONSOLIDATED FINANCIAL STATEMENTS                                         19
4.  PERFORMANCE OF THE VARIOUS BUSINESS SECTORS                               21
5.  OTHER ACTIVITIES                                                          27
6.  SIGNIFICANT EVENTS WHICH OCCURRED AFTER THE CLOSE OF THE YEAR             29
7.  OTHER INFORMATION                                                         30
8.  PROPOSED ALLOCATION OF NET INCOME FOR THE YEAR                            33

CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31 2006
1.   BALANCE SHEET                                                            36
2.   INCOME STATEMENT                                                         37
3.   CASH FLOW STATEMENT                                                      38
4.   STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY                             39
5.   EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS               41

CONSOLIDATED FINANCIAL STATEMENTS OF DIRECTLY CONTROLLED SUBSIDIARIES          93

STATUTORY FINANCIAL STATEMENTS OF THE PARENT COMPANY AS OF DECEMBER 31 2006
1.   BALANCE SHEET                                                            104
2.   INCOME STATEMENT                                                         105
3.   CASH FLOW STATEMENT                                                      106
4.   STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY                             107
5.   EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS                            109

FINANCIAL STATEMENTS OF DIRECTLY CONTROLLED SUBSIDIARIES                      145

LIST OF INVESTMENTS AT DECEMBER 31 2006                                       171

REPORT OF THE BOARD OF STATUTORY AUDITORS                                     179

REPORT OF THE INDEPENDENT AUDITORS                                            187
                                                   COMPAGNIE INDUSTRIALI RIUNITE

Limited-liability corporation - Share capital € 391,688,733.50 - Registered Office: Strada Volpiano, 53 - 10040 Leinì (Turin) - www.cirgroup.it
                               R.E.A. n. 3933 - Turin Company Register / Fiscale Code / VAT no. 00519120018
                              Company subject to the management and coordination action of COFIDE S.p.A.
                                     Head Office: Via Ciovassino, 1 - 20121 Milan - Tel. +39 02 72270.1
                                  Office in Rome: Via del Tritone, 169 - 00187 Rome - Tel. +39 06 692055.1
                               BOARD OF DIRECTORS



                                 Chairman          CARLO DE BENEDETTI (1) (5)

                 Chief Executive Officer           RODOLFO DE BENEDETTI (2)
                   and General Manager

                                  Directors        GIAMPIO BRACCHI
                                                   FRANCO DEBENEDETTI
                                                   PIERLUIGI FERRERO (3)
                                                   GIOVANNI GERMANO (5)
                                                   FRANCO GIRARD (3)
                                                   PAOLO MANCINELLI (6) (7)
                                                   LUCA PARAVICINI CRESPI (6)
                                                   CLAUDIO RECCHI (6) (7)
                                                   MASSIMO SEGRE (4)
                                                   GUIDO TABELLINI (8)
                                                   UMBERTO ZANNI (5)

                  Secretary to the Board           FRANCA SEGRE




                            BOARD OF STATUTORY AUDITORS


                                 Chairman          PIETRO MANZONETTO

                       Statutory Auditors          LUIGI NANI
                                                   RICCARDO ZINGALES

                        Reserve Auditors           MARCO REBOA
                                                   GIANLUCA PONZELLINI
                                                   LUIGI MACCHIORLATTI VIGNAT




                                  INDEPENDENT AUDITORS

                           PRICEWATERHOUSECOOPERS S.p.A.




    Notice pursuant to the recommendation contained in Consob Circular no.
    DAC/RM/97001574 of February 20 1997:
    (1)      Power to sign all documents relating to ordinary and extraordinary administration
             with single signature except for those reserved by law to the Board of Directors
    (2)      Power to sign all documents relating to ordinary administration with single signature
    (3)      Power to sign all documents specified in mandate with joint signature
    (4)      Power to sign all documents specified in mandate with single signature
    (5)      Member of the Compensation Committee
    (6)      Member of the Internal Control Committee
    (7)      Member of the Surveillance Body
    (8)      Lead Independent Director




4
                                                        CIR S.p.A.
                                                101st   Year of Business

                   ANNUAL GENERAL MEETING OF SHAREHOLDERS
                                           Turin, April 26 2007, 1st call
                                           Turin, April 27 2007, 2nd call




                   NOTICE OF THE ORDINARY AND EXTRAORDINARY
                   ANNUAL GENERAL MEETING OF SHAREHOLDERS

All Shareholders are invited to attend the Ordinary and Extraordinary Meeting of the Shareholders of the Company
to be held in the Centro Congressi dell’Unione Industriale di Torino, in Turin - Via Fanti 17, on April 26 2007 at
10.30 a.m., at the first call, and on April 27 2007 at the same time and place, if a second call is necessary, in order to
discuss and pass resolution on the following:


                                                     AGENDA


Ordinary Session

1. Annual Report and Financial Statements as of December 31 2006
   Report of the Board of Statutory Auditors.
   Resolutions pertaining to the above

2. Proposal to revoke the resolution adopted on April 27 2006 authorizing the buy-back of the Company’s own
   shares and the disposal of the same. Proposal for a new authorization.

3. Proposal regarding the approval of the incentive program for the year 2007.

4. Proposal to amend the regulations of Stock Option Plans March 7 2000, September 13 2000 and January 30
   2001.

Extraordinary Session

5. Proposal to amend the Company Bylaws partly to bring them into line with Law 262/2005 and subsequent
   amendments: specifically, the amendment of articles 4, 8, 9, 10, 12, 15, 16, 19 and 20 of the Bylaws.
   Resolutions pertaining to and resulting from the above.



Shareholders have a right to take part in the Shareholders’ Meeting provided that their intermediaries have notified
their attendance, in accordance with the terms of Art. 34-bis of Consob Resolution no. 11768 and subsequent
amendments and additions. at least two working prior to the meeting.
Any holders of shares that have not yet been dematerialized should present their share certificates to an authorized
intermediary for input into the centralized clearing system in electronic form, in accordance with the provisions of
Article 51 of Consob Resolution no. 11768 and subsequent amendments and additions, and should request that
notification as above be sent within the required time limit.
As from April 11 2007 Shareholders may obtain a copy of the documentation relating to the items on the Agenda
from the Company offices or from Borsa Italiana S.p.A..
The Financial Statements of the Company as of December 31 2006 and the Consolidated Financial Statements of
the Group as of the same date will be available as from March 30 2007 from the Company offices or from Borsa
Italiana S.p.A..



                                                                                       THE BOARD OF DIRECTORS




Notice of this meeting was published in the newspapers: "Il Sole-24 Ore" and "la Repubblica"of March 24 2007




                                                                                                                             5
                            LETTER TO OUR SHAREHOLDERS



Dear Shareholders,

In November 2006 we celebrated the first thirty years of CIR. Thirty years of building and
promoting in CIR and its subsidiaries that which today is recognized as “our” Business Culture,
which considers human capital as the most important factor to guarantee lasting success in any
business activity. The spirit and values that underpinned the company when it was established are
still valid today and are a firm point of reference for all those who have worked with us and those
who work with us today.
Thirty years in which we have continued to project ourselves into the future and anticipate some
of the great evolutionary trends of industry and the economy, always selecting new investment
opportunities with the aim of helping to create fresh value for our shareholders.

The ever faster evolution of the environment surrounding us compels us to adapt our organization
and our positioning continually but we never distort their nature. The main objective of our role
in allocating investment capital has always been to continue to create value and this we do by
defining strategies and checking that business plans are being implemented, in conjunction with
the managers of the operating companies.
Today we can say that we have completed our transformation from a traditional holding company
into a modern Group able to create and sustain new businesses in high-growth sectors following
an investment logic of creating deep value in the medium-long term.

Towards our shareholders we take full responsibility for the decisions we make, some big and
some small, and we are entirely answerable for the credibility of our business plans and the
objectives that we set ourselves. We are committed to achieving successful results so that over
time we can build up and strengthen the relationship of trust between CIR and its Stakeholders.

Today CIR holds a portfolio of assets balanced between companies operating in mature business
sectors with consolidated positions in the market and good profitability, and businesses that have
started up more recently, are interesting opportunities for allocation of capital, have promising
growth prospects but with profitability that has not yet reached satisfactory levels due to the
relative immaturity of the business.

Every company in our Group has a business plan agreed on with those who are directly
responsible for its management and the prerogatives of top management of the investee
companies are respected in every way. It is an essential condition if we too are to fulfil the
expectations of our shareholders that these business plans contribute to the creation of value in
the medium-long term in a realistic and credible way.

We operate in three broad business sectors: Energy (Sorgenia), Media (Espresso), and
Automotive components (Sogefi), plus the Healthcare sector, which has been developed more
recently, and a new area of investment which is Innovative Finance (Jupiter and Oakwood).




                                                                                                      7
During 2006 the performance of our subsidiaries was very satisfactory and in some cases was
better than we had expected.

In particular Sorgenia, which has become our principal investment, has been continuing its
expansion in the power generating business: the new Termoli plant has started operating to
capacity and work has begun on the construction of the Modugno plant. Recently the new
business plan for 2007-2010 was approved, involving further expansion with the construction of
new plants with particular attention devoted to those with a low impact on the environment and
those using renewable sources. The Espresso Group has confirmed its position both as top
newspaper and top private radio broadcaster with good levels of profitability. Sogefi, despite
operating in an unfavourable market environment, has again confirmed its leadership in the filter
and suspension components sectors and has improved its net profitability for the fifth year
running. The acquisition of Anni Azzurri by HSS has enabled us to become the number one
private operator in the field of care for the elderly.

Our recent acquisition of 47% of the capital of Oakwood Financial Investments has further
strengthened our commitment in the innovative financial service business where our new
company Jupiter Finance is already operating in the field of non-performing loans.

Investors who have given us their trust by becoming our shareholders share our medium-long
term time horizon for achieving a return on their investment. Calculated in terms of average
annual return, our stock has given a return of 22.1% over the last 3 years and of 20.2% over the
last 10 years.

Our goal for 2007 is to pursue and give concrete support to the development of our new
businesses and at the same time to strengthen our commitment to the successful rollout of the
individual business plans of investee companies.




The Chairman                                                 Chief Executive Officer
Carlo De Benedetti                                           Rodolfo De Benedetti
        MANAGEMENT REPORT ON THE PERFORMANCE OF OPERATIONS
                      IN FINANCIAL YEAR 2006




Dear Shareholders,

In 2006 the CIR Group reported consolidated net income of € 101.1 million, up by 15.3% from
€ 87.7 million in 2005. Consolidated revenues came in at € 4,136.8 million, showing an increase
of 22.3% from € 3,382.7 million in the previous year.

The year saw further consolidation of the growth strategies of the Group which strengthened con-
siderably its presence in the utilities sector and at the end of the year made a new investment in
the financial sector.

This confirms the strategy of CIR which is pursuing the objective of creating value for its share-
holders in the medium-long term with the launch of new business initiatives in sectors considered
to be of potential interest and through the management of its investments in businesses where it
already has a presence. This strategy is carried out by constantly developing the business and con-
tinually seeking to optimize profitability.
In putting this strategy into practice CIR has maintained a prudent approach, following a financial
policy that guarantees a balanced ratio of its own resources to those of third parties, thus maintain-
ing a solid financial structure.

CIR considers that the most important factor to guarantee lasting success in the business activities
in which it has invested and is continuing to invest is having human capital of a very high profes-
sional level which with its capabilities, intuition and strategic vision can make a very positive con-
tribution to reaching the common objective of the creation of value for the whole Group.

The current configuration of the Group includes four main business sectors: utilities (electricity
and gas), media (publishing, radio and television), automotive components (filters and suspension
systems) and healthcare (residences for the elderly, hospitals and rehabilitation centres).

The Group has also identified an investment opportunity in a sector considered of potential inter-
est, that of non-performing loans. 2006 was the first full year of operation of Jupiter Finance, the
company created at the end of 2005, with the aim of acquiring from financial institutions and
managing portfolios of non-performing loans. In 2006 the company acquired over 50 portfolios




                                                                                     Management Report   9
     for a total amount of approximately € 40 million and a nominal value of approximately € 340 mil-
     lion.

     In January 2007, continuing to implement its strategy of expansion in businesses with a high
     growth potential and of value creation, the Group made an important investment - the acquisition
     with a prime financial institution of the standing of Merrill Lynch of joint control of the company
     Oakwood Financial Investments, specializing in innovative retail financial services aimed at non-
     conforming or non-prime clients, meaning those who do not fulfil the traditional criteria for being
     given loans. Oakwood currently operates through five companies: three in Britain, one in Austra-
     lia and one in Italy. On completion of the deal CIR invested approximately € 100 million, with a
     commitment to support the development of new initiatives for a further investment estimated at
     around € 50 million.

     All the businesses described above are aimed at achieving the objective of continuing growth in
     the value of the investments over the medium-long term. The economic results for each period do
     not always reflect this growth in a linear way and a comparison over a short time frame may not
     be very representative, considering all the events of an extraordinary nature that can affect the re-
     sults from time to time.

                                                    *****

     To make it easier to evaluate the profitability of the Group, the performance of 2006 is presented
     below through a breakdown of the economic contribution and the balance sheet structures of the
     operating groups and of the holding company, which contains the figures for CIR and CIR Inter-
     national.

     As has already been mentioned, consolidated net income for 2006 came in at € 101.1 million up
     from € 87.7 million in 2005.
     The contribution of the operating groups to this result rose by € 6.9 million (+ 6.6%) from € 104.7
     million in 2005 to € 111.6 million in 2006 while the contribution of the financial subsidiaries de-
     clined from € 16.2 million in 2005 to € 15 million in 2006.

     The result of the holding company in 2006 was a negative € 25.5 million and compares with a net
     loss of € 33.2 million in 2005, which included non-recurring charges of € 16.1 million.
     Apart from overheads, this result was determined by:
     - Net financial charges of € 21.1 million due to the higher average cost of the gross debt com-
         pared with the average return on financial investments;
     - Dividends, gains and losses from trading securities for € 4.3 million consisting mainly of
         gains on investments in private equity funds for € 20.5 million offset by write-downs of finan-
         cial assets for € 16.4 million.

     The results of the operating groups for financial year 2006 are illustrated below for each of the
     main business sectors.

     In the utilities sector the Energia group adopted the new name of Sorgenia in July 2006 with the
     aim of giving maximum value to its positioning and to the role that it intends to take in the Italian
     free market for electricity and gas, defining itself as a provider sensitive to environmental issues.
     In 2006 the Sorgenia group was engaged in the roll-out of its industrial program which involves
     investment in the period up to 2010 of over € 1.8 billion in addition to the € 0.9 billion invested
     up to 2006. This investment will finance a significant expansion in the sector of power generation



10   Management Report
with particular attention being devoted to low environmental impact and renewable sources. In
2006 the consolidated revenues of the group rose by 56.4% reaching € 1,916.1 million thanks to
the good performance of sales of both electricity and natural gas and consolidated net income
reached € 56.3 million, up from € 29.1 million in the previous year (+93,5%).

In the media sector in 2006 the Espresso group reported consolidated revenues of € 1,102.6 mil-
lion (+2.1% from 2005) and posted consolidated net income of € 103.6 million compared with
€ 116.3 million in the previous year. The rise in advertising and the good performance of circula-
tion offset the decline in the sale of add-ons. Again in 2006 the daily news title la Repubblica con-
firmed its ranking as number one newspaper in Italy for number of readers and the Espresso
group’s radio stations confirmed their leadership in terms of audience.

The Sogefi Group, top Italian producer of automotive components, confirmed its leadership in
Europe in the two sectors in which it operates: filters and suspension components. In an unfavour-
able market environment due to the decline in business of several important clients, in 2006 the
group confirmed sales revenues of over one billion euro (€ 1,018.6 million), while at the same
time improving its net profitability for the fifth year running, posting consolidated net income of
€ 50.8 million, up by 13.7% from € 44.7 million in 2005. In the next few years the group plans to
expand its business both in Asian markets (China, Korea and India) and in the North American
market, continuing to maintain among its strategic objectives possible acquisitions in the automo-
tive components sector.

During 2006 HSS – Holding Sanità e Servizi continued to develop its operations with a view to
consolidating its presence in the healthcare sector.
In 2006 the Group reported consolidated revenues of € 99.2 million up from € 53.8 million in
2005 (+ 84.4%). The net result was a negative € 4.4 million (due to higher financial expense and
non-recurring costs for acquisitions) which compares with a net loss of € 1.4 million in 2005.
In June 2006 the company HSS acquired 100% of Anni Azzurri, the company specializing in the
construction and management of residences for the elderly and present in four regions with eleven
residences and 1,600 beds.
This deal together with other smaller acquisitions made during 2006 was an important step for-
ward in the roll-out of the strategy of the HSS group which intends to develop further in the Ital-
ian healthcare market through fresh acquisitions.

Apart from a breakdown by business sector of the economic and financial results of the Group,
the charts on the following pages also show a breakdown of the contribution of the main subsidi-
aries to the aggregate results of the holding (CIR and CIR International).




                                                                                    Management Report   11
12


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




                    (in milllions of euro)
                                                                                                                                                           2006                                                                                                   2005
                                                                                                                                                                                                                                                             Net income
                                                CONSOLIDATED              Revenues          Costs of Other operating Adjustments to      Amortization,    Net financial       Dividends,    Income     Income (Loss)        Net income      Net income              (loss)
                                                                                           productionncome & expense      to value of depreciation and     income and          gains and      taxes      from assets    (loss) Minority   (loss) for the   for the Group
                                                                                                                        investments       write-downs        expenses       losses from                      held for         interests           Group
                                                                                                                            valued at                                        trading and                     disposal
                                                                                                                               equity                                          valuation
                    AGGREGATE                                                                                                                                              of securities
                    Sorgenia group                                         1,916.1          (1,861.6)           32.6            33.0              (7.7)            (8.4)             0.5     (34.8)                --           (36.6)            33.1              16.8
                    Espresso group                                         1,102.6            (899.8)             0.3             1.4           (41.2)           (19.0)             (0.6)    (39.8)                --           (49.8)            54.1              59.1
                    Sogefi group                                           1,018.6            (869.8)          (15.1)            (0.3)          (49.3)           (11.0)              1.9     (21.6)                --           (23.7)            29.7              26.3
                    HSS group                                                 99.2              (88.4)           (4.4)              --            (4.1)            (3.3)               --      (2.9)            (0.9)              1.0             (3.8)             (1.1)
                    Other subsidiaries                                         0.3                (3.5)           0.7               --            (0.1)             0.7                --       0.5                --             (0.1)            (1.5)              3.6

                    Total operating subsidiaries                           4,136.8          (3,723.1)           14.1            34.1           (102.4)          (41.0)              1.8      (98.6)             (0.9)          (109.2)          111.6             104.7

                    Financial subsidiaries                                        --             (2.2)             --              --               --            (0.5)           20.9           --                --             (3.2)           15.0              16.2

                    Total subsidiaries                                     4,136.8          (3,725.3)           14.1            34.1           (102.4)          (41.5)            22.7       (98.6)             (0.9)          (112.4)          126.6             120.9


                    Holding companies (CIR and CIR International)

                    Revenues                                                      --                                                                                                                                                                 --                --
                    Costs of production                                                        (22.1)                                                                                                                                            (22.1)            (20.7)
                    Other operating income and expense                                                           4.8                                                                                                                               4.8               2.8
                    Adjustments to the value of
                    investments valued at equity                                                                                   --                                                                                                                 --                --
                    Amortization, depreciation and write-downs                                                                                    (0.5)                                                                                            (0.5)             (0.2)
                    Net financial income and expense                                                                                                             (21.1)                                                                          (21.1)            (13.0)
                    Dividends, gains and losses from trading and valuation of securities                                                                                            4.3                                                             4.3               8.7
                    Income taxes                                                                                                                                                               9.1                                                  9.1               5.3

                    Total holding companies (CIR and CIR International)
                    before non-recurring items                                    --           (22.1)            4.8               --            (0.5)           (21.1)             4.3        9.1                                               (25.5)            (17.1)

                    Non-recurring items                                           --                --             --              --               --               --               --         --                                                   --           (16.1)

                    Consolidated total for the Group                       4,136.8          (3,747.4)           18.9            34.1           (102.9)          (62.6)            27.0       (89.5)             (0.9)          (112.4)          101.1              87.7
                    CONSOLIDATED BALANCE SHEET FIGURES BY BUSINESS SECTOR



                    (in millions of euro)
                                                                                                                                           31.12.2006                                                                  31.12.2005

                                                     CONSOLIDATED                 Fixed assets              Other net     Net working    Net financial             Total                   Minority   Shareholders'    Shareholders'
                                                                                                   non-current assets          capital        position      shareholders' of which:   shareholders'   equity - Group   equity - Group
                    AGGREGATE                                                                           and liabilities                                           equity                    equity
                    Sorgenia group                                                       734.1                 222.3           186.1          (596.9) (*)         545.6                     293.8            251.8            220.9
                    Espresso group                                                       907.0                 (158.8)           87.8         (262.7)             573.3                     279.6            293.7            279.5
                    Sogefi group                                                         367.2                  (58.2)         113.0          (126.3)             295.7                     132.4            163.3            145.6
                    HSS group                                                            170.7                     5.0           (0.9)        (110.7)              64.1                        9.9             54.2             21.2
                    Other subsidiaries                                                      0.3                  11.7            47.6           (12.2)             47.4                        4.0             43.4             27.6

                    Total subsidiaries                                                2,179.3                    22.0          433.6        (1,108.8)           1,526.1                     719.7            806.4            694.8

                    Holding companies (CIR and CIR International)

                    Fixed assets                                                         103.0                                                                    103.0                                      103.0              81.4
                    Other net non-current assets and liabilities                                                107.3                                             107.3                                      107.3              58.3
                    Net working capital                                                                                         (14.7)                             (14.7)                                     (14.7)            (9.3)
                    Net financial position                                                                                                     258.2              258.2                                      258.2            359.8

                    Consolidated total - Group                                        2,282.3                  129.3           418.9          (850.6)           1,979.9                     719.7          1,260.2          1,185.0


                    ( *) The financial position includes the free cash flow of Energia Holding S.p.A.
Management Report
13
      1.         PERFORMANCE OF THE GROUP

      Consolidated revenues for 2006 totalled € 4,136.8 million, up from € 3,382.7 million in 2005,
      with a rise of € 754.1 million (+22.3%).

      Consolidated revenues can be broken down by business sector as follows:

      (in millions of euro)                                                                                     Change
                                                       2006       %          2005                  %      absolute          %
      Utilities
       Sorgenia Group                                1,916.1    46.3      1,225.2                36.2       690.9        56.4
      Media
       Espresso Group                                1,102.6    26.7      1,079.9                31.9         22.7        2.1
      Automotive components
       Sogefi Group                                  1,018.6    24.6      1,023.4                30.3          (4.8)      (0.5)
      Healthcare
       HSS Group                                       99.2      2.4          53.8                1.6         45.4       84.4
      Other sectors                                      0.3      --              0.4              --          (0.1)     (25.0)

      Total consolidated revenues                    4,136.8   100.0      3,382.7               100.0       754.1        22.3


      of which: ITALY                                3,213.9    77.7      2,471.2                73.1       742.7        30.1
                 ABROAD                               922.9     22.3        911.5                26.9         11.4        1.3



      The highlights of the consolidated income statement are as follows:

      (in millions of euro)                                              2006              %              2005             %
      Revenues                                                         4,136.8          100.0           3,382.7        100.0
      Consolidated gross operating margin (EBITDA)                      442.4           10.7             370.0           10.9
      Consolidated operating result (EBIT)                              339.5             8.2            275.1            8.1
      Financial management result                                        (35.6)          (0.9)            (20.5)         (0.6)
      Income taxes                                                       (89.5)          (2.2)            (64.7)         (1.9)
      Income (loss) from assets held for disposal                        (0.9)             --                 --            --
      Net income including minority interests                           213.5             5.2            189.9            5.6
      Minority interests                                                (112.4)          (2.7)           (102.2)         (3.0)
      Net result of the Group                                           101.1             2.4             87.7            2.6


      The consolidated gross operating margin (EBITDA) in 2006 was € 442.4 million (10.7% of
      revenues) compared to € 370 million in 2005 (10.9% of revenues), with a rise of € 72.4 million
      (+ 19.6%). This result was determined mainly by the following factors:
          A significant improvement of approximately € 65 million reported by the Sorgenia group, due
          to the development of the generating business;
          The continuing profitability of the Sogefi group;
          A reduction in the profitability of the Espresso group of around € 18 million, mainly due to
          the absence of paper subsidies, which were not renewed for financial year 2006.




14    Management Report
 14    M       tR t
The consolidated operating margin (EBIT) in 2006 was a positive € 339.5 million (8.2% of
revenues) up from € 275.1 million (8.1% of revenues) in 2005, with a rise of 23.4%.

The financial management result was determined by net financial expense that rose from € 48.2
million in 2005 to € 62.6 million mainly due to the rise in debt, and to dividends and net gains
from trading securities for € 27 million (€ 27.7 million in 2005).

The consolidated balance sheet highlights of the CIR Group at December 31 2006, prepared
according to a “managerial” format with a comparison with the same situation at December 31
2005 is as follows:

(in millions of euro)                                                  31.12.2006          31.12.2005
Fixed assets                                                              2,282.3             1,997.9
Other net non-current assets and liabilities                                129.3                74.9
Net working capital                                                         418.9               248.8
Net invested capital                                                      2,830.5             2,321.6
Net financial debt                                                         (850.6)             (465.2)
Total shareholders’ equity                                                1,979.9             1,856.4
Shareholders’ equity of the Group                                         1,260.2             1,185.0
Minority interests                                                          719.7               671.4


Net invested capital at December 31 2006 amounted to € 2,830.5 million compared to € 2,321.6
million at December 31 2005, with a rise of € 508.9 million mainly due to the considerable in-
vestment made during the year by the Sorgenia and HSS groups in particular.

The net financial debt position at December 31 2006 showed a balance of € 850.6 million (com-
pared to € 465.2 million at December 31 2005), which was the result of the following:
- a financial surplus for CIR and CIR International of € 258.2 million which compares with
   € 359.8 million at December 31 2005. The reduction of € 101.6 million which took place dur-
   ing the year was mainly due to disbursements for the buyback of own shares and for invest-
   ment in private equity funds and in shareholdings for approximately € 119 million, only par-
   tially offset by the positive balance of € 14 million between dividends received and those paid
   out;
- total debt of the operating groups of € 1,108.8 million, up from € 825 million at December 31
   2005. The increase of € 283.8 million was mainly due to the investments made by the Sorgenia
   group for the construction of new power stations and to the acquisition of Anni Azzurri by the
   HSS group.

Total shareholders’ equity at December 31 2006 stood at € 1,979.9 million compared with
€ 1,856.4 million at December 31 2005, with a rise of € 123.5 million after the distribution of
€ 37.5 million of dividends by CIR and a total of € 53.3 million by the subsidiaries to their minor-
ity shareholders.

The shareholders’ equity of the Group rose from € 1,185 million at December 31 2005 to
€ 1,260.2 million at December 31 2006, with a net rise of € 75.2 million.

Minority interests rose from € 671.4 million at December 31 2005 to € 719.7 million at Decem-
ber 31 2006, with a rise of € 48.3 million.



                                                                                     Management Report   15
     The net financial debt and shareholders’ equity figures at December 31 2006 include € 127.1 mil-
     lion resulting from the fair value adjustment of available-for-sale securities, which are held mainly
     by the company Medinvest. In fact the accounting treatment of Medinvest involves recognizing
     any changes in the fair value of the funds directly to shareholders’ equity. The total net increase
     during 2006, excluding foreign exchange differences, was € 20.7 million compared to € 13.6 mil-
     lion in 2005.
     Since inception (April 1994) performance has been particularly satisfactory up to and including
     2006, giving the portfolio a weighted average annual return in dollar terms of 9.7%. In 2006 too,
     performance gave a positive return, net of commissions, of 11.3%.

     The evolution of consolidated shareholders’ equity is given in the Explanatory Notes to the Fi-
     nancial Statements.

     The consolidated cash flow statement for 2006, prepared according to a “managerial” format
     which, unlike the format used in the statements attached, shows the changes in net financial posi-
     tion instead of the changes in cash and cash equivalents, and can be broken down as follows:

     (in millions of euro)                                                        2006               2005

     SOURCES OF FUNDS

     Net income for the period including minority interests                      213.5              189.9
     Amortization, depreciation and write-downs and other non-monetary changes   109.3                79.4
     Self-financing                                                              322.8              269.3
     Change in working capital                                                   (174.0)             (89.9)
     CASH FLOW GENERATED BY CURRENT OPERATIONS                                   148.8              179.4
     Capital increases                                                             10.4               26.0
     TOTAL SOURCES                                                               159.2              205.4


     APPLICATIONS
     Net investments in fixed assets                                             (434.5)            (443.9)
     Buy-back of own shares                                                       (15.6)             (35.9)
     Payment of dividends                                                         (90.8)             (75.9)
     Other changes                                                                 (3.7)             (39.4)
     TOTAL APPLICATIONS OF FUNDS                                                 (544.6)            (595.1)
     FINANCIAL SURPLUS (DEFICIT)                                                 (385.4)            (389.7)


     NET FINANCIAL POSITION AT THE BEGINNING OF THE PERIOD                       (465.2)             (75.5)
     NET FINANCIAL POSITION AT THE END OF THE PERIOD                             (850.6)            (465.2)


     The composition of the net financial debt figure, given in the Explanatory Notes to the Financial
     Statements, includes the following items: the cash and cash equivalents, securities, financial re-
     ceivables and available-for-sale financial assets (including the hedge funds held by Medinvest)
     classified as current assets, net of bank liabilities, borrowings and bonds.




16   Management Report
Net financial debt rose from € 465.2 million at the start of the year to € 850.6 million at December
31 2006. The change is mainly attributable to the investment flows to the Sorgenia group and the
HSS group in particular.

Self-financing rose by over 20% compared with last year and was partly absorbed by the change
in working capital which rose mainly because of the higher turnover of the Sorgenia group.

Also during the year dividends were paid out for € 90.8 million, shares were bought back for
€ 15.6 million and other “applications” were made for € 3.7 millions.

At December 31 2006 the Group had 11,102 employees.




                                                                                   Management Report   17
     2.         PERFORMANCE OF THE PARENT COMPANY

     The parent company CIR S.p.A. closed financial year 2006 with net income of € 36.7 million
     (compared with € 4.8 million in 2005 which was penalized for € 16.1 million by tax charges relat-
     ing to prior periods).
     Shareholders’ equity at December 31 2006 stood at € 940.7 million compared with € 953.2 mil-
     lion at December 31 2005.

     The key income statement figures of CIR S.p.A. for 2006, with a comparison with those of 2005,
     are as follows:

     (in millions of euro)                                                      2006              2005
     Net operating costs                                                        (12.5)            (12.3)
     Other operating costs and amortization                                      (2.3)             (1.8)
     Financial management result                                                 42.4              29.7
     Result before taxes and non-recurring items                                27.6              15.6
     Taxes from prior periods                                                       --            (16.1)
     Income taxes                                                                 9.1               5.3
     Net income                                                                 36.7                4.8

     Net operating costs for 2006, which amounted to € 12.5 million (€ 12.3 million in 2005), include
     charges resulting from the IAS/IFRS treatment of stock option plans for € 2.2 million. This com-
     pares with € 5.7 million in 2005 (of which € 3.8 million referred to extraordinary stock option
     plans).
     Other operating costs amounted to € 2.3 million and compare with € 1.8 million in 2005.

     The financial management result includes the dividends of subsidiaries, which totalled € 61.1 mil-
     lion in 2006 compared to € 42.8 million in 2005.

     Lastly, 2006 benefited from a positive net tax position of € 9.1 million, compared with € 5.3 mil-
     lion in 2005, as a result taking part in the group fiscal consolidation as from 2004.




18   Management Report
The key balance sheet figures of CIR S.p.A. at December 31 2006, compared with the situation
at December 31 2005, is as follows:

(in millions of euro)                                                                     31.12.2006            31.12.2005
Fixed assets                                                                                    966.7                917.6
Other net non-current assets and liabilities                                                      (0.1)                 0.0

Net working capital                                                                              42.3                  15.6
Net invested capital                                                                          1,008.9                933.2

Net financial position                                                                           (68.2)               20.0

Shareholders’ equity                                                                            940.7                953.2


The net financial position at December 31 2006 was a position of net debt of € 68.2 million which
compares with a net financial surplus of € 20 million at December 31 2005. The change of € 88.2
million was mainly due to an investment in own shares for approximately € 16 million, sharehold-
ings for € 47 million, loans made to subsidiaries for approximately € 29 million, net dividends re-
ceived for € 23 million and operating costs for € 8 million.

The decrease in shareholders ‘equity from € 953.2 million at December 31 2005 to € 940.7 mil-
lion at December 31 2006 was mainly caused by the distribution of dividends for € 37.5 million
and the effects of the IAS/IFRS treatment of own share buybacks which were only partially offset
by the net income for the period.
At December 31 2006 there were 34,094,000 own shares held in the portfolio, equal to 4.37% of
capital, for a total value of € 76.9 million, compared with 27,216,642 at December 31 2005.


3.       CHART RECONCILING THE ACCOUNTING FIGURES OF THE PARENT COM-
         PANY AND THOSE OF THE CONSOLIDATED ACCOUNTS

The following chart shows the reconciliation of the results for the year and the shareholders’ eq-
uity of the Group with the figures of the parent company.

(in thousands of euro)                                                            Shareholders’ equity            Net result
                                                                                         31.12.2006                   2006
Figures of the parent company CIR S.p.A.                                                     940,738                36,697
- Dividends from companies included in consolidation                                          (61,046)              (61,046)
- Reversal of valuations and cover of losses on investments in companies
  included in the consolidation                                                                 1,193                1,193
- Net contribution of consolidated companies                                                 325,534               126,334
- Difference between carrying value of subsidiaries and portion of consolidated
  shareholders’ equity, net of contributions                                                  55,794                      --
- Other consolidation adjustments                                                              (2,058)               (2,058)
Consolidated figures, Group’s share                                                        1,260,155               101,120




                                                                                                          Management Report    19
     MAIN EQUITY INVESTMENTS OF THE GROUP
     AS OF DECEMBER 31 2006




                                                            SORGENIA             Utilities
                                                              58.2% (*)




                                                            ESPRESSO             Media
                                                                  52.2%




                                                              SOGEFI      Automotive Components
                                                                  58.4%




                                                                  HSS          Healthcare
                                                                  85.3%




     (*) Percentage of indirect control through Energia Holding



20   Management Report
4. PERFORMANCE OF THE BUSINESS SECTORS


UTILITIES SECTOR

On July 18 2006 the Extraordinary Meeting of the Shareholders of the company Energia voted to
change the name of the company to Sorgenia. The choice of the new brand was an important step
forward in the evolution of the project that began in 1999 and aims to give greater value to the po-
sitioning of the company and the role that it is pursuing in the free market in Italy for electricity
and gas. Sorgenia projects itself to the market as an operator sensitive to the environment, capable
of operating in a clean, careful and responsible way, establishing an open and transparent dialogue
with the client, who is offered solutions to eliminate waste and use energy in a more efficient
manner.

In 2006 the Sorgenia group reported consolidated revenues of € 1,916.1 million, with a rise of
56.4% on 2005, (in which they totalled € 1,225.2 million), to which higher sales volumes of elec-
tricity contributed substantially (+35.6%) and natural gas to a lesser degree (+5.5%).
The Sorgenia group reported consolidated net income of € 56.3 million in 2006 compared with
€ 29.1 million in the previous period (+93.5%).

The consolidated revenues can be broken down as follows:

(in millions of euro)                            2006                 2005                    Change
                                                Values      %         Values     %                 %
Electricity                                     1,258.3   65.7         750.9   61.3              67.6
Natural gas                                      648.7    33.9         472.8   38.7              37.2
Other revenues                                      9.1    0.4           1.5   n.s.               n.s.
TOTAL                                           1,916.1 100.0        1,225.2 100.0               56.4

A widespread sales network throughout the country, the possibility of accessing different seg-
ments of clients in the free market, the use of new sales channels and offering new solutions de-
voted to energy efficiency in particular, all these factors enabled the Sorgenia group to increase its
client base tenfold, closing 2006 with 150,000 customers, up from 15,000 at the end of 2005.

The consolidated gross operating margin (EBITDA) more than doubled, rising from € 55.1 mil-
lion (4.5% of sales) in 2005 to € 120.4 million (6.3% of sales).
This sharp rise was due in particular to the entry into production of the Termoli power station and
to the contribution of the new combined cycles of the subsidiary Tirreno Power at Torrevaldaliga,
which started fully operating during 2006. Since Tirreno Power is consolidated into Sorgenia us-
ing the equity method, the EBITDA of the Sorgenia group includes its share of the net income of
that company (Tirreno Power is 50% controlled by Energia Italiana, in which Sorgenia holds a
62% stake).
The consolidated operating income for 2006 was € 112.7 million, up from € 52.3 million in the
previous period.

The consolidated net financial position of the Sorgenia group at December 31 2006 showed net
debt of € 601.9 million compared to € 429.9 million at December 31 2005. This increase was due
mainly to the investments made to roll out its business plan, in particular those in the construction
of the Modugno power plant, on which building work started in the second half of 2006.



                                                                                      Management Report   21
     At December 31 2006 the group had 208 employees compared with 148 at December 31 2005.

     The Board of Directors of Sorgenia S.p.A., which met on February 26 2007, proposed distributing
     dividends for a total of € 9.3 million, against € 8 million the previous year, corresponding to a
     dividend of € 0.0115 per share up from € 0.010 in 2005.

     The Sorgenia group is engaged in the roll-out of its industrial plan which involves significant ex-
     pansion in the electricity generating sector, with particular attention being devoted to sources with
     a low environmental impact and to renewables. The industrial objectives of the program include
     the construction of four combined cycle power plants fired by natural gas, each with an output of
     770 MW; the completion of the repowering of the power plants of the subsidiary Tirreno Power;
     the construction of 450 MW of wind plant and investment in the photovoltaic solar sector. These
     projects will require investment going forward to 2010 for over € 1.8 billion.
     The second half of 2006 saw the Termoli (Cb) power plant enter full operation. This is the first of
     the four power plants planned and work continued on the construction of the Modugno plant in
     Puglia. In September the authorization process was completed for the Aprilia plant (Lazio), with
     the favourable opinion expressed by the Service Conference and the issue of the final authoriza-
     tion decree on October 2 2006 by the Ministry of Economic Development. This authorization
     joins the one already obtained for the Bertonico-Turano Lodigiano plant (Lombardy).

     As far as the Tirreno Power repowering is concerned, the conversion to a 760 MW combined cy-
     cle of a section of the Vado Ligure plant is going ahead according to schedule and is expected to
     start operating during 2007. A new 380 MW combined cycle module is also being constructed at
     Napoli Levante and this one should start operating in 2008.
     In 2006 Tirreno Power reported revenues of € 988.4 million, up by 27.9% from € 772.7 in 2005,
     with a net production volume of approximately 11.6 TWh (10.9 TWh in 2005). The gross operat-
     ing margin rose by 38.9%, coming in at € 229 million compared to € 164.9 million in 2005. Net
     income more than quadrupled, rising from € 15.4 million in 2005 to € 57.4 million in 2006.

     As already indicated, Sorgenia is also developing generating projects from renewable sources,
     with particular attention being devoted to the construction of wind and photovoltaic solar plants.
     Soluxia, its wholly owned subsidiary set up to design and build photovoltaic plants, has already
     obtained from the GSE (Electricity Services Management), admission to incentive feed-in tariffs
     for 15 new photovoltaic plants each with an output of 1 MW, located in various regions of the
     South of Italy, with a total installed capacity of approximately 15 MW. On the subject of wind en-
     ergy, Sorgenia has obtained authorization for projects with a total output of 62 MW – Minervino
     Murge (Bari) for 18 MW, Castelnuovo di Conza (Salerno) for 10 MW and San Gregorio Magno
     (Salerno) for 34 MW.


     MEDIA SECTOR

     The Espresso group closed 2006 with consolidated revenues of € 1,102.6 million up from
     € 1,079.9 million in 2005 (+2.1%).

     Consolidated net income came in at € 103.6 million compared to € 116.3 million in the previous
     year and benefited this year again (for the last time) from the recognition of deferred tax assets re-
     lating to the previous losses of the subsidiary Elemedia.




22   Management Report
The revenues of the group can be broken down as follows:
(in millions of euro)                              2006                 2005                 Change
                                                  Values      %        Values       %             %
Circulation                                        458.9    41.6        466.6     43.2          (1.6)
Advertising                                        615.8    55.9        585.7     54.2           5.1
Other revenues                                      27.9     2.5         27.6      2.6           1.1
TOTAL                                            1,102.6   100.0       1,079.9   100.0           2.1


Consolidated advertising revenues, which rose by 5.1%, benefited also from the competitive ad-
vantage that the Espresso group derives from being the only company in Italy in the media sector
to be able to offer advertisers multimedia advertising, with a portfolio of published titles that are
all leaders in their respective markets.

Circulation revenues declined by 1.6% compared with 2005 on account of lower sales of optional
products (22 million printed and multimedia add-ons in 2006 compared with almost 26 million in
2005).
The negative impact of strikes on revenues was however offset by the good performance of the
circulation of la Repubblica, (628 thousand average copies per day) and L’espresso (395 thousand
copies per week), and by the rise in price of certain local papers to one euro. This change did not
produce any further negative effects on the performance of circulation which reached a total of
452 thousand average copies per issue.

All the media of the group performed well even in terms of readers and traffic.
For the fifth time running La Repubblica confirmed its ranking as the most widely read newspaper
in Italy with over 3 million readers and the trend is a rising one. The readers of L’espresso are
more than 2.3 million and the local papers clocked up 3.2 million readers.
In December the group’s internet website network reached 9.5 million unique users and 339 mil-
lion page views. The number of visitors to Repubblica.it rose during the year by 45% reaching 6.7
million, more than one third of all Italian users of the web.

The listening figures of the radio stations were also positive, with an overall rise of 4% on 2005:
Radio Deejay confirmed its position as the number one private broadcaster in Italy on an average
day with 5.8 million listeners which rise to 13.7 million over the whole week; the audience of Ra-
dio Capital is now over 2 million people on an average day and 6.6 million over a seven day pe-
riod, while m2o now clocks up 1.1 million listeners per day and 2.9 million per week (Audiradio).
These listening figures also rewarded the music television channel All Music which in October,
according to research carried out by IPSOS, had over 2.8 million viewers in the 15-34 age group,
claiming the position as the young people’s broadcaster with the highest audience increase over
the last few months.

Consolidated operating income declined from € 177.5 million in 2005 to € 163.3 million in 2006.
If the effect of subsidized paper purchases is netted out of the 2005 figures, the operating result
for that year would be € 156.9 million giving a rise of 0.8% in 2006 with a ratio to sales stable at
over 14%, despite the decline in optional products, the margins of which were still significant but
reduced by the declining trend of the market.




                                                                                     Management Report   23
     The consolidated net financial position at December 31 2006 showed net debt of € 262.7 million,
     up from € 252.6 million at December 31 2005 thanks to the good performance of operating cash
     flow (€ 121.9 million).

     Consolidated shareholders’ equity rose from € 550 million at December 31 2005 to € 562.8 mil-
     lion at December 31 2006.

     At December 31 2006 there were 3,384 employees on the group payrolls, down by 13 from 3,397
     at December 31 2005.

     The Board of Directors of the parent company Gruppo Editoriale L’Espresso, which met on Feb-
     ruary 21 2007, proposed the distribution of a dividend of € 0.16 per share (€ 0.145 in 2005).

     National newspapers
     Revenues of the national daily sector totalled € 539.8 million, up from € 524 million in 2005
     (+3%).
     The operating result of this area was € 64.9 million and compares with a result for 2005 (net of
     subsidies for the purchase of paper which were no longer given in 2006) of € 69.7 million with a
     decline of € 4.8 million due to the cost of designing and launching new titles and to the 4.5% rise
     in the price of paper.

     Local newspapers
     Consolidated revenues of this sector totalled € 260.5 million, which was in line with the figure for
     the previous year (+0.2%).
     The operating result of the area declined from € 49.5 million (19% of revenues) in 2005 to € 46.7
     million (17.9% of revenues) in 2006, penalized by the absence of € 2.6 million in the form of sub-
     sidies. Excluding these subsidies, profitability was unchanged at 18%.

     Periodicals
     The periodicals area reported revenues of € 118.1 million, down by 5.7% from € 125.2 million in
     2005.
     The operating result was € 12.2 million, up from € 6.9 million in 2005. The ratio of operating in-
     come to sales rose from 9.2% last year to 10.3% in 2006, thanks mainly to the rise in advertising
     and to the positive contribution of optional products.

     Radio
     In 2006 the group radio stations increased their revenues by 3.8% from € 75.4 million in 2005 to
     € 78.3 million.
     Operating income rose from € 34.1 million in 2005 to € 34.6 million, with a ratio to sales of
     44.2%.
     In 2006 the three broadcasters of the group invested a lot in the circulation of published content
     on different platforms, confirming their collaboration with the TV group All Music and strength-
     ening the internet business.

     In the early months of this current year advertising revenues have continued to grow for all the
     media of the group, circulation is performing well, while optional add-ons have declined com-
     pared with previous years because the market is saturated and competition is becoming more and
     more aggressive.
     From the above scenario, management expects advertising revenues to grow while revenues and
     margins on optional products decline. Consolidated net income for the year 2007 should in any



24   Management Report
case be lower than that of 2006 since there is of no longer the benefit of any deferred tax assets
relating to losses of subsidiaries in prior periods.


AUTOMOTIVE COMPONENTS SECTOR

The consolidated revenues of the Sogefi group in 2006 came in at € 1,018.6 million, substantially
in line with the previous year’s figure of € 1,023.4 million, in a market environment that was not
particularly favourable due to a decline in the business of several important clients.
The further growth of sales volumes in South American countries largely offset the decline in
revenues in the European and US markets.

Consolidated net income was € 50.8 million, up by 13.7% from € 44.7 million in 2005.

The breakdown of consolidated sales of the Sogefi group by business sector is as follows:

(in millions of euro)                             2006                 2005               Change
                                                Values        %      Values      %            %
Filters                                          527.2      51.7      518.5    50.7           1.7
Suspension components and precision springs      491.6      48.3      504.9    49.3          (2.6)
Intercompany elimination                           (0.2)      --        0.0      --            --
TOTAL                                           1,018.6    100.0    1,023.4   100.0          (0.5)


The profitability of industrial management actually rose in both divisions (Filters and Suspension
components) despite being burdened by rises in energy prices and in the prices of components in
aluminium and other alloys used in the special steels for the suspension business.

Consolidated EBITDA was € 128.5 million in 2006 (12.6% of sales), with an improvement of
1.3% from € 126.9 million (12.4% of sales) last year. The latter result was negatively impacted by
industrial restructuring charges (€ 5.2 million), write-downs of fixed assets (€ 4.3 million) and
non-recurring expense for paying management bonuses for results achieved in recent years (€ 2.3
million). By contrast the year 2006 benefited from capital gains of € 4 million, mainly due to the
sale of a factory in Spain.

Consolidated EBIT was € 83.5 million (8.2% of sales), up by 3.1% from € 81 million (7.9% of
sales) in 2005.

In 2006 the result before taxes and minority interests was € 74.9 million, up by 11.6% from € 67.1
million in 2005, thanks to lower financial expenses, higher gains from recovering withholding tax
on foreign dividends in prior periods and a capital gain from the sale of a shareholding invest-
ment.

At December 31 2006 the consolidated net financial position showed net debt of € 126.3 million,
with an improvement of € 41 million compared with the figure of € 167.3 million at December 31
2005.

The group had 6,168 employees on its payroll at December 31 2006 compared to 6,171 at De-
cember 31 2005.




                                                                                  Management Report   25
     The Board of Directors of Sogefi, which met on February 27 2007, proposed distributing a divi-
     dend of € 0.20 per share (€ 0.175 in 2005).

     Sales revenues of the filter division in 2006 came in at € 527.2 million, up from 518.5 million in
     2005 (+1.7%). The division improved its economic results both in Europe and in South America,
     thanks to the good performance of sales in the aftermarket sector during the latter months of the
     year.
     EBITDA came to € 70.2 million (13.3% of sales) up from € 68.5 million (13.2% of sales) in 2005,
     while EBIT rose to € 51.9 million (9.8% of sales) from € 50 million (9.6% of sales) in 2005.

     The suspension components division reported sales revenues of € 491.6 million in 2006, down
     from € 504.9 million in 2005 (-2.6%), following the decline in production volumes of French ve-
     hicle manufacturers. Despite this, profitability improved: EBITDA rose by 3.6% to € 63.4 million
     (12.9% of sales) from € 61.2 million in 2005 (12.1% of sales). EBIT reached € 37.4 million (7.6%
     of sales) with a rise of 8.4% from € 34.5 million (6.8% of sales) in 2005.

     No change is expected this year in the main markets in which the group operates: the European
     market is stable, and the South American market is still growing. In the markets where there is
     less presence (US and China) the evolution of demand should be positive with orders from new
     clients. Since, however, there is likely to be more tension on the steel and energy fronts, manage-
     ment strategy will continue to be based on increasing efficiency and defending profit margins.


     HEALTHCARE SECTOR

     In 2006 the HSS group continued to develop and manage the new initiatives it has undertaken in
     this sector. In June a 100% acquisition was made of Anni Azzurri, the company specializing in the
     construction and management of residences for the elderly, which in 2005 reported consolidated
     sales revenues of approximately € 50 million and is present in four regions with 11 residences and
     a total of 1,600 beds.
     In the second half of 2006 there were two acquisitions – of the companies Meia (which manages
     four residences for the elderly in Piedmont) and Medipass, which purchases and manages ad-
     vanced technology in public and private hospitals. At the close of the year the company Physio-
     clinic, which operates in the development of competitive and amateur sports rehabilitation, was
     sold to minority shareholders.

     In 2006 the HSS group reported revenues of € 99.2 million, up from € 53.8 million in the previous
     year (+84.4%). Confirming the trend already evident in the final months of 2005, in 2006 the
     group achieved a positive EBIT figure of € 2.3 million compared with a negative figure of € 0.7
     million in 2005.

     The net result was a negative € 4.4 million (compared with a net loss of € 1.4 million in 2005) and
     was affected by higher net financial expense (from € 0.3 million in 2005 to € 3.3 million in 2006)
     due to the rise in debt and to non-recurring costs for acquisitions made.

     At December 31 2006 the HSS group showed net financial debt of € 110.7 million compared with
     a net financial surplus of € 4.2 million at December 31 2005. The change was mainly due to the
     acquisition of Anni Azzurri, which involved a disbursement of approximately € 60 million for the
     shares plus the debt taken on for some € 90 million, to other acquisitions for approximately € 25
     million and to a capital increase of € 40 million.




26   Management Report
In line with the strategy followed so far, for part of the properties belonging to Anni Azzurri a
preliminary contract of sale was signed in February 2007 for an amount of € 50 million and
they were posted to assets held for disposal.

At December 31 2006 consolidated shareholders’ equity amounted to € 63.5 million.

The business of the HSS group is currently directed at managing four kinds of services:
1)   Residences and nursing homes (RSAs), through the companies Villa Margherita, which
     manages three residences, Casaverde (eight residences), Meia (five residences) and Anni
     Azzurri (eleven residences);
2)   Psychiatric services, with the company Redancia which manages seven psychiatric care
     communities;
3)   Rehabilitation, with the company Rehab specializing in functional recovery and rehabilita-
     tion;
4)   Hospital management, with the company Ospedale di Suzzara (controlled by HSS) which in
     2004 was awarded management of the Presidio Ospedaliero F.lli Montecchi di Suzzara
     (Mantua) and with the company Medipass, which manages diagnostic imaging units in pub-
     lic and private hospitals.

Currently the HSS group manages a total of 3,400 beds.

The employees of the group totalled 1,302 at December 31 2006.


5.    OTHER ACTIVITIES

JUPITER FINANCE – This company was set up on September 2 2005 with the aim of acquiring
portfolios of non-performing loans from financial institutions and managing them.
The current phase of regulatory discontinuity, following the Basel2 agreements and the introduc-
tion of the new international accounting standards, offers an interesting opportunity to enter a
business sector with the potential for high growth, as examples of the development of this busi-
ness in advanced markets demonstrate (US, Japan, UK and Germany).
The company aims to become an independent industrial partner of Italian banks and businesses in
the management of non-performing loans, both for bloc sales on a non-recourse basis and for pro-
grams of optimization of a credit portfolio over a period of time, acting as services in the broadest
sense of the term.
Target segments include: distressed bank loans (loan agreements), problem securitized loans, con-
sumer credit in arrears (credit cards and personal loans), irrecoverable receivables of industrial
companies and public administrations, overdue leasing (with purchase of asset) and mortgage re-
ceivables.
In line with the scheduled growth plan, in 2006 more than 50 portfolios of non-performing loans
were acquired from banks and consumer credit companies for an overall sum of approximately
€ 40 million and a gross book value of around € 340 million.
During 2006 the company started collecting the receivables it had acquired using servicing com-
panies. At December 31 2006 the total amount recovered was according to plan.

CIR VENTURES – At the end of 2006 the portfolio of CIR Ventures, the venture capital fund of the
Group, contained investments in seven companies of which six in the United States and one in Is-
rael. These companies all operate in the sector of information and communications technology.
The fair value of these investments at December 31 2006 totalled 14.8 million dollars.



                                                                                    Management Report   27
     During 2006 the stake in the Italian company Iriscube was sold to the company Reply and two
     new investments were made in the Californian companies Active Optical Mems, which operates
     in the sector of advanced components for fibre optics communication networks, and Home Ro-
     bots, which develops robotized devices that aid home cleaning.
     In December 2006 the sale was announced of the stake in Bitfone to Hewlett-Packard and the deal
     was successfully completed in February 2007.
     The management activity of the fund is still mainly directed towards supporting the companies in
     the portfolio and identifying opportunities for taking profit. The prospects for the evolution of the
     business of these companies remain cautiously optimistic within a scenario of a general improve-
     ment in the technology sector.

     DRY PRODUCTS – The early part of 2006 saw the completion of the sale of the investment in Ric-
     ciarelli, the only company of the Dry Products group still operating in the sector of machinery for
     the food industry at a price of € 3.6 million, which was in line with its carrying value. With this
     transaction the CIR group has now terminated its program of gradual disinvestment from this sec-
     tor, which was no longer considered strategic.

     INVESTMENTS IN PRIVATE EQUITY FUNDS - Through its subsidiary CIR International the CIR
     group holds a diversified portfolio of funds and minority private equity holdings, of which the fair
     value determined on the basis of the NAV provided by the various funds was approximately € 87
     million at December 31 2006. Remaining commitments outstanding as of the same date amounted
     to € 20 million. During 2006 approximately € 17.6 million of realized gains were recognized to
     the accounts.
     Investors in this kind of fund undertake to provide asset managers with a predetermined
     amount. The fund managers have a limited time (approximately 5 years) to identify and make
     the investments following their strategy, requiring from investors the amounts they had paid
     in. The duration of these investment vehicles is generally limited to about 10 years and proceeds
     from the sale of investments are immediately distributed to the investors.
     The investment strategies of these funds follow various procedures, the main one being the acqui-
     sition of controlling shareholdings often using significant leverage.
     Risk on private equity investments is reduced by a process of diversification based on criteria that
     include, among other things, establishing a maximum amount for each individual commitment.
     At December 31 2006 CIR had invested in some 25 funds mainly denominated in euro and in dol-
     lars. The exchange rate risk on dollar investments has been hedged.




28   Management Report
6.    SIGNIFICANT EVENTS WHICH OCCURRED AFTER THE CLOSE OF THE YEAR

With regard to the principal events which have taken place since December 31 2006 and the out-
look for business in this current year, detailed information has already been given in the section of
the report on the performance of the business sectors.

In January 2007, through its subsidiary CIR International, CIR finalized the acquisition of a
47.4% shareholding, in joint control with Merrill Lynch, in Oakwood Financial Investments, with
a disbursement of approximately € 100 million and a further commitment of € 50 million.
The Oakwood Group specializes in the creation, acquisition and management of retail finance
companies and concentrates on the non-conforming or non-prime client sector, i.e. those clients
that do not meet the traditional criteria for obtaining mortgages, consumer credit, vehicle loans
and leasing solutions.
Oakwood currently operates in the Australian, British and Italian markets through five companies:
three of these were set up between 2001 and 2006 by management (Pepper Homeloans in Austra-
lia, One World Leasing and Edeus in Britain), while controlling stakes were acquired in the other
two (Ktesios in Italy and Blue Motor Finance in Britain). Details of these are as follows:

1. Pepper Homeloans, founded in 2001, based in Sydney is currently the third largest lender of
   residential non-conforming mortgages in Australia and to date has issued 5 securitizations;
2. One World Leasing, set up in 2003, based in Manchester UK, specializes in originating small
   ticket leases;
3. Ktesios, control of which was acquired during 2006, is based in Rome and is one of the lead-
   ing Italian distributors of salary-secured personal loans;
4. Blue Motor Finance, based in Warrington (UK), originates non-conforming auto loans. The ma-
   jority stake in this company was also acquired in 2006;
5. Edeus, launched in September 2006, is based in Essington (UK) and specializes in offering
   non-conforming residential mortgages. Edeus uses highly advanced technology that enables
   brokers to complete mortgages much faster than they could with traditional methods.


As far as own share deals are concerned, it should be pointed out that between January 1 2007 and
today (March 13 2007) CIR bought back 2,950,000 of its own shares for a total of € 8.5 million.
As of today, therefore, treasury stock held amounts to 37,044,000 equal to 4.7% of share capital.

It should also be noted that between January 1 2007 and today 2,312,800 shares have been issued
in exercise of options by the beneficiaries of existing stock option plans. After this operation the
share capital consisted of 782,791,867 shares with a nominal value of € 0.50 each, for a total
value of € 391,395,933.50.




                                                                                    Management Report   29
     7.        OTHER INFORMATION


               Information on shares held by Directors, General Managers and Statutory Auditors

               The chart below gives the information required by Art. 79 of Consob Resolution no. 11971
               of May 14 1999 and subsequent amendments and additions.

     SHARES HELD BY DIRECTORS, STATUTORY AUDITORS AND GENERAL MANAGERS

      Last name and first name         Company in which shares are held         Number of    Number of   Number of   Number of shares   Notes
                                                                                    shares      shares      shares      owned at end
                                                                             owned at end      bought         sold       of this year
                                                                          of previous year
      DE BENEDETTI CARLO                                     CIR S.p.A.     358,708,621             --          --      358,708,621       (1)
      DE BENEDETTI CARLO         GRUPPO EDITORIALE L’ESPRESSO S.p.A.        218,826,235      1,950,000          --      220,776,235       (2)
      DE BENEDETTI CARLO                                 SOGEFI S.p.A.       65,194,962             --          --       65,194,962       (3)
      DE BENEDETTI RODOLFO                                   CIR S.p.A.        6,710,000      337,500           --         7,047,500
      PIASER ALBERTO                                         CIR S.p.A.           94,000      180,000     274,000                  --
      DEBENEDETTI FRANCO                                     CIR S.p.A.          375,000            --          --          375,000
      FERRERO PIERLUIGI                                      CIR S.p.A.          315,000      100,000      65,000           350,000
      FERRERO PIERLUIGI          GRUPPO EDITORIALE L’ESPRESSO S.p.A.              30,000            --          --            30,000
      FERRERO PIERLUIGI                                  SOGEFI S.p.A.            10,000       10,000      10,000             10,000
      GERMANO GIOVANNI                                   SOGEFI S.p.A.         2,012,000            --          --         2,012,000
      GERMANO GIOVANNI                                   SOGEFI S.p.A.         1,004,312            --          --         1,004,312      (4)
      GIRARD FRANCO                                          CIR S.p.A.          128,000            --          --          128,000
      GIRARD FRANCO                                      SOGEFI S.p.A.                  --     10,000           --            10,000
      GIRARD FRANCO              GRUPPO EDITORIALE L’ESPRESSO S.p.A.                    --     10,000           --            10,000
      PARAVICINI CRESPI LUCA                                 CIR S.p.A.          333,333            --          --          333,333
      SEGRE MASSIMO              GRUPPO EDITORIALE L’ESPRESSO S.p.A.               3,000            --          --             3,000


     (1) Indirectly owned through COFIDE S.p.A.
     (2) At December 31 2006 the shares are owned through the following subsidiaries:
           CIR S.p.A.            218,825,235
           ROMED S.p.A.                 1,000
     (3) Indirectly owned through CIR S.p.A.
     (4) Indirectly owned through Siria S.r.l.



               Transactions with companies of the Group and related parties

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




30   Management Report
The most significant financial transactions between CIR and its subsidiaries are analysed in
detail in the Explanatory Notes particularly under the item Miscellaneous receivables,
Other payables and Financial receivables with subsidiaries in the Balance Sheet and under
the items Miscellaneous revenues and income, Financial expenses and Dividends in the In-
come Statement.

Regarding the main equity transactions reference is made to the appropriate sections of the
explanatory notes.

It should be pointed out that the CIR Group did not enter into any transactions with related
parties, according to Consob’s definition, of a non-typical or unusual nature beyond nor-
mal business administration or such as to have any significant impact on the economic, fi-
nancial or equity situation of the Group.

The code of conduct governing transactions with related parties was defined by the Board
of Directors of the Company in September 2002.


National tax consolidation

As is known, the new Income Tax Consolidation Act (TUIR) introduced the possibility for
companies belonging to the same group to determine a single total income figure corre-
sponding more or less to the sum of the taxable income of the various companies (parent
company and subsidiaries controlled directly and/or indirectly for at least 50% according to
certain requisites) and thus to calculate a single income tax figure for the income of the
companies of the group. In the last few months of 2004 the Boards of Directors of 28 com-
panies belonging to the Espresso, Sorgenia, Sogefi and HSS subgroups voted to take part in
the “CIR Tax Consolidation”, signing a general agreement (“General Rules of the CIR Tax
Consolidation”), which sets out the rights and obligations of CIR and its subsidiaries, re-
sulting from their taking part in the tax consolidation.
At December 31 2006 there were 26 companies taking part in the CIR tax consolidation.

Report on Corporate Governance

It should be noted that the full text of the “Annual Report on Corporate Governance” for
the year 2006 was approved – in its entirety – by the Board of Directors convened to ap-
prove the Financial Statements for the year ended December 31 2006.

This Report will be available to anybody who requests it, according to the conditions stipu-
lated by Borsa Italiana for publishing the same. The Report will also be available on the
website of the Company.

In relation to D.Lgs. 231/01, issued with the aim of bringing regulations on the subject of
the administrative liability of entities into line with international agreements signed by It-
aly, on March 7 2003 the Board of Directors of the Company approved the adoption of a
Code of Ethics of the CIR Group, published as an attachment to the “Annual Report on
Corporate Governance”, which defines the values which the Group follows in the achieve-
ment of its objectives and establishes binding principles of conduct for its Directors, em-
ployees and those who have a relationship with the Group. Moreover, on September 5
2003, the Board of Directors of the company approved the “Organization Model – the Or-



                                                                             Management Report   31
            ganizational and Management Model as defined by D.Lgs. no. 231/01”, in line with the in-
            structions laid down in the decree which aimed to ensure correctness and transparency in
            the conduct of business and corporate activities.

            On April 27 2006 the Board of Directors approved an update to the Organizational and
            Management Model as defined by D.Lgs. no. 231/01 which was needed after law no. 62 of
            April 18 2005 took effect. This law amended decree 231/2001 inserting art. 25-sexties
            which establishes fines for offences involving the abuse of privileged information and ma-
            nipulation of the market.

            Lastly it should be noted that the companies of the Group have complied with the provi-
            sions of Art. 2497-bis of the Civil Code.

            Preparation of “Security Policy Document (DPS)”

            D.Lgs. no. 196/03, giving instructions on the protection of personal information, stipulates
            that by March 31 of each year the organization responsible for the treatment of personal in-
            formation draw up a formal security policy document containing, among other things, ap-
            propriate information regarding the following:
             - the list of the types of treatment of personal information carried out by the organiza-
                  tion;
             - the distribution of responsibilities and tasks within the sphere of the treatment of such
                  information;
             - a description of the measures to be taken to guarantee the integrity and the availability
                  of the information and the protection of the areas set aside for storing it and making it
                  accessible;
             - the description of the criteria and the procedures for restoring access to the said infor-
                  mation in the event of it being destroyed or damaged;
             - the description of the criteria to be adopted in order to guarantee that the minimum
                  measures of security are followed when the treatment of personal information is en-
                  trusted, in conformity with the Civil Code, to someone outside the structure of the Of-
                  ficer Responsible.
            Article 26 of the Technical Rules states that the preparation or amendment of the Security
            Policy Document must be mentioned in the Annual Report accompanying the Financial
            Statements if required.
            The Security Policy Document was updated with the support of specialist consultants in
            this field who have been certified as BS7799 lead auditors by the British Standard Institute.

            Other

            The company CIR S.p.A. – Compagnie Industriali Riunite has its registered office in Strada
            Volpiano 53, Leinì (To), Italy and its operating headquarters in Via Ciovassino 1, Milan,
            Italy.

            CIR shares, which have been quoted on the Milan Stock Exchange since 1973, since 2004
            have been traded on the Blue-chip segment (Reuter code: CIRX.MI, Bloomberg code CIR
            IM).

            This Annual Report for the period January 1 – December 31 2006 was approved by the
            Board of Directors on March 13 2007.



32   Management Report
PROPOSED ALLOCATION OF NET INCOME FOR THE YEAR



Dear Shareholders,

The Financial Statements for the year ended December 31 2006 that we are submitting to your ap-
proval closed with net income of € 36,697,002.36.

We propose:

.   making 2.5% of distributable net income, amounting to € 917,425.06, available to the Board of
    Directors in accordance with Art. 23 of the Company Bylaws.

.   distributing a dividend of € 0.050 to each of the shares in circulation with dividend rights as of
    January 1 2006 (with the exclusion of own shares held as treasury stock), using the distributable
    part of the net income for the year of € 35,779,577.30, which is equal to € 36,697,002.36 minus
    the amount of € 917,425.06 made available to the Board of Directors and making up the differ-
    ence from the item “Retained earnings”.


The proposed allocation of the net income for the year:

¨   takes into account the provisions of Art. 2357 ter, 2nd paragraph, of the Civil Code which stipu-
    lates that the dividend rights on own shares be allocated pro rata to the other shares;
¨   will take into account the dividend entitlement of the 4,941 shares servicing 810 former Sasib
    privileged shares, the conversion of which has not yet been requested.

It should be pointed out that the actual amounts allocated to dividends and the withdrawal from the
“Retained earnings” reserve will be based on the number of own shares held as treasury stock and
the ordinary shares in circulation as of the date of the Shareholders’ Meeting, in case any further
shares are bought back in the meantime or any new shares are issued in execution of the exercise of
options by beneficiaries of the various stock option plans outstanding.




                                                                     THE BOARD OF DIRECTORS




Milan, March 13 2007




                                                                                             Management Report   33
                 CIR Group

Consolidated Financial Statements
    as of December 31 2006


                BALANCE SHEET

              INCOME STATEMENT

            CASH FLOW STATEMENT

 STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY




                                                Consolidated Financial Statements   35
     1.       CONDOLIDATED BALANCE SHEET

     (in thousands of euro)


     ASSETS                                       Notes     31.12.2006   31.12.2005

     NON-CURRENT ASSETS                                      2,742,536    2,401,558
     INTANGIBLE ASSETS                             (9.a)       951,009      864,436
     TANGIBLE ASSETS                               (9.b)     1,091,030      897,972
     REAL-ESTATE INVESTMENTS                       (9.c)        17,604        6,944
     INVESTMENTS IN COMPANIES VALUED AT EQUITY     (9.d)       214,163      221,042
     OTHER EQUITY INVESTMENTS                      (9.e)         8,530        7,529
     OTHER RECEIVABLES                             (9.f)       250,991      261,403
     SECURITIES                                    (9.g)        98,583       59,841
     DEFERRED TAX ASSETS                           (9.h)       110,626       82,391

     CURRENT ASSETS                                          2,984,189    2,775,594
     INVENTORIES                                  (10.a)       217,082      162,864
     WORK IN PROGRESS                                            1,685          933
     TRADE RECEIVABLES                            (10.b)       996,477      790,744
     OTHER RECEIVABLES                            (10.c)       273,992      201,362
     FINANCIAL RECEIVABLES                        (10.d)        21,354       26,513
     SECURITIES                                   (10.e)       654,248      467,959
     AVAILABLE-FOR-SALE FINANCIAL ASSETS          (10.f)       372,867      362,930
     CASH AND CASH EQUIVALENTS                    (10.g)       446,484      762,289

     ASSETS HELD FOR SALE                          (2.c)        47,589       17,143

     TOTAL ASSETS                                            5,774,314    5,194,295



     LIABILITIES AND SHAREHOLDERS' EQUITY                   31.12.2006   31.12.2005

     SHAREHOLDERS' EQUITY                                    1,979,912    1,856,383
     SHARE CAPITAL                                (11.a)       390,240      389,621
     RESERVES                                     (11.b)       367,779      401,794
     RETAINED EARNINGS (LOSSES)                   (11.c)       401,016      305,945
     NET INCOME FOR THE YEAR                                   101,120       87,675
     SHAREHOLDERS' EQUITY - GROUP                            1,260,155    1,185,035
     MINORITY INTERESTS                                        719,757      671,348

     NON-CURRENT LIABILITIES                                 2,288,420    2,186,453
     BONDS                                        (12.a)     1,187,750    1,199,251
     OTHER BORROWINGS                             (12.b)       758,514      654,785
     OTHER PAYABLES                                              1,178           21
     DEFERRED TAX LIABILITIES                      (9.h.)      137,743      126,260
     PERSONNEL OBLIGATIONS                        (12.c)       166,554      163,671
     PROVISIONS FOR RISKS AND LOSSES              (12.d)        36,681       42,465

     CURRENT LIABILITIES                                     1,469,640    1,137,983
     BANK OVERDRAFT FACILITIES                                 265,180       54,962
     OTHER BORROWINGS                             (13.a)       134,134      175,881
     TRADE PAYABLES                               (13.b)       748,901      649,766
     OTHER PAYABLES                               (13.c)       273,962      213,768
     PROVISIONS FOR RISKS AND LOSSES              (12.d)        47,463       43,606

     LIABILITIES HELD FOR SALE                    (2.c.)        36,342       13,476

     TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY              5,774,314    5,194,295



36        Consolidated Financial Statements
2.     CONSOLIDATED INCOME STATEMENT

(in thousands of euro)

                                                           Notes               2006               2005

REVENUES FROM SALES AND SERVICES                            (14)           4,136,769           3,382,661
CHANGE IN INVENTORIES                                                          2,206              (1,691)
COSTS FOR PURCHASE OF GOODS                                (15.a)          (2,457,185)        (1,818,934)
COSTS FOR SERVICES                                         (15.b)           (711,792)           (674,847)
PERSONNEL COSTS                                            (15.c)           (575,342)           (545,777)
OTHER OPERATING INCOME                                     (15.d)             80,263             92,443
OTHER OPERATING EXPENSE                                    (15.e)             (66,651)           (82,448)
ADJUSTMENTS TO THE VALUE OF INVESTMENTS VALUED AT EQUITY   (9.d.)             34,154             18,596
AMORTIZATION, DEPRECIATION AND WRITE-DOWNS                                  (102,938)            (94,894)

INCOME BEFORE INTEREST AND TAXES ( E B I T )                                339,484             275,109


FINANCIAL INCOME                                           (16.a)             67,176             83,512
FINANCIAL EXPENSES                                         (16.b)           (129,763)           (131,657)
DIVIDENDS                                                                      1,470                396
GAINS FROM TRADING SECURITIES                              (16.c)             96,539             93,094
LOSSES FROM TRADING SECURITIES                             (16.d)             (54,030)           (65,527)
ADJUSTMENTS TO THE VALUE OF FINANCIAL ASSETS                                 (16,958)               (297)

INCOME BEFORE TAXES                                                         303,918             254,630

INCOME TAXES                                                (17)              (89,478)           (64,753)

INCOME AFTER TAX FROM OPERATING ACTIVITY                                    214,440             189,877

NET INCOME/(LOSS) FROM BUSINESSES HELD FOR DISPOSAL                              (932)                  --

NET INCOME FOR THE YEAR INCLUDING MINORITY INTERESTS                        213,508             189,877

 - NET INCOME - MINORITY INTERESTS                                          (112,388)           (102,202)
 - NET INCOME - GROUP                                                       101,120               87,675




BASIC EARNINGS PER SHARE (in euro)                                            0.1351             0.1156
DILUTED EARNINGS PER SHARE (in euro)                                          0.1343             0.1149




                                                                    Consolidated Financial Statements        37
     3.       CONSOLIDATED CASH FLOW STATEMENT

     (in thousands of euro)


                                                                              2006         2005

     OPERATING ACTIVITY

     NET INCOME FOR THE PERIOD INCLUDING MINORITY INTERESTS                 213,508      189,877

     ADJUSTMENTS:
       AMORTIZATION, DEPRECIATION AND WRITE-DOWNS                           102,938       94,894
       SHARE OF THE RESULT OF COMPANIES VALUED AT EQUITY                     (34,154)     (18,596)
       ACTUARIAL VALUATION OF STOCK OPTION PLANS                              9,726       11,000
       CHANGE IN PERSONNEL PROVISIONS AND PROVISIONS FOR RISKS AND LOSSES       956        (8,179)
       ADJUSTMENTS TO THE VALUE OF FINANCIAL ASSETS                          16,958          297
       INCREASE/(REDUCTION) IN NON-CURRENT RECEIVABLES AND PAYABLES          (12,763)     (29,673)
       (INCREASE)/REDUCTION IN NET WORKING CAPITAL                          (174,004)     (89,935)
       OTHER NON-MONETARY CHANGES                                            39,960        (8,219)
     CASH FLOW FROM OPERATING ACTIVITY                                      163,125      141,466
     of which:
     - interest received (paid)                                              (70,679)     (38,024)
     - payment of income taxes                                               (50,909)     (92,700)

     INVESTMENT ACTIVITY
     (PURCHASE) SALE OF SECURITIES                                          (210,573)    (266,468)
     NET DISBURSEMENT FOR ACQUISITIONS OF COMPANIES                          (73,752)    (119,213)
     NET PROCEEDS FROM DISPOSALS                                                637         7,426
     PURCHASE OF FIXED ASSETS                                               (361,395)    (322,610)
     CASH FLOW FROM INVESTMENT ACTIVITY                                     (645,083)    (700,865)

     FINANCING ACTIVITY
     PROCEEDS FROM CAPITAL INCREASES                                         10,372       26,000
     OTHER CHANGES IN SHAREHOLDERS' EQUITY                                    (3,666)     (20,608)
     BONDS                                                                         --    (294,966)
     PROCEEDS/(REPAYMENT) OF OTHER BANK BORROWINGS                           55,640      268,967
     FINANCIAL RECEIVABLES - JOINT VENTURES                                        --     (21,924)
     BUY-BACK OF OWN SHARES                                                  (15,564)     (35,878)
     DIVIDENDS PAID OUT                                                      (90,847)     (75,930)

     CASH FLOW FROM FINANCING ACTIVITY                                       (44,065)    (154,339)

     INCREASE (DECREASE) IN NET CASH AND CASH EQUIVALENTS                   (526,023)    (713,738)

     NET CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                   707,327     1,421,065

     NET CASH AND CASH EQUIVALENTS AT END OF PERIOD                         181,304      707,327




38        Consolidated Financial Statements
4.      STATEMENT OF CHANGES IN CONSOLIDATED SHAREHOLDERS' EQUITY



(in thousands of euro)                                                             Attributable to Shareholders of the Parent Company                          Minority         Total
                                                                         Share           Reserves           Retained       Net income             Total        interests
                                                                        capital                      earnings (losses)    for the year

BALANCE AT JANUARY 1 2005                                             388.279            374.528            201.274          155.247        1.119.328         583.332       1.702.660
Capital increases                                                        1.342             2.273                    --              --           3.615          22.385        26.000
Dividends to Shareholders                                                     --                --                  --        (38.009)         (38.009)        (37.921)       (75.930)
Portion of income available to Board of Directors                             --                --                  --           (708)            (708)                --        (708)
Retained earnings                                                             --                --          116.530         (116.530)                 --               --           --
AGM Resolution to buy back own shares                                         --          11.859             (11.859)               --                --               --           --
Fair value of hedging instruments                                             --           1.424                    --              --           1.424           1.291         2.715
Fair value of securities                                                      --          47.373                    --              --          47.373                 --     47.373
Securities fair value reserve recognized to
income statement                                                              --           (7.608)                  --              --          (7.608)                --      (7.608)
Buy-back of own shares                                                        --         (35.879)                   --              --         (35.879)                --     (35.879)
Notional value of stock option plans                                          --           5.737                    --              --           5.737                 --      5.737
Effects of equity changes in subsidiaries                                     --           (7.087)                  --              --           (7.087)         (4.523)      (11.610)
Currency translation adjustments                                              --           9.174                    --                           9.174           4.582        13.756
Net income for the year                                                       --                --                  --        87.675            87.675        102.202        189.877

BALANCE AT DECEMBER 31 2005                                           389.621            401.794            305.945           87.675        1.185.035         671.348       1.856.383
Capital increases                                                          619             1.076                    --              --           1.695           8.677        10.372
Dividends to Shareholders                                                     --                --                  --   (*) (37.520)          (37.520)        (53.327)       (90.847)
Retained earnings                                                             --                --            50.155          (50.155)                --               --           --
Cancellations of AGM resolution of April 27
2005 to buy-back own shares                                                   --         (54.816)             54.816                --                --               --           --
Fair value of hedging instruments                                             --             478                    --              --             478             357           835
Fair value of securities                                                      --          33.075                    --              --          33.075                 --     33.075
Securities fair value reserve recognized to
income statement                                                              --         (16.893)                   --              --         (16.893)                --     (16.893)
Buy-back of own shares                                                        -- (**)    (5.664)              (9.900)               --         (15.564)                --     (15.564)
Notional value of stock option plans                                          --           2.213                    --              --           2.213                 --      2.213
Effects of equity changes in subsidiaries                                     --          20.751                    --              --          20.751         (18.953)        1.798
Currency translation adjustments                                              --         (14.235)                   --                         (14.235)            (733)      (14.968)
Net income for the year                                                       --                --                  --       101.120          101.120         112.388        213.508

BALANCE AT DECEMBER 31 2006                                           390.240            367.779            401.016          101.120        1.260.155         719.757       1.979.912




(*)   Annual General Meeting of April 27 2006: dividend per share € 0.05
(**) Reduction of the reserve for "Buy-back of own shares" (note 11.b. consolidated financial statements and note 7.b. statutory financial statements of CIR S.p.A.)




                                                                                                                                  Consolidated Financial Statements                      39
EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


1.     STRUCTURE AND CONTENT OF THE FINANCIAL STATEMENTS

These consolidated financial statements have been prepared in accordance with IAS/IFRS interna-
tional accounting standards supplemented by the interpretations of the Standing Interpretation
Committee issued by the International Accounting Standards Boards (IASB).

The consolidated financial statements for the year ended December 31 2006 include the Parent
company CIR S.p.A. (hereinafter “CIR”) and the companies that the latter controls.

The consolidated Financial Statements for the year ended December 31 2006 were prepared using
the statements of the individual companies included in the consolidation, i.e. their statutory finan-
cial statements (known as “individual” or “separate” in IAS/IFRS terminology), or else consoli-
dated into subgroups, examined and approved by their respective boards and amended and re-
stated where necessary in order to bring them into line with the accounting principles listed below
and with Italian regulations.

These financial statements were prepared in thousands of euro, which is the “functional” and
“presentation” currency of the Group according to the terms of IAS 21, except where expressly
indicated otherwise.


2.     CONSOLIDATION PRINCIPLES

2.a.   Consolidation methods

Controlled companies (subsidiaries):
All the companies in which the Group exercises control according to the terms of IAS 27, SIC 12
and IFRIC Interpretation 2 are considered controlled companies. In particular, companies and in-
vestment funds are considered as controlled companies when the Group has the power to make
decisions regarding financial and operating policy. The existence of this power is presumed to ex-
ist where the Group possesses the majority of the voting rights of a company, including potential
voting rights that are exercisable without any restrictions.
The controlled companies are fully consolidated as from the date on which the Group took control
and they are de-consolidated when such control ceases to exist.
Consolidation is carried out using the full line-by-line consolidation method. The main criteria
adopted for the application of this method are the following:
- the book value of the holding is eliminated against the appropriate portion of shareholders’ eq-
uity and the difference between acquisition cost and the shareholders’ equity of the subsidiaries is
posted, where the conditions exist, to the items of assets and liabilities included in the consolida-
tion. Any remaining part is recognized to the statement of income when it is negative or to the
“Goodwill” item of the assets when it is positive. Goodwill is then subjected to an impairment test
to determine its recoverable value;
- significant transactions between consolidated companies are eliminated as are payables, receiv-
ables and unrealized income resulting from transactions between companies of the Group, net of
any tax effects;
- minority equity and their portion of net income for the period are shown in special items of the
consolidated balance sheet and income statement.



                                                                        Consolidated Financial Statements   41
     Affiliated companies
     All those companies in which the Group has a significant influence, without having control, in ac-
     cordance with the terms of IAS 28, are considered as affiliated companies or affiliates. Significant
     influence is presumed to exist when the Group holds a percentage of the voting rights of between
     20% and 50% (excluding cases where there is joint control).
     The consolidated financial statements include the part attributable to the Group of the results of
     the affiliates, accounted for using the equity method starting from the date on which the Group
     acquires substantial influence over the affiliate and they are de-consolidated when such influence
     ceases to exist. Whenever the part attributable to the Group of the losses of the affiliate exceeds
     the carrying value of the investment in the accounts, the value of the investment is written off and
     the share of any further losses is not recognized except to the extent to which the Group has the
     obligation to answer for them.
     The accounting principles of the affiliate are amended, where necessary, in order to make them
     compatible with the accounting principles adopted by the Group.

     Joint ventures
     All companies in which the Group exercises control jointly with another company according to
     the terms of IAS 31 are considered as joint ventures. It is presumed that joint control exists when
     the Group owns half of the voting rights of a company.
     The most significant joint venture belonging to the Group is Tirreno Power. International account-
     ing standards give two methods for consolidating joint ventures:
     . the reference method, which involves pro-rata consolidation:
     . the alternative method with allows them to be consolidated using the equity method.
     The Group has adopted the equity method.

     2.b.    Translation of foreign companies’ financial statements into euros

     The translation into euros of the financial statements of foreign subsidiaries not belonging to the
     single currency, none of which has an economy subject to hyperinflation according to the defini-
     tion given in IAS 29, is carried out at the year-end exchange rate for the balance sheet and at the
     period average exchange rate for the income statement. Any exchange rate differences resulting
     from the translation of shareholders’ equity at the year-end exchange rate and from the translation
     of the income statement at the average rate for the period are recorded in a separate component of
     the shareholders’ equity entitled “Other reserves”.

     The main exchange rates used are the following:

                                                         31.12.2006                             31.12.2005
                                          Average rate            31.12.2006     Average rate            31.12.2005
     US Dollar                                 1.2556                    1.317        1.2441                   1.1797
     UK Sterling                               0.6729                   0.6715        0.6838                   0.6853
     Swedish Krona                             9.2524                   9.0408        9.2773                   9.3888
     Brazilian Real                            2.7292                   2.8133        3.0062                   2.7432
     Argentine Peso                            3.8565                   4.0450        3.6323                   3.5727
     Chinese Renminbi                          10.004                  10.2796      10.1792                    9.5202
     Slovene Tolar                          239.8082                  239.8082     239.8082                  239.2345




42   Consolidated Financial Statements
2.c.     Consolidation area

The consolidated financial statements as of December 31 2006 and the consolidated financial
statements for the previous year of the Group are the result of the consolidation at those dates of
the Parent Company CIR and of all the companies directly or indirectly controlled, jointly con-
trolled or affiliated, with the exception of any companies being wound up. The assets and liabili-
ties of companies scheduled for disposal are reclassified in the items of assets and liabilities that
show such an eventuality.
Specifically, in 2006 the assets as above refer mainly to the properties belonging to the HSS group
and which are scheduled for disposal while the liabilities are mainly the borrowings associated
with these properties.

The HSS group has extended its consolidation through the acquisitions of the Anni Azzurri Group
(Residenze Anni Azzurri S.r.l., Residenze Anni Azzurri Monza S.p.A, La Nuova Palma S.r.l., So-
demare S.A.) and of the companies Medipass S.p.A. and Meia S.r.l.. In addition the group has in-
creased its percentage of ownership of a company which it had already controlled since 2005
(Cima S.r.l. subsequently incorporated into Redancia S.r.l.). The following chart gives the main
figures as of December 31 2006 of the acquired companies.

 (in thousands of euro)                    Residenze Anni Azzurri Group   Medipass S.p.A.           Meia S.r.l.
 Fixed assets                                                 150,724             14,923                3,484
 Working capital                                               10,769              4,063                 (588)
 Net financial debt                                          (124,047)           (16,443)                (566)
 Non-current liabilities                                       (19,102)           (1,311)                (701)
 Shareholders’ equity                                          18,344              1,232                1,629


As far as the Dry Products group is concerned, in the first half of 2006 the sale of the stake in Ric-
ciarelli was finalized for a price of € 3.6 million, which was in line with its carrying value. With
this deal the CIR group completed its program of gradual disinvestment from this sector which in
the consolidated financial statements for 2005 was classified under assets and liabilities held for
disposal.

The list of equity investments included in the consolidation, with an indication of the method u-
sed, and of those excluded is given in the appropriate section of this document.


3.       ACCOUNTING PRINCIPLES APPLIED

3.a.     Intangible assets (IAS 38)

Intangible assets are recognized only if they can be separately identified, if it is probable that they
will generate future economic benefits and if the cost can be measured reliably.
Intangible assets with a finite useful life are valued at purchase or production cost net of deprecia-
tion and impairment.

Intangible assets are initially recognized at purchase or production cost. Purchase cost is repre-
sented by the fair value of payments and any additional cost directly incurred for preparing the as-
set for use. The purchase cost is the equivalent price in cash as of the date of the acquisition and,




                                                                              Consolidated Financial Statements   43
     where payment is deferred beyond normal terms of credit, the difference compared with the cash
     price is recognized as interest for the whole period of deferment.
     Amortization is calculated on a straight-line basis following the expected useful life of the asset
     and starts when the asset is ready for use.

     The carrying value of intangible assets is maintained as long as there is evidence that this value
     can be recovered through use; to this end at least once a year an impairment test is carried out to
     check that the intangible asset is able to generate future cash flows.
     Intangible assets with an indefinite useful life are not amortized but are constantly monitored for
     any permanent loss of value. It is mainly the newspaper and magazine titles and frequencies of the
     Espresso Group that are considered as intangible assets with an indefinite useful life.

     Development costs are recognized as intangible assets when their cost can be measured reliably,
     when there is a reasonable assumption that the asset can be made available for use or for sale and
     that it is able to generate future benefits. Once a year or any time there are reasons which justify
     it, capitalized costs are subjected to an impairment test.
     Research costs are charged to the income statement as and when they are incurred.
     Trademarks and licenses, which are initially recognized at cost, are subsequently accounted for
     net of amortization and any impairment. The period of amortization is defined as the lower of the
     contractual duration for use of the license and the useful life of the asset.
     Software licenses, including associated costs, are recognized at cost and are recorded net of amor-
     tization and of any impairment.

     Goodwill represents the excess of the cost of an acquisition over the fair value of the subsidiaries
     and affiliates at the date of their acquisition, with reference to the net values of their assets and li-
     abilities identifiable as of the date of the acquisition.
     After initial recognition, goodwill is valued at cost less any impairment.
     Goodwill resulting from acquisitions made after March 31 2004 is no longer amortized whereas
     goodwill already recorded prior to that date is no longer amortized as from January 1 2004.
     Goodwill always refers to identified income-producing assets, the ability of which to generate in-
     come and cash flows is constantly monitored for any impairment.


     3.b.   Tangible assets (IAS 16)

     Tangible assets are recognized at purchase price or at production cost net of accrued depreciation.
     Cost includes associated expenses and any direct and indirect costs incurred at the moment of ac-
     quisition and necessary to make the asset ready for use. Financial expense relating to loans for
     long-term investments are capitalized until the date when the assets start operating.
     Where there are contractual or compulsory obligations for decommissioning, removing or clearing
     sites where fixed assets are installed, the value recognized includes an estimate of costs that will
     be incurred on disposal of the same, discounted to present value.
     Fixed assets are depreciated on a straight-line basis for each year in relation to their remaining
     useful life.

     Land, assets in process and payments on account are not subject to depreciation.

     Extraordinary maintenance costs which determine an increase in the value, the functionality or the
     useful life of the assets, such as costs for improvements, renovations and conversions which in-




44   Consolidated Financial Statements
crease value, are allocated directly to the assets to which they refer and are depreciated over the
residual useful of the assets.
Ordinary maintenance costs are charged to the income statement.

Real estate and land that are not used for instrumental or operating purposes are classified under a
special item of assets and are accounted for on the basis of the terms of IAS 40 “Investment prop-
erties” (see paragraph 3.e. below).

Should there be any events which one can assume will cause a lasting reduction in the value of an
asset, its carrying value is checked against its recoverable value, which is the higher of fair value
and its value in use. Fair value is defined on the basis of values expressed by the active market, by
recent transactions or from the best information available to determine the potential amount ob-
tainable from the sale of the asset. Value in use is determined from the net present value of cash
flows resulting from the use expected of the same asset, applying the best estimates of its residual
useful life and a rate that also takes into account the implicit risk of the specific business sectors in
which the Group operates. This valuation is carried out for each individual asset or for the small-
est identifiable cash generating unit (CGU).
Where there is a negative difference between the values stated above and the carrying value, the
asset’s carrying value is written down, while as soon as the reasons for such loss in value cease to
exist the asset then undergoes an upward revaluation. Write-downs and revaluations are posted to
the income statement.


3.c.   Public entity grants

Any grants from a public entity are recognized when there is a reasonable degree of certainty that
the receiving company will comply with all the conditions stipulated for such a grant, independ-
ently of whether or not there is a formal resolution awarding the said grant, and the certainty that
the grant will actually be received.
Capital contributions are recognized in the balance sheet either as deferred income, which is po-
sted to the income statement on the basis of the useful life of the asset for which it has been
granted so that the depreciation can be reduced, or else they are deducted directly from the asset to
which they refer.
Any State grants obtained in the form of reimbursement of expenses and costs already incurred or
with the purpose of providing immediate support for the beneficiary company without there being
any future related costs, are recognized as income in the period in which they can be claimed.


3.d.   Leasing contracts (IAS 17)

Leasing contracts for assets where the lessee substantially assumes all the risks and rewards of
ownership are classified as finance leases. Where there are such finance lease contracts out-
standing the asset is recognized at the lower of its fair value and the present value of the minimum
lease payments stipulated in the relevant contracts. The total lease payments are allocated between
the liability and finance charges so as to achieve a constant rate on the finance balance out-
standing. The residual lease payments, net of financial expenses, are classified as borrowings. The
interest expense is charged to the income statement over the lease period. Assets acquired with fi-
nancial leasing contracts are depreciated to an extent consistent with the nature of the asset.




                                                                           Consolidated Financial Statements   45
     The leasing contracts in which the lessor substantially retains the risks and rewards of ownership
     are, on the other hand, classified as operating leases and payments made under such leases are
     charged to the income statement on a straight-line basis over the period of the lease.
     In the event of a sale and lease-back agreement, any difference between the price of sale and the
     carrying value of the asset is not recognized to the income statement unless there is a loss repre-
     senting an impairment of the asset itself.


     3.e.   Investment property/real estate investments - (IAS 40)

     An investment property is a property, either land or building – or part of a building – or both, o-
     wned by the owner or by the lessee, through a financial leasing agreement, for the purpose of re-
     ceiving lease payments or for obtaining a gain on the capital invested or for both of these reasons,
     rather than for the purpose of directly using it for the production or supply of goods or services or
     for administration of the company or for sales, in ordinary business activities.
     The cost of an investment property is represented by its purchase price, any improvements made,
     and any replacement and extraordinary maintenance.
     For self-constructed investment property an estimation is made of all costs incurred as of the date
     on which the construction or the development was finished. Until that date the conditions set forth
     in IAS 16 apply.
     In the event of an asset held through a finance lease contract, the initial cost is determined accord-
     ing to IAS 17 from the lower of the fair value of the property and the present value of the mini-
     mum lease payments due.
     The Group has opted for the cost method to be applied to all investment property held. According
     to the cost method, estimation is made net of depreciation and of any impairments.

     At the moment of disposal or in the event of permanent non-use of the assets, all related income
     and expenses will be charged to the income statement.


     3.f.   Impairment of assets (IAS 36)

     Periodically and whenever events or changes in circumstance make it appropriate, tangible and
     intangible assets are subjected to an impairment test to see whether they have undergone any loss
     in value.
     The impairment test consists of an estimate of the recoverable value of the asset and a subsequent
     comparison with its net carrying amount. If the recoverable value is lower than the carrying
     amount, the latter is written down and the impairment loss is charged to the income statement.
     If at a later date the reasons for the write-down cease to exist, the original carrying amount is re-
     stored with the relative entry to the income statement.


     3.g.   Other equity investments

     Investments in companies where the Parent Company does not exercise a significant influence are
     accounted under IAS 39 and are therefore classified as available-for-sale investments and are
     measured at fair value or at cost if the estimation of fair value or market price is not reliable.




46   Consolidated Financial Statements
3.h.   Receivables and payables (IAS 32, 39 and 21)

Receivables are recognized at amortized cost and measured at their presumed realization value,
while payables are recognized at amortized cost.
Receivables and payables in foreign currencies, which are originally recognized at the spot rates
of the transaction date, are adjusted to the year-end spot exchange rates and any exchange gains
and losses are recognized to the income statement: if the net of such adjustments is a gain the
amount is recorded in a specific equity reserve and cannot be distributed until it is realized.


3.i.   Securities (IAS 32 and 39)

In accordance with IAS 32 and IAS 39 investments in companies other than subsidiaries and af-
filiates are classified as available-for-sale financial assets and are measured at fair value.
Gains and losses resulting from fair value adjustments are recorded in a separate component of
equity. When there are impairment losses or when the assets are sold, the gains and losses recog-
nized previously to shareholders’ equity are then posted to the income statement.

This category also includes financial assets either bought or issued for trading purposes or
classified at fair value through profit and loss in application of the fair value option.
For a more complete description of the treatment of financial instruments we would refer readers
to the note specially prepared on the subject.


3.l.   Income taxes (IAS 12)

Current taxes are recorded and determined on the basis of a realistic estimate of taxable income
following current tax regulations of the country in which the company is based and taking into ac-
count any exemptions that apply and any tax credits that can be claimed.

Deferred taxes are calculated on the basis of time differences, which are taxable or deductible, be-
tween the carrying values of assets and liabilities and their tax bases and are classified under non-
current assets and liabilities.
A deferred tax asset is recognized to the extent that it is probable that future taxable profit will be
available against which the temporary differences can be utilized.
The carrying value of deferred tax assets is subject to periodic analysis and is reduced to the ex-
tent to which it is no longer probable that there will be sufficient taxable income to allow the
benefit of this deferred asset to be utilized.


3.m. Inventories (IAS 2)

Inventories are stated at the lower of purchase or production cost, calculated using the weighted
average cost method, and the net realizable value.


3.n.   Work in progress (IAS 11)

Contracted work in progress refers to specific projects in progress that have been requested by ex-
ternal clients.



                                                                          Consolidated Financial Statements   47
     Contractual revenues and their related costs are recognized according to their percentage of com-
     pletion. Revenues include any price revision included in the contract. When it is likely that total
     costs will exceed contractual revenues, the expected loss is immediately recognized to the income
     statement.

     If the outcome of a construction contract cannot be reliably estimated, the contractual income is
     recognized in relation to the costs incurred, provided that it is likely that such costs can be recov-
     ered.


     3.o.   Cash and cash equivalents (IAS 32 and IAS 39)

     Cash and cash equivalents include cash in hand, call deposits and short-term and high-liquidity
     financial assets, which are easily convertible into cash and which have a risk of change in value
     that is irrelevant.


     3.p.   Shareholders’ equity

     Ordinary shares are recorded at nominal value. Costs directly attributable to the issuance of new
     shares are deducted from the shareholders’ equity reserves, net of any related tax benefit.

     Own shares are classified in a special item which is deducted from reserves; any subsequent
     transaction of sale, re-issuance or cancellation will have no impact on the income statement but
     will affect only shareholders’ equity.

     Unrealized gains and losses, net of tax, on financial assets classified as available for sale are re-
     corded under shareholders’ equity in the fair value reserve.
     The reserve is reversed to the income statement when the asset is realized or when a permanent
     loss of value is recognized.

     The hedging reserve is formed from the fair value movements of derivatives which, under IAS 39,
     have been designated as “cash flow hedging instruments” or as instruments hedging net invest-
     ments in foreign operations”.
     The portion of the profit and loss considered as “effective” is recognized to shareholders’ equity
     and is reversed to the income statement as and when the elements hedged are in turn recognized to
     the income statement, i.e. when the subsidiary is sold.

     When a subsidiary prepares its financial statements in a currency different from the Group’s func-
     tional currency, the subsidiary’s financial statements are translated accounting any differences re-
     sulting from such translation in a special reserve. When the subsidiary is sold the reserve is re-
     versed to the income statement with a detail of any gains or losses resulting from the subsidiary’s
     disposal.
     The item “Retained earnings (losses)” includes accrued income and losses and the transfer of bal-
     ances from other equity reserves when these become free of any “limitations” to which they have
     been subject.
     This item also shows the cumulative effect of the changes in accounting principles and/or the cor-
     rection of errors which are accounted for in accordance with IAS 8.




48   Consolidated Financial Statements
3.q.   Financial liabilities (IAS 32 and IAS 39)

Loans are initially recognized at cost, represented by their fair value net of ancillary costs in-
curred. Subsequently loans are measured at amortized cost calculated by applying the effective
interest rate, taking into consideration any issuance costs incurred and any premium or discount
applied at the time in which the instrument is settled.


3.r.   Provisions for risks and losses (IAS 37)

Provisions for risks and losses refer to liabilities which are extremely likely but where the amount
and/or maturity is uncertain. These are the result of past events which will cause a future cash out-
flow. Provisions are recognized exclusively in the presence of a current obligation, either legal or
constructive, towards third parties which implies an outflow and when a reliable estimate of the
amount involved can be made. The amount recognized as a provision is the best estimate of the
outflow required to fulfil the obligation as of the date of the financial statements. The provisions
recognized are re-examined at the closing date of each accounting period and are adjusted to rep-
resent the best current estimate. Changes in the estimate are recognized to the income statement.

When the estimated outflow relating to the obligation is expected in a time horizon longer than
normal payment terms and the discount factor is significant, the provision represents the present
value, discounted at a risk-free interest rate, of the expected future outflows to discharge the obli-
gation.

Contingent assets and liabilities (possible assets and liabilities, or those not recognized because no
reliable estimate can be made) are not recognized. However specific disclosure on such items is
given.


3.s.   Revenue recognition (IAS 18)

Revenues from the sale of goods are recognized at the moment when the goods change hands and
the risks and benefits are transferred. Revenues are recognized net of returns, discounts and re-
bates. Revenues for the rendering of services are recognized at the moment when the service is
rendered, with reference to the state of completion of the activity as of the date of the financial
statements.

Income from dividends, interest and royalties are recognized as follows:
- Dividends, when the shareholder’s right to receive payment is established (with an offset in re-
   ceivables at the resolution date);
- Interest, using the effective interest rate method (IAS 39);
- Royalties, on an accruals basis, in accordance with the substance of the relevant contractual
   agreement.


3.t.   Employee benefits (IAS 19)

Benefits to be paid to employees after the termination of their employment and other long term
benefits are subject to actuarial valuation.




                                                                         Consolidated Financial Statements   49
     Following this methodology, liabilities recognized represent the present value of the obligation
     adjusted for any actuarial gains or losses which have not been accounted for.
     The instruments underlying the above mentioned benefits can be distinguished between “defined
     contribution plans” and “defined benefit plans”, where in the first case the obligation of the com-
     pany is limited to paying the contributions (to Government, to funds or to other separate legal en-
     tities) and is determined on the basis of the contributions owed, while in the second case liabilities
     are determined on the basis of actuarial calculations.
     Actuarial gains and losses for the defined benefit pension plans are recognized in the income
     statement, pro rata on the basis of the remaining working life of the employees covered by the
     plan, for the part in excess of 10% of the greater of the fair value of any assets servicing the plan
     and the present value of the associated liability, in accordance with the so called corridor method.
     For other long-term benefits, actuarial gains and losses are recognised to income statement.

     IFRS 2 “Share-based payments” issued in February 2005 but applicable as from January 1 2005
     stated in its transition instructions that application would be retrospective for all transactions
     where the assignation of stock option took place after November 7 2002 and for which, as of the
     date of its taking effect, the vesting conditions contained in the various plans had not yet been sat-
     isfied.
     In compliance with this principle the CIR Group measures the notional cost of stock options and
     recognizes it to the income statement under personnel costs during the vesting period of the bene-
     fit, with a corresponding posting to the appropriate reserve in shareholders’ equity.
     The cost of the option is determined at the grant date of the plan applying special models and mul-
     tiplying by the number of options exercisable over the respective period, which is evaluated with
     the aid of appropriate actuarial variables.


     3.u.   Derivative financial instruments (IAS 32 and 39)

     Derivative financial instruments are measured at fair value.
     The Group uses derivatives mainly to hedge risks, in particular interest rate, foreign exchange and
     commodity price risks. The hedging purpose of the derivative is formally documented and the de-
     gree of “effectiveness” of the hedge is specified.
     For accounting purposes hedging transactions can be classified as:
     - fair value hedges – where the effects of the hedge are recognized to the income statement.
     - cash flow hedges – where the effective portion of the hedge is recognized directly to share-
        holders’ equity while the non-effective part is recognized to income statement.
     - hedge of a net investment in a foreign operation – where the effective portion of the hedge is
        recognized directly to shareholders’ equity while the non-effective part is recognized to the in-
        come statement.


     3.v.   Foreign currency translation (IAS 21)

     The Group’s functional currency is the euro, which is the currency in which its financial state-
     ments are prepared and published.
     The companies of the Group prepare their financial statements in the currencies that are used in
     their respective countries.

     Transactions carried out in foreign currencies are initially recognized at the spot exchange rate on
     the date of the transaction.



50   Consolidated Financial Statements
At the date of the close of the reporting period monetary assets and liabilities denominated in for-
eign currency are translated at the spot exchange rate prevailing on that date.
Non-monetary items measured at historical cost in a foreign currency are translated using the his-
torical exchange rate prevailing on the date of the transaction.
Non-monetary items measured at fair value are translated using the spot exchange rate at the date
on which the measurements are determined for the financial statements.
The assets and liabilities of the companies within the Group whose functional currency is not the
euro are valued using the following procedures:
- assets and liabilities are translated using the spot exchange rate prevailing at the date of the
   close of the reporting period;
- costs and revenues are translated using the average exchange rate for the period;
Exchange rate differences are recognized directly to a special reserve under shareholders’ equity
in a special reserve.
Should an investment in a foreign operation be sold, the accumulated exchange rate differences
recognized in the equity reserve are reversed to the income statement.


3.w. Adoption of new accounting standards

In financial year 2006 the Group adopted the following Principles, Interpretations and Updates to
the standards already published:
- IAS 39 – Financial instruments Recognition and Measurement. This principle was amended by
Regulation no. 1864 of November 15 2005 effective January 1 2006 (fair value option), which
partially revised the classification of financial assets and liabilities; in particular the revision
limited the use of the initial designation option for financial assets and liabilities other than de-
rivatives and those held for trading, as items measured at fair value directly to the income state-
ment to those instruments that meet the following requirements:
    a) The fair value option designation eliminates or significantly reduces an accounting mis-
         match, or
    b) A group of financial assets, financial liabilities, or both are managed and their performance
         is evaluated on a fair value basis, in accordance with a documented investment risk man-
         agement strategy, and
    c) An instrument contains an implicit derivative which meets particular conditions.
- IAS39 – Financial instruments. Recognition and measurement. This principle was amended by
Regulation no. 2106 of December 21 2005 which partly revised the basic assumptions regarding
intercompany transactions,
- IFRS6 – Exploration for and Evaluation of Mineral Resources. This principle is not relevant for
the business of the Group;
- IFRIC4 – Checking the requisites for a contract to be considered as a leasing contract;
- IFRIC5 – Rights to interest arising from decommissioning, restoration and environmental reha-
bilitation funds. This interpretation is not relevant for the Group;
- IFRIC6 – Liabilities arising from Participating in a Specific market: Waste electrical and Elec-
tronic Equipment. This interpretation is not relevant for the Group.

Moreover the Group did not opt for the early adoption of the following Principles, Interpretation
and Updates to principles already published, which will become obligatory in the next few years:
- IFRIC7 – Applying the Restatement Approach under IAS 29. This interpretation will take effect
for financial years following March 1 2006. This interpretation is not relevant for the Group;
-IFRIC8 – Scope of IFRS2. This interpretation will take effect for financial years following May 1
2006. This interpretation is not relevant for the Group;



                                                                        Consolidated Financial Statements   51
     - IFRIC9 – Reassessment of Embedded Derivatives. This interpretation will take effect for finan-
     cial years following June 1 2006. The interpretation is not relevant for the Group.
     - IFRIC10 – Interim Financial Reporting and Impairment. This interpretation will take effect for
     financial years following November 1 2006;
     - IFRS7 – Financial instruments: Disclosures. This principle introduces new information to be
     provided for financial instruments and will take effect as from January 1 2007.


     3.z. Earnings per share (IAS 33)

     Basic earnings per share are determined by dividing the net income attributable to the ordinary
     shareholders of the Parent Company by the weighted average number of ordinary shares in circu-
     lation during the period.

     Diluted earnings per share are calculated by adjusting the weighted average number of ordinary
     shares in circulation to take into account the effect of all potential ordinary shares, resulting for
     example from the possibility of the exercise of stock options assigned, which can have a dilutive
     effect.



     4.     FINANCIAL INSTRUMENTS

     Financial instruments take on a particular significance in the economic and financial structure of
     the CIR Group; for this reason, in order to give a better and clearer understanding of financial is-
     sues, it was considered useful to devote a special section to the accounting treatment of IAS 32
     and IAS 39.

     According to IAS 32 financial instruments are classified in four categories:
         a) Financial instruments that are valued at fair value through profit and loss (FVTPL) in ap-
             plication of the fair value option, which are held for trading purposes;
         b) Investments held to maturity (HTM);
         c) Loans and receivables (L&R);
         d) Available-for-sale financial assets (AFS).
     Classification depends on Financial Management’s intended use of the financial instrument in the
     business context and each involves a different measurement for accounting purposes; financial
     transactions are recognized on the basis of their value date.


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



52   Consolidated Financial Statements
   a) The fair value option designation eliminates or significantly reduces an accounting mis-
      match, or;
   b) A group of financial assets, financial liabilities, or both are managed and their performance
      is evaluated on a fair value basis, in accordance with a documented investment risk man-
      agement strategy, and
   c) An instrument contains an implicit derivative which meets particular conditions.

The designation of an individual instrument to this category is definitive, is made at the moment
of initial recognition and cannot be modified.


Investments held to maturity
This category includes non-derivative instruments with fixed payments or payments that can be
determined and that have a fixed maturity, and which it is intended and possible to hold until ma-
turity.
These instruments are measured at amortized cost and constitute an exception to the general
measurement principle of fair value.
Amortized cost is determined by applying the effective interest rate of the financial instrument,
taking into account any discounts or premiums received or paid at the moment of purchase, and
recognizing them throughout the whole life of the instrument until its final maturity.
Amortized cost represents the initial recognition value of a financial instrument, net of any capital
repayments and of any impairment, plus or minus the cumulated amount of the differences be-
tween its initial net value and the nominal amount at maturity calculated using the effective inter-
est rate method.
The effective interest rate method is a calculation criterion used to assign financial expenses to
their appropriate time period.
The effective interest rate is the rate that gives a correct present value to expected future cash
flows until maturity, so as to obtain the net present carrying value of the financial instrument.
If even one single instrument belonging to this category is sold before maturity, for a significant
amount and where there is no special justification for this, the tainting rule is applicable and re-
quires that the whole portfolio of securities classified as Held To Maturity be reclassified and
measured at fair value, and this category cannot be used in the two following years.

Loans and receivables
This refers to financial instruments which are not derivatives, have payments that are either fixed
or can be determined, which are not quoted on an active market and which are not intended to be
traded.
This category includes trade receivables (and payables), which are classified as current assets or
liabilities with the exception of the part due in over 12 months from the date of the financial state-
ments.
The measurement of these instruments is made by applying the method of amortized cost, using
the effective interest rate and taking into account any discounts or premiums obtained or paid at
the moment of acquisition and recognizing them throughout the whole life of the instrument until
its final maturity.


Available-for-sale financial assets
This is a “residual” category which includes non-derivative financial instruments that are desig-
nated as available for sale and are not included in any of the previous categories.




                                                                         Consolidated Financial Statements   53
     Financial instruments held for trading are recognized at their fair value plus any transaction costs.
     Gains and losses are recognized to a special equity reserve until the financial instruments are sold
     or have been impaired. In such cases the profit or loss accrued under shareholders’ equity is re-
     leased to the income statement.

     Fair value is the amount for which an asset can be exchanged or a liability can be settled, between
     knowledgeable, willing parties in a transaction at arm’s length.
     In the case of securities listed on regulated liquid markets, the fair value is the bid price at the
     close of trading on the last day of the accounting period.
     Where no market prices are available, fair value is determined either on the basis of the fair value
     of another financial instrument that is substantially similar or by using appropriate financial tech-
     niques (for example the discounted cash flow method).
     Investments in financial assets can be eliminated from the balance sheet, or derecognized, only
     when the contractual rights to receive their respective financial cash flows have expired or when
     the financial asset is transferred to third parties together with all its associated risks and rewards.



     5.     FINANCIAL RISK MANAGEMENT

     The CIR Group operates in different sectors of industry and services both at the domestic and the
     international level and as a result its businesses are exposed to different kinds of financial risk, in-
     cluding market risk (exchange rate and price risk), credit risk, liquidity risk and interest rate risk.
     In order to minimize these risks the Group uses derivative instruments for hedging purposes.

     Risk management is carried out by the central finance and treasury function on the basis of poli-
     cies approved by the Management of CIR and passed on to the subsidiaries on July 25 2003.


     Market risk
           Foreign currency risk
     Some companies of the Group (Sogefi in particular) are exposed to foreign exchange risk result-
     ing from their use of difference currencies. Exchange rate movements in the foreign currencies
     can affect the fair value of their assets and liabilities.
     This risk is however limited by the fact that the companies operate in the local currency, they are
     active both in their home markets and abroad and in the event of such a need arising financial re-
     sources are raised locally.

     Regarding the net investment in Medinvest Plc, expressed in USD, a specific hedging strategy is
     followed with purpose of hedging the net investment from the volatility of the spot EUR/USD ex-
     change rate used to translate the subsidiary’s net investment into the functional currency of the
     Group, i.e. the euro.

            Price risk
     The Group is exposed to price risk on its commodities, such as paper, cellulose products, steel,
     plastic products, aluminium, oil and gas.
     These risks are managed centrally by the individual sub-holdings through the diversification of
     their sourcing and, where deemed necessary, through suitable derivative hedging products.




54   Consolidated Financial Statements
Credit risk
Credit risk can be evaluated both in commercial terms in relation to client type, contractual condi-
tions and concentration of sales, and also in financial terms in relation to the type of counterparty
of financial transactions. Within the Group there are no significant concentrations of credit risk.
Adequate policies were put in place several years ago to ensure that sales are made to clients with
an appropriate credit rating. Counterparties for derivatives instruments and cash transactions are
exclusively financial institutions with a high credit rating. The Group also has policies which limit
credit exposure to single financial institutions.


Liquidity risk
Prudent management of liquidity risk implies maintaining sufficient liquidity and tradable securi-
ties as well as having the availability of financial resources obtainable through an adequate supply
of credit lines.
The Group respects the maturity dates of its commitments systematically, which allows it to oper-
ate in the market with flexibility and the availability of funds in order to maintain a correct bal-
ance between funding and the application of its financial resources.


Interest rate risk (fair value risk and cash flow risk)
Interest rate risk is caused by movements in interest rates in the market which can change the fair
value of the cash flows of financial assets or liabilities.
Interest rates on leasing contracts are determined at the commencement of the contract and there
is no exposure to a change in the fair value of the interest rate.
Interest rate risk mainly affects long-term bond issues, which having been issued at a fixed rate,
expose the Group to the risk of a change in the fair value of the bonds due to interest rates move-
ments.

Following risk management policies, the Parent Company and the subsidiaries have entered into
various IRS contracts throughout the years in order to hedge fair value interest rate risk on their
bond issues and loan agreements.

Derivative instruments are recognized at their fair value.

The accounting models for hedging transactions are as follows:
- fair value hedges if they are subject to price changes in the market value of the underlying as-
  set or liability;
- cash flow hedges if they are entered into to protect from the risk of changes in cash flows re-
  sulting from an existing asset and liability, or from a future transaction.
- hedges of a net investment in a foreign operation if they are entered into to hedge the net in-
  vestments from the exchange rate risk arising from the translation of equity denominated in
  currencies other than the functional currency of the Group.

For derivative financial instruments classified as fair value hedges, gains and losses resulting from
both the determination of their own market value and the fair value adjustment of the element un-
derlying the hedge are recognized to the income statement.
For derivative instruments classified as cash flow hedges (for example interest rate swaps), the ef-
fective portion of gains and losses due to changes in their fair value are recognized directly to
shareholders’ equity while any non-effective portion is recognized to the income statement.




                                                                        Consolidated Financial Statements   55
     For derivative financial instruments classified as hedges of a net investment in a foreign operation
     the effective portion of gains and losses due to changes in their fair value are recognized directly
     to shareholders’ equity while any non-effective portion is recognized to the income statement.
     Hedge accounting specifies that derivatives for hedging purposes be accompanied by a hedging
     relationship which documents the individual instrument being hedged, and gives the degree of ef-
     fectiveness of the hedging strategy in relation to the instrument being hedged.
     The effectiveness of the hedges is assessed regularly and the effective part is posted to sharehold-
     ers’ equity while any non-effective part is recognized to the income statement. More specifically,
     the hedge is considered effective when the change in fair value or in the cash flows of the item be-
     ing hedged is “almost entirely” offset by the change in the fair value or the cash flows of the
     hedging instrument and the actual results are in a range of between 80% and 125%.

     At December 31 2006 the Group had the following derivatives contracts outstanding, which were
     recognized under hedge accounting and are shown at their notional value:
     (a) Interest rate swaps hedging bonds:
         Fixed/floating IRS contracts with a notional value of € 400 million maturing in March 2009
         entered into by CIR International,
     (b) Forward sales of foreign currency on the investment in Medinvest Plc.:
         10 forward contracts selling USD and buying EURO for a total of USD 415 million entered
         into by CIR International.
     (c) Interest rate swaps on bank loans for the value of € 20 million relating to the Sorgenia group,
         maturing on October 15 2010;
     (d) 3 forward sales of GBP 4.3 million maturing March 2007 and 2 forward sales of USD 20.8
         million maturing in March 2007, entered into by the Sogefi group;
     (e) Interest rate swaps on bank loans for the value of € 15 million maturing in September 2007
         and € 20 million maturing in December 2008 relating to the Sogefi group.




56   Consolidated Financial Statements
FINANCIAL RISK MANAGEMENT

(in thousands of euro)                <1 year        >1<2        >2<3        >3<4        >4<5          >5                Total

INTEREST BEARING
Fixed Rate
Trade receivables                           664         4,636           --          --           --           --        5,300
Other receivables                        78,045             --          --          --      48,967       12,049      139,061
Financial receivables                    16,975             --          --          --           --           --       16,975
Securities                               66,064         7,059       1,099         172            --           --       74,394
Available-for-sale financial assets             --          --          --          --           --           --            --
Cash and cash equivalents               160,044             --          --          --           --           --      160,044
Bank overdraft facilities                (2,794)            --          --          --           --           --       (2,794)
Bonds                                    (3,362)         (654)   (414,878)       (719)    (199,430)    (568,707)   (1,187,750)
Other borrowings                        (29,565)      (17,015)    (16,618)    (16,803)     (16,074)     (53,282)    (149,357)
Trade payables                             (579)            --          --          --           --           --         (579)
Other payables                             (143)            --          --          --           --           --         (143)


Floating Rate
Trade receivables                               --          --          --          --           --           --            --
Other receivables                           279             --    170,552           --           --                  170,831
Financial receivables                           --          --          --          --           --           --            --
Securities                               34,214         7,526           --     12,058       50,259      190,597      294,654
Available-for-sale financial assets             --          --          --          --           --           --            --
Cash and cash equivalents               286,078             --          --          --           --           --      286,078
Bank overdraft facilities              (262,386)            --          --          --           --           --    (262,386)
Bonds                                           --          --          --          --           --           --            --
Other borrowings                        (53,524)     (138,136)   (107,995)   (128,796)    (140,817)    (123,207)    (692,475)
Trade payables                                  --          --          --          --           --           --            --
Other payables                                  --          --          --          --           --           --            --


NON INTEREST BEARING
Trade receivables                       991,177             --          --          --           --           --     991,177
Other receivables                       205,399         8,666           --          --           --       1,026      215,091
Financial receivables                     4,379             --          --          --           --           --        4,379
Securities                              266,552             --          --          --       9,890      107,341      383,783
Available-for-sale financial assets     372,867             --          --          --           --           --     372,867
Cash and cash equivalents                   362             --          --          --           --           --          362
Bank overdraft facilities                       --          --          --          --           --           --            --
Bonds                                           --          --          --          --           --           --            --
Other borrowings                        (50,816)            --          --          --           --           --      (50,816)
Trade payables                         (748,322)            --          --          --           --           --    (748,322)
Other payables                         (266,465)       (1,466)     (7,066)          --           --           --    (274,997)



In accordance with the requirements of IAS 32 paragraph 74, the above chart shows the informa-
tion on interest rate risk with a breakdown by asset and liability group and by year of maturity.
This information was extrapolated from the balance sheet as of December 31 2006 and is shown
over a time horizon of 5 years on the basis of the way the interest accrues.




                                                                                         Consolidated Financial Statements       57
     6.     ACCOUNTING PRINCIPLES, CHANGES IN ACCOUNTING ESTIMATES AND ERRORS

     The criteria for making estimates and measurements are re-examined on a regular basis and are
     based on historical experience and on other factors such as expectations of possible future events
     that are reasonably likely to take place.

     If the initial application of a principle affects the current year or the previous one, its effect is rec-
     ognized by indicating the change resulting from any transitional rules, the nature of the change,
     the description of the transitional rules, which may also affect future years, and the amount of any
     adjustments relating to years preceding those being presented.
     If a voluntary change of a principle affects the current or previous year this effect is shown by in-
     dicating the nature of the change, the reasons for the adoption of the new principle, the amount of
     any adjustments made for years preceding those being presented.
     In the event of a new principle/interpretation issued but not yet endorsed, an indication is given of
     the fact, of its potential impact, the reason for the principle/interpretation, the date on which it will
     take effect and the date on which it will first be applied.

     A change in accounting estimates involves an indication of the nature and the impact of the
     change. Estimates are used mainly to show impairment of assets recorded, provisions made for
     risks, employees benefits, taxes and other provisions and reserves. Estimates and assumptions are
     reviewed regularly and the effects of any such changes are reflected in the income statement.

     Lastly, the treatment of accounting errors involves an indication of the nature of the error, the a-
     mount of the adjustments to be made at the beginning of the first accounting period after it was
     discovered.


     7.      NON-CURRENT ASSETS HELD FOR SALE (IFRS 5)

     A non-current asset is held for sale if its carrying value will be recovered principally through a
     sale rather than through use. For this condition to be satisfied the asset must be immediately sella-
     ble in its present condition and the sale must be considered as highly likely.
     The assets or groups of assets for disposal that are classified as held for sale are valued at the lo-
     wer of their carrying value and fair value less costs to sell.
     Individual assets or assets belonging to a group classified as held for sale are not amortized.
     The above assets are shown in the financial statements in a single item of the income statement
     giving the profits and losses net of taxes resulting from the sale. Similarly the assets and liabilities
     must be shown on a separate line of the Balance Sheet.




58   Consolidated Financial Statements
8.      INFORMATION ON THE BUSINESS SECTORS

The business sectors coincide with the Groups of companies in which CIR S.p.A. holds a control-
ling stake. These are:
- the Sorgenia group: utilities;
- the Espresso group: media;
- the Sogefi group: automotive components;
- the HSS group: healthcare.

Geographically speaking, with the exception of the Sogefi group, all the business activities are
carried out in Italy.
An analysis of the income contribution and the balance sheet and equity figures for the primary
sector is given in the Management Report, while the breakdown of revenues by geographical
segment (secondary sector) is given in the Explanatory Notes to the Financial Statements in the
section regarding revenues (note 14).
The breakdown by geographical area of the businesses, investments, amortization and write-
downs, as required by IAS 14, is given in the following chart.

(in thousands of euro)                                   Businesses    Investments       Amortization /
                                                                                          Write-downs
Italy                                                    4,489,149        391,957              62,249
Other European countries                                 1,701,199         31,642              40,639
North America                                               42,148          5,659               5,042
South America                                               70,360          6,249               4,012
Asia                                                         7,474            185                 836
Other countries                                                  --              --                  --
Consolidation adjustments                                 (536,016)         (1,144)             (9,840)
Total assets                                             5,774,314        434,548             102,938




                                                                      Consolidated Financial Statements   59
     BALANCE SHEET: NOTES


     9.      NON-CURRENT ASSETS


     9.a. INTANGIBLE ASSETS



     2005                                                                                     Opening balances         Changes for the period
                                                                                                       Balance   Purchases          Combinations
                                                                                                   01.01.2005                     sales of business
     (in thousands of euro)                                                                                                   increases          decreases
     Start-up and expansion costs                                                                         166          14             --                 --
     Capitalized development costs
        - purchased                                                                                         --          --           --                  --
        - produced internally                                                                          14,449       6,881            --                  --
     Industrial patents and intellectual
     property rights                                                                                    3,144       1,640           --                   (2)
     Concessions, licenses, trademarks & similar rights                                                11,975       4,330         324                 (359)
     Publication titles                                                                               400,244           2           --                    --
     Frequencies                                                                                       58,695      19,152     118,209                     --
     Goodwill                                                                                         176,238      11,551      44,398                     --
     Assets in process and advance payments
        - purchased                                                                                       335         923           --                    --
        - produced internally                                                                             681         622           --                    --
     Others                                                                                             1,114         794           --                   (4)
     Total                                                                                            667,041      45,909     162,931                 (365)




     2006                                                              Opening balances                                Changes for the period
                                                            Original   Accrued amortization            Balance   Purchases          Combinations
                                                              costs        and write-downs         31.12.2005                     sales of business
     (in thousands of euro)                                                                                                   increases          decreases
     Start-up and expansion costs                            3,199                  (3,168)                31           --            --                 --
     Capitalized development costs
        - purchased                                              --                      --                 --          --           --                  --
        - produced internally                               34,805                 (18,934)            15,871       6,469            --                  --
     Industrial patents and intellectual
     property rights                                        21,794                 (18,869)             2,925         418            --                   --
     Concessions, licenses, trademarks & similar rights     52,807                 (40,579)            12,228       4,104           70                   (9)
     Publication titles                                    400,245                       --           400,245           --           --                   --
     Frequencies                                           195,961                       --           195,961       5,025            --                   --
     Goodwill                                              284,067                 (52,572)           231,495      34,540       39,501                (451)
     Assets in process and advance payments
        - purchased                                           2,135                      --             2,135       4,783            --                  --
        - produced internally                                 1,519                      --             1,519         235            --                  --
     Others                                                  10,303                 (8,277)             2,026       1,625            --                 34
     Total                                                1,006,835              (142,399)            864,436      57,199       39,571                (426)




     Intangible assets rose from € 864,436 thousand at December 31 2005 to € 951,009 thousand at December 31 2006.
     The item Goodwill rose during the period mainly as a result of the acquisition of the Anni Azzurri group by HSS
     and of the acquisition of further shares in Gruppo Editoriale L'Espresso by CIR S.p.A..




60        Consolidated Financial Statements
                  Changes in the period                                             Closing Balances
Exchange rate        Other                 Net     Amortization and     Original     Accrued amortization         Balance
   differences     changes           disposals        write-downs         costs          and write-downs      31.12.2005
                                         costs
            7         (146)                  --                (10)      3,199                    (3,168)             31

           --            --                  --                  --          --                        --              --
         755        (1,233)                  --             (4,981)     34,805                   (18,934)         15,871

          29             --                   --            (1,886)     21,794                   (18,869)         2,925
         110           100                    --            (4,252)     52,807                   (40,579)        12,228
           --            --                  (1)                 --    400,245                         --       400,245
           --            --                (95)                  --    195,961                         --       195,961
           --         (692)                   --                 --    284,067                   (52,572)       231,495
                                                                                                                      --
           --          877                    --                 --       2,135                        --         2,135
          31           185                    --                 --       1,519                        --         1,519
         111           195                   (1)              (183)      10,303                   (8,277)         2,026
       1,043          (714)                (97)            (11,312)   1,006,835                (142,399)        864,436




                  Changes in the period                                             Closing Balances
Exchange rate        Other                 Net     Amortization and     Original     Accrued amortization         Balance
   differences     changes           disposals        write-downs         costs          and write-downs      31.12.2006
                                         costs
            --         (16)                  --                 (4)         38                         (27)           11

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

            (2)        85                    (1)            (1,580)     19,916                   (18,071)         1,845
          (49)      1,097                 (337)             (5,484)     57,110                   (45,490)        11,620
             --         --                    --                 --    400,245                         --       400,245
             --         --                (414)                  --    200,572                         --       200,572
             1         57                     --                 --    359,739                   (54,596)       305,143

           (70)     (1,976)                   --                 --       4,872                        --         4,872
           (19)          --                 (33)                 --       1,702                        --         1,702
           (44)      3,970                    --              (423)      15,129                   (7,941)         7,188
         (327)       4,362                (807)            (12,999)   1,104,066                (153,057)        951,009




                                                                                   Consolidated Financial Statements        61
     AMORTIZATION RATES


     Description                                                                                         %
     Capitalized development costs                                                               20-33%
     Industrial patents and intellectual property rights                                          4-20%
     Concessions, licences, trademarks and similar rights                                        16-30%
     Other intangible assets                                                                     16-30%




     A more detailed analysis of the main items of intangible assets is given in the following charts.

     Publication titles:
     (in thousands of euro)                                                   31.12.2006       31.12.2005
     la Repubblica                                                              229,952          229,952
     Il Piccolo / Messaggero Veneto                                             104,527          104,527
     Other local newspapers                                                      61,222           61,222
     Other titles                                                                 4,544             4,544
     Total                                                                      400,245          400,245



     Frequencies:
     (in thousands of euro)                                                   31.12.2006       31.12.2005
     Radio frequencies                                                           63,491           58,937
     Television frequencies                                                     137,081          137,024
     Total                                                                      200,572          195,961



     Goodwill:
     (in thousands of euro)                                                   31.12.2006      31.12.2005
     Gruppo Editoriale L’Espresso S.p.A.                                         116,307          98,447
     Sogefi S.p.A.                                                                91,293          91,292
     Energia Holding S.p.A.                                                       23,602          22,463
     Holding Sanità e Servizi S.p.A.                                              73,941          19,293
     Total                                                                       305,143         231,495




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




                                                                        Consolidated Financial Statements   63
     9.b. TANGIBLE ASSETS


     2005                                                                            Opening balances       Changes during the period
                                                                                           Net balance   Purchases         Combinations
                                                                                           01.01.2005                   sales of businesses
     (in thousands of euro)                                                                                           increases        decreases
     Land                                                                                     26,217          268              --          (1,213)
     Buildings used for business                                                             122,622        1,747         4,246          (12,506)
     Property, plant and equipment                                                           311,250       22,164         6,217            (7,325)
     Power stations                                                                            5,232           26              --               --
     Industrial and commercial equipment                                                      13,060        5,609           284              (101)
     Other assets                                                                             36,658       16,316         1,245            (1,299)
     Assets in process and advance payments                                                  243,264      185,380              --               --
     Total                                                                                   758,303      231,510        11,992          (22,444)




     2006                                                      Opening balances                             Changes during the period
                                                   Original   Accrued depreciation         Net balance   Purchases         Combinations
                                                      cost        and write-downs          31.12.2005                   sales of businesses
     (in thousands of euro)                                                                                           increases        decreases
     Land                                           26,533                   (152)            26,381        1,206         2,775                 --
     Buildings used for business                   202,408                (89,028)           113,380        2,240        43,785                 --
     Property, plant and equipment                 917,526              (613,797)            303,729       24,290        14,098               (82)
     Power stations                                  5,928                   (949)             4,979          255           501                 --
     Industrial and commercial equipment           100,800                (84,094)            16,706        5,723         2,309             (249)
     Other assets                                  153,349              (111,494)             41,855       15,189        16,422             (195)
     Assets in process and advance payments        390,942                      --           390,942      149,369         2,517                 --
     Total                                       1,797,486              (899,514)            897,972      198,272        82,407             (526)




     DEPRECIATION RATES

     Description                                        %

     Buildings used for business                     3.00%
     Plant and machinery                      10.00-25.00%

     Other assets:
     - Electronic office equipment                 20.00%
     - Furniture and fittings                      12.00%
     - Motor vehicles                              25.00%




64     Consolidated Financial Statements
                                Changes during the period                                                   Closing balances
Capitalized    Exchange rate             Other                     Net    Depreciation and      Original   Accrued depreciation        Balance
  financial      differences           changes              disposals        write-downs           cost        and write-downs     31.12.2005
 expenses                                                         cost
          --            319              1,238                   (448)                   --      26,533                   (152)       26,381
          --          2,032              2,659                   (837)              (6,583)     202,408                (89,028)      113,380
          --          6,465             24,596                   (360)            (59,278)      917,526              (613,797)       303,729
          --              --                 --                      --               (279)       5,928                   (949)        4,979
          --            200              4,730                   (215)              (6,861)     100,800                (84,094)       16,706
          --            337                382                 (1,309)            (10,475)      153,349              (111,494)        41,855
     7,118              445            (45,253)                    (12)                  --     390,942                      --      390,942
     7,118            9,798            (11,648)                (3,181)            (83,476)    1,797,486              (899,514)       897,972




                                Changes during the period                                                   Closing balances
Capitalized    Exchange rate             Other                     Net    Depreciation and      Original   Accrued depreciation        Balance
  financial      differences           changes              disposals        write-downs           cost        and write-downs     31.12.2006
 expenses                                                         cost
          --             (60)                77                  (215)                   --      30,306                    (142)       30,164
     1,500                42            30,149                   (712)              (7,474)     276,868                (93,958)       182,910
       609           (2,662)            30,360                 (1,101)            (58,041)      975,864              (664,664)        311,200
   16,292                  --          322,185                       --             (3,781)     345,161                  (4,730)      340,431
         98              (55)             4,281                (1,002)              (7,302)     103,120                (82,611)        20,509
          --           (420)              1,975                  (791)            (12,964)      190,782              (129,711)         61,071
          --           (255)          (397,346)                  (482)                   --     145,230                    (485)      144,745
   18,499            (3,410)             (8,319)               (4,303)            (89,562)    2,067,331              (976,301)      1,091,030




                                                                                                     Consolidated Financial Statements           65
     9.c. REAL ESTATE INVESTMENTS




     2005                                                                  Opening balances      Changes during the period
                                                                                Net balance   Purchases         Combinations
                                                                                01.01.2005                   sales of businesses
     (in thousands of euro)                                                                                increases        decreases
     Real estate                                                                       268           --            --               --
     Total                                                                             268           --            --               --




     2006                                            Opening balances                            Changes during the period
                                         Original   Accrued depreciation        Net balance   Purchases         Combinations
                                            cost       and write-downs          31.12.2005                   sales of businesses
     (in thousands of euro)                                                                                increases        decreases
     Real estate                          7,050                    (106)             6,944       3,119             --               --
     Total                                7,050                    (106)             6,944       3,119             --               --




     Real-estate investments rose from € 6,944 thousand at December 31 2005 to € 17,604 thousand at
     December 31 2006. The increases during the period refer to the completion of renovation work on
     a building situated in the centre of Milan, carried out during the year for € 3,119 thousand and
     reclassified in this item from Assets in process and advance payments for € 7,918 thousand.
     Its carrying value corresponds substantially to market value.




     DEPRECIATION RATES

     Description                              %

     Buildings                            3.00%




66   Consolidated Financial Statements
                                Changes during the period                                              Closing balances
Capitalized    Exchange rate             Other                    Net    Depreciation and   Original   Accrued depreciation       Balance
  financial       differences          changes              disposals        write-downs       cost        and write-downs    31.12.2005
 expenses                                                        cost
          --               --            6,782                      --              (106)    7,050                    (106)        6,944
          --               --            6,782                      --              (106)    7,050                    (106)        6,944




                                Changes during the period                                              Closing balances
Capitalized    Exchange rate             Other                    Net    Depreciation and   Original   Accrued depreciation       Balance
  financial       differences          changes              disposals        write-downs       cost        and write-downs    31.12.2006
 expenses                                                        cost
          --               --            7,918                      --              (377)   18,087                    (483)       17,604
          --               --            7,918                      --              (377)   18,087                    (483)       17,604




                                                                                              Consolidated Financial Statements             67
     LEASING

     The position of assets under leasing as of December 31 2006 and of restrictions applied to tangi-
     ble assets on account of guarantees and commitments is as follows:

     (in thousands of euro)                              Gross leasing amount               Accrued depreciation                   Restrictions for
                                                                                                                             guarantees and commitments
                                                              2006           2005                 2006           2005               2006              2005
     Land                                                    3,556            827                    --             --              1,851            2,678
     Buildings                                              54,403         14,844                4,340          2,914             36,573             6,939
     Property, plant and equipment                          32,382         24,104               12,999         11,408            569,392           251,558
     Other assets                                            2,937          1,498                  804            477               4,910          341,069



     9.d.       INVESTMENTS IN COMPANIES VALUED AT EQUITY

     (in thousands of euro)
     2005                                       %         Balance    Increases    Decreases     Dividends         Contributions             Other        Balance
                                                      01.01.2005                                                  Loss          Income    changes    31.12.2005
     Aire/Tirreno Power (*)                  50.00      170,688              --            --             --         --       19,762        3,295      193,745
     Le Scienze S.p.A.                       50.00           185             --            --       (121)            --           284           --          348
     Saire S.r.l.                            50.00           348             --            --             --         --            15           --          363
     Editoriale La Libertà S.p.A.            35.00        22,691             --            --       (875)            --           917       (190)        22,543
     Altrimedia S.p.A.                       35.00           683             --            --       (140)            --           128           --          671
     Allevard Ressorts Composites S.A.       50.00           392             --            --             --       (20)             --          --          372
     KS Automotive Suspensions
     Asia Private Ltd                        50.00         5,562             --            --             --    (2,490)             --        (72)        3,000
     Total                                               200,549             --            --     (1,136)       (2,510)       21,106        3,033      221,042


     (*) On June 30 2005 the merger by incorporation of Aire into Tirreno Power became effective. Following the merger by incorporation of the controlling com-
         pany (a reverse merger), Tirreno Power is now controlled equally by Energia Italiana and Eblacea




     (in thousands of euro)
     2006                                       %         Balance    Increases    Decreases     Dividends         Contributions             Other        Balance
                                                      31.12.2005                                                  Loss          Income    changes    31.12.2006
     Aire/Tirreno Power                      50.00       193,745             --            --    (39,960)            --       33,018          252      187,055
     Le Scienze S.p.A.                       50.00           348             --        (285)              --         --           129           --          192
     Saire S.r.l.                            50.00           363             --            --             --         --            16           --          379
     Editoriale La Libertà S.p.A.            35.00        22,543             --        (875)              --         --         1,072           --       22,740
     Editoriale Corriere di Romagna S.r.l.   49.00             --       2,940              --             --         --            41           --        2,981
     Altrimedia S.p.A.                       35.00           671             --        (105)              --         --           149           --          715
     Allevard Ressorts Composites S.A.       50.00           372             --            --             --     (271)              --          --          101
     KS Automotive Suspensions
     Asia Private Ltd                            --        3,000             --      (3,000)              --         --             --          --            --
     Total                                               221,042        2,940        (4,265)     (39,960)        (271)        34,425          252       214,163




68   Consolidated Financial Statements
9.e.    OTHER EQUITY INVESTMENTS

(in thousands of euro)                                        %         31.12.2006          31.12.2005
Dumenil Leblé Belgium (in liquidation)                   100.00               298                  331
Ansa S. Coop. A.R.L.                                      17.32             2,209                2,209
E-Ink Corporation                                          0.26             1,481                1,481
Tecnoparco Valbasento                                     20.00               516                  516
Emittenti Titoli S.p.A.                                    5.44               132                  132
Anemon S.p.A.                                                 --                --               1,763
Others                                                        --            3,894                1,097
Total                                                                       8,530                7,529

The investments in subsidiaries refer to companies being liquidated. These are recorded in the fi-
nancial statements at cost, written down where appropriate to reflect loss of value and are consid-
ered to be substantially equivalent to the fair value of the same.


9.f.      OTHER RECEIVABLES

The item “Other receivables” had a balance at December 31 2006 of € 250,991 thousand com-
pared with € 261,403 thousand at December 31 2005 and refers for € 169,905 thousand
(€ 163,008 thousand at December 31 2005) to the long-term loan made by Energia Italiana to Tir-
reno Power at market conditions to finance its development plan. At December 31 2006 this item
also included € 48,967 thousand (€ 81,546 thousand at December 31 2005) of tax assets referring
to VAT rebates requested by the Sorgenia group. The decrease compared with the previous year
is due to the rebate received by Energia Molise S.p.A..


9.g.      SECURITIES

“Securities” totalled € 98,583 thousand at December 31 2006 compared with € 59,841 thousand
at December 31 2005 and refer entirely to investments in private equity funds. These funds were
measured at fair value recognizing to the fair value reserve an amount of € 20,352 thousand
(€ 12,482 thousand at December 31 2005). During the year the portion of the fair value reserve
relating to these funds charged to the income statement € 5,378 thousand. At December 31 2006
the remaining investment committed to private equity funds was € 20,000 thousand.


9.h.      DEFERRED TAXES

The amounts refer to taxes resulting from temporary differences deductible and from losses car-
ried forward, which are deemed to be recoverable.




                                                                       Consolidated Financial Statements   69
     The breakdown of “Deferred tax assets and liabilities” by type of temporary difference, is as fol-
     lows:

     (in thousands of euro)                                          2006                        2005
                                                                 Amount                      Amount
                                                           of temporary         Tax    of temporary         Tax
                                                             differences      effect     differences      effect
     Temporary difference liabilities from:
       - write-down of current assets                           46,286       16,257         37,362       13,208
       - write-down of fixed assets                             40,816       14,096         29,419       15,104
        - revaluation of current liabilities                     8,545        2,734         24,845        7,669
        - revaluation of personnel provisions                   38,484       12,676          9,332        3,069
        - revaluation of provisions for risks and losses        41,041       13,366         63,232       18,179
        - write-down of financial instruments                   10,810        3,644         12,029        4,094
        - tax losses of prior periods                         143,379        47,853         64,100       21,068
     Total deferred tax assets                                329,361       110,626       240,319        82,391



     Temporary difference assets from:
       - revaluation of current assets                          4,626         1,499          3,300        1,117
       - revaluation of fixed assets                          356,276       128,871        325,895      117,159
        - write-down of current liabilities                      4,704        1,513          6,995        1,850
        - valuation of personnel provisions                      7,558        2,504          6,871        2,282
        - write-down of provisions for risks and losses          2,391         806             191         633
        - revaluation of financial instruments                   6,905        2,550          8,755        3,219
     Total deferred tax liabilities                           382,460       137,743       352,007       126,260
     Net deferred taxes                                                     (27,117)                    (43,869)


     The deferred taxes credited directly to shareholders’ equity during the period amounted to € 528
     thousand.

     Earlier losses not utilized for the calculation of deferred taxes refer to the Espresso group for € 18
     million, the company CIR International for € 541.5 million that can be carried forward indefi-
     nitely and the Sogefi group for € 10 million. It should be pointed out that no deferred tax assets
     were calculated for these losses because at present conditions are such that there is no certainty
     that they can be recovered.




70   Consolidated Financial Statements
10.       CURRENT ASSETS


10.a. INVENTORIES

Inventories can be broken down as follows:

(in thousands of euro)                                                31.12.2006           31.12.2005
Raw materials, secondary materials and consumables                        76,973               72,304
Work in progress and semi-finished goods                                  13,033               13,579
Finished goods and merchandise                                          127,043                76,948
Advance payments                                                              33                   33
Total                                                                   217,082               162,864

Inventories of finished goods and merchandise rose mainly as a result of the higher volumes of
gas stored for marketing and sale by Sorgenia S.p.A..
The value of stocks is shown net of any write-down made either in past periods or in this current
one and take into account the degree of obsolescence of finished goods, merchandise and secon-
dary materials.


10.b. TRADE RECEIVABLES

(in thousands of euro)                                                31.12.2006           31.12.2005
Receivables - clients                                                   988,534               784,505
Receivables – subsidiaries                                                 6,914                5,665
Receivables – affiliated companies                                         1,029                  574
Total                                                                   996,477               790,744

“Receivables - clients” are non-interest bearing and have an average maturity in line with market
conditions. The net increase is mainly due to the increase in revenues.
Trade receivables are shown net of any write-downs accounting for credit risk. During 2006 pro-
visions were made to the reserve for the write-down of receivables for the sum of € 10,515 thou-
sand compared with € 7,228 thousand in 2005.

“Receivables - subsidiaries” represent intercompany receivables not eliminated because they refer
to companies not fully consolidated line-by-line. The balance at December 31 2006 refers mainly
to receivables from CIGA Luxembourg.


10.c. OTHER RECEIVABLES

(in thousands of euro)                                                31.12.2006           31.12.2005
Financial receivables from affiliated companies                                --                 256
Tax receivables                                                         163,862               146,327
Receivables – others                                                    110,130                54,779
Total                                                                   273,992               201,362




                                                                      Consolidated Financial Statements   71
     “Tax receivables” amounted to € 163,862 thousand up from € 146,327 thousand at December 31
     2005. The rise in the balance of this item is mainly due to the higher VAT receivable of Energia
     Molise S.p.A. linked to the investment in the Termoli power plant and to higher duties due to in-
     creased volumes in the Sorgenia group.


     10.d.     FINANCIAL RECEIVABLES

     “Financial receivables” declined from € 26,513 thousand at December 31 2005 to € 21,354 thou-
     sand at December 31 2006 and refer essentially to the fair value of outstanding interest rate swap
     contracts on Bonds.


     10.e.     SECURITIES

     This item consists of the following categories of securities:

     (in thousands of euro)                                                                   31.12.2006   13.12.2005
     Italian Government securities or equivalent securities                                      25,208       41,093
     Investments funds or similar funds                                                         248,578       53,939
     Bonds                                                                                       49,947       97,203
     Certificates of deposit and miscellaneous securities                                       330,515      275,724
     Total                                                                                      654,248      467,959


     (in thousands of euro)                                                                   31.12.2006   31.12.2005
     Of which held for trading                                                                  607,568      438,429
     Of which in application of the fair value option due to the presence of an implied de-
                                                                                                 46,680       29,530
     rivative
     Total                                                                                      654,248      467,959

     The fair value of the item “Securities” involved a negative adjustment to the statement of income
     of € 13.7 million, of which € 10.9 million referred to securities held for trading.


     10.f. AVAILABLE-FOR-SALE FINANCIAL ASSETS

     This item refers in its entirety to shares in hedge funds and redeemable shares in asset manage-
     ment companies held by Medinvest which collects excess liquidity that the Group has available
     on a regular basis. The degree of liquidity of the investment is a function of the time required for
     the redemption of the funds in which Medinvest invests, which normally varies from one to three
     months.
     Diversification between categories of funds give the performance of Medinvest a low level of
     volatility.
     Assigning a fair value to the funds held by Medinvest meant making an adjustment to the value
     of these funds which at December 31 2006 amounted to € 146,075 thousand (€ 136,524 thou-
     sands at December 31 2005). The effects of this valuation on CIR’s shareholders’ equity for the
     amount pertaining to the Group total € 127,115 thousand (€ 118,803 thousand at December 31




72   Consolidated Financial Statements
2005). The amount of fair value recognized to the income statement after the sale of some of the
funds came to € 11,508 thousand.
To cover the exchange rate risk resulting from the translation of the part of the equity of Medin-
vest denominated in $USD into the functional currency of the Group, hedging contracts were en-
tered into, the effects of which are indicated under item 11.b. “Reserves” in the breakdown of the
”Translation reserve”.


10.g. CASH AND CASH EQUIVALENTS

Cash and cash equivalents decreased from € 762,289 thousand at December 31 2005 to € 446,484
thousand at December 31 2006.
A breakdown of the change during the period is given in the cash flow statement.



11.   SHAREHOLDERS’ EQUITY


11.a. SHARE CAPITAL

Share capital rose from € 389,620,833.50 at December 31 2005 (comprising 779,241,667 shares
each with a nominal value € 0.50) to € 390,239,533.50 (780,479,067 shares) at December 31
2006 as a result of the issuance of 1,237,400 shares in execution of the exercise of option rights
by beneficiaries of stock option plans.
At December 31 2006 the Company was holding 34,094,000 of it own shares (4.37% of share
capital) for a total value of € 76,884 thousand, up from 27,216,642 shares for a total value of
€ 61,320 thousand at December 31 2005.
In application of IAS 32, as from January 1 2005 the treasury stock held by the Parent Company
is being deducted from shareholders’ equity.

The share capital is fully subscribed and paid in. No shares carry any rights, privileges or restric-
tions on the distribution of dividends, except for the own shares held a treasury stock.

It should be pointed out that Board of Directors has been given the power for a period of five
years starting from April 27 2005 to increase the share capital either in one or several tranches up
to a maximum of € 500 million (nominal value) and for a further maximum of € 20 million
(nominal value) in favour of employees of the Company and of its subsidiaries and parent com-
panies.

Regarding stock option plans, at December 31 2006 there were 41,710,600 options in circulation,
corresponding to the same number of shares.
The total notional cost of the stock options assigned to employees, which was posted to a special
equity reserve, totalled € 2,213 thousand at December 31 2006.




                                                                         Consolidated Financial Statements   73
     11.b. RESERVES

     The evolution and breakdown of the item “Reserves” is given below:

     (in thousands of euro)                                   Additional      Legal   Fair value   Translation   Stock option      Other      Total
                                                                 paid-in    reserve     reserve       reserve         reserve   reserves   reserves
                                                                 capital

     Balance at January 1 2005                                   7,699     115,969      89,761         (1,389)         1,915    160,573    374,528
     Capital increases                                           2,273           --           --            --             --         --     2,273
     Shareholder resolution to buy back own shares               (3,553)         --           --            --             --    15,412     11,859
     Fair value recognition of hedging instruments                    --         --      1,424              --             --         --     1,424
     Fair value recognition of securities                             --         --     47,373              --             --         --    47,373
     Fair value reserve recognized to income statement                --         --      (7,608)            --             --         --    (7,608)
     Buy-back of own shares                                           --         --           --            --             --   (35,879)   (35,879)
     Recognition of notional cost of stock options                    --         --           --            --         5,737          --     5,737
     Effects of equity changes in subsidiaries                        --         --           --            --             --    (7,087)    (7,087)
     Currency translation adjustments                                 --         --           --        9,174              --         --     9,174

     Balance at December 31 2005                                 6,419     115,969    130,950           7,785          7,652    133,019    401,794
     Capital increases                                           1,076           --           --            --             --         --     1,076
     Cancellation of AGM resolution of April 27 2005 to buy
     back own shares                                            16,422           --           --            --             --   (71,238)   (54,816)
     Fair value recognition of hedging instruments                    --         --        478              --             --         --       478
     Fair value recognition of securities                             --         --     33,075              --             --         --    33,075
     Fair value reserve recognized to income statement                --         --    (16,893)             --             --         --   (16,893)
     Buy-back of own shares                                           --         --           --            --             --    (5,664)    (5,664)
     Recognition of notional cost of stock options                    --         --           --            --         2,213          --     2,213
     Effects of equity changes in subsidiaries                        --         --           --            --             --    20,751     20,751
     Currency translation adjustments                                 --         --           --      (14,235)             --         --   (14,235)

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


     The “Additional paid-in capital” reserve totalled € 23,917 thousand at December 31 2006 com-
     pared to € 6,419 thousand at December 31 2005. The change is due to the subscription of stock
     option plans for € 1,076 thousand and for € 16,422 thousand is due to the resolution adopted on
     April 27 2006 by the Ordinary Shareholders’ Meeting which cancelled the previous resolution of
     April 27 2005 to buy back own shares, giving a new authorization for eighteen months from the
     aforesaid date to buy back a maximum of 25,000,000 shares at a minimum price per share of
     € 0.50 and a maximum of € 4.00.

     The “Fair value reserve” totalled € 147,610 thousand at December 31 2006 and referred for
     € 20,352 thousand to the valuation of “Securities” in item 9.g., for € 127,115 thousand to the
     valuation of “Available-for-sale financial assets” in item 10.f. and for € 143 thousand to the
     valuation of hedging instruments.




74   Consolidated Financial Statements
The “Translation reserve” totalled € 6,450 thousand at December 31 2006 and consisted of the
following breakdown:

(in thousands of euro)
 (in thousands of euro)            31.12.2005       Increases           Decreases         31.12.2006
 Sogefi group                           5,952              --                (976)             4,976
 CIR Ventures                           1,032              --              (3,246)             (2,214)
 Medinvest                            36,435               --             (33,658)             2,777
 Medinvest hedging effect             (35,726)       23,645                     --            (12,081)
 Others                                   92               --                   --                92
 Total                                  7,785        23,645               (37,880)             (6,450)



The item “Other reserves” at December 31 2006 comprised the following:

(in thousands of euro)
 Reserve for capital increases                                                                       3
 Extraordinary reserve                                                                              21
 Consolidation reserve                                                                         76,844
 Total                                                                                         76,868

The movement of treasury stock during the period was as follows:

(in thousands of euro)                                             Number of shares               Value
Balance at December 31 2005                                            27,216,642               61,320
Increases                                                                6,877,358              15,564
Balance at December 31 2006                                            34,094,000               76,884



11.c. RETAINED EARNING (LOSSES)

The changes in Retained earnings (losses) are shown in the “Chart showing changes in Sharehol-
ders’ equity”.




                                                                       Consolidated Financial Statements   75
     12.      NON-CURRENT LIABILITIES


     12.a. BONDS

     The detail of the item “Bonds”, net of intercompany elimination, is as follows:

                                                          Effective rate   31.12.2006        Fair value      31.12.2005        Fair value
     (in thousands of euro)
                                                                                        at 31.12.2006                     at 31.12.2005
     CIR S.p.A. Bond issue 5.75% 2004/2024                       5.90%       266,382          252,445          266,225          262,502
     CIR International S.A. Bond issue 6.375% 2003/2011          6.03%       198,677          194,620          199,162          203,870
     CIR International S.A. Bond issue 5.25% 1999/2009           5.41%       414,192          414,192          424,769          424,769
     Gruppo Editoriale L’Espresso S.p.A. Bond issue
     5.125% 2004/2014                                            4.82%        308,499         295,452           309,095         315,558
     Total                                                                  1,187,750       1,156,709         1,199,251       1,206,699


     In application of IAS 32 and 39, at January 1 2005 the original values of bonds issued were writ-
     ten down to account for expenses incurred and bond issuance discounts. Liabilities relating to fi-
     xed/floating interest rate swaps entered into for hedging purposes were also recognized for an
     amount of € 5.3 million.

     At December 31 2006 CIR International was holding a nominal € 30,000 thousand (unchanged
     from December 31 2005) of the CIR 5.75% Bond issue 2004/2024.


     12.b. OTHER BORROWINGS

     (in thousands of euro)                                                                          31.12.2006              31.12.2005
     Loans from banks secured by collateral                                                               170,304                134,812
     Other loans from banks                                                                               558,140                496,319
     Leasing                                                                                               16,305                 19,799
     Other borrowings                                                                                      13,765                  3,855
     Total                                                                                                758,514                654,785

     The item “Other loans from banks” consists mainly of the following items:
     - € 59,000 thousand granted in 2003 to Energia Italiana by Banca Monte dei Paschi di Siena for
     the acquisition of Tirreno Power, with a maturity of January 2010 and a floating rate of Euribor
     plus 150 basis points;
     - € 24,500 thousand made during 2004 to Sorgenia, with a maturity of June 2009 - a syndicated
     loan organized by Banca Popolare di Vicenza with a floating rate of Euribor plus 140 basis
     points;
     - € 30,000 thousand made on December 23 2005 to Sorgenia by Centrobanca with a maturity of
     December 2009 at a floating rate;
     - € 254,776 thousand, € 141,673 thousand of which were paid out during the year to Energia Mo-
     lise by Banca Monte dei Paschi di Siena in relation to the construction of the Termoli thermoelec-
     tric power plant, maturing 2014 with a floating rate, and a non-recourse basis;
     - € 10,000 thousand, which refers to the share of a loan made to Sorgenia by Banca Monte dei
     Paschi di Siena at a floating rate and a maturity of 2011;
     - € 50,000 thousand, made to Sorgenia by Intesa BCI at a floating rate with a maturity of 2011;




76   Consolidated Financial Statements
- € 40,000 thousand, made during 2003 to Sogefi, as partial drawdown of a syndicated loan facil-
ity of € 100,000 thousand, with a maturity of December 2008 and a floating rate of Euribor plus
60 basis points;
- € 29,900 thousand, as partial drawdown of a loan agreement of € 50,000 thousand, entered into
by Sogefi S.p.A. during the year with a maturity of September 2011 and a floating rate of Euribor
plus 22.5 basis points;
- € 29,800 thousand, as partial drawdown of a loan agreement of € 100,000 thousand, entered into
by Sogefi S.p.A. during the year with a maturity of September 2011 and a floating rate of Euribor
plus 22.5 basis points.


12.c. PERSONNEL OBLIGATIONS

The detail of this item is the following:

(in thousands of euro)                                                31.12.2006           31.12.2005
Employee severance and leaving indemnity fund (TFR)                     126,794               120,431
Retirement fund and similar obligations                                   39,805                43,240
Total                                                                   166,554               163,671



(in thousands of euro)                                                31.12.2006           31.12.2005
Starting balance                                                         163,671              157,759
Provisions made for work done during the period                           18,924               16,522
Increases for interest                                                     5,416                5,804
Actuarial income or expense                                                 (781)               1,763
Benefits paid out                                                        (25,734)             (17,153)
Increases or decreases due to changes in consolidation area                5,018                (1,809)
Other changes                                                                 40                  785
Closing balance                                                          166,554              163,671

In compliance with IAS 19, personnel funds were valued using special actuarial methods based
on demographic, economic and financial factors.
The application of the corridor method generated an actuarial cost not recognized to the Income
Statement of € 5,008 thousand.
The data used for calculating the TFR fund, Pensions funds and the Defined Benefit Plan in-
cluded in the item “Retirement funds and similar obligations” are summarized in the following
chart:

TFR and Defined Benefit Provisions
 Annual discount rate for calculating present value                                      4.0% - 4.25%
 Annual inflation rate                                                                            2%
 Annual rate of pay increases                                                                2% - 3%
 Annual rate of TFR increase                                                                      3%
 Annual payout probability rate                                                                   4%
 Voluntary resignation rate                                                           2% - 5% of staff




                                                                      Consolidated Financial Statements   77
              Pension Funds
                Annual discount rate for calculating present value                                                                                                                              4.8%
                Annual inflation rate                                                                                                                                                           2.8%
                Annual rate of pay increases                                                                                                                                             3.25% - 4%
                Return on assets servicing the plan                                                                                                                                       3.25% - 6%
                Retirement age                                                                                                                                                                      63



              STOCK OPTION PLANS OUTSTANDING AT DECEMBER 31 2006

              The following chart shows the stock option plans of the Parent Company CIR S.p.A..


                                                Options in circulation         Options awarded                Options exercised                      Options in circulation                    Options exercisable
                                            at the beginning of the year        during the year                during the year                       at the end of the year                   at the end of the year
                                             No. of          Weighted       No. of          Weighted        No. of          Weighted       No. of          Weighted           Average        No. of          Weighted
                                             options          average       options          average        options          average       options          average           duration       options          average
                                                            strike price                   strike price                    strike price                   strike price         (years)                      strike price

     Stock Option Plan March 7 2000         3,110,000               3.70              --              --              --              --   3,110,000             3.70              3.75      3,110,000             3.70

     Stock Option Plan September 13 2000       70,000               4.06              --              --              --              --     70,000              4.06              4.25         70,000             4.06

     Stock Option Plan January 30 2001      1,743,000               2.62              --              --              --              --   1,743,000             2.62              4.75      1,743,000             2.62

     Stock Option Plan September 7 2001     2,359,600                1.28             --              --    100,800               1.28     2,258,800             1.28              5.00      2,258,800             1.28

     Stock Option Plan March 14 2002          578,600               1.20              --              --     70,300               1.20      508,300              1.20              5.75       508,300              1.20

     Stock Option Plan September 13 2002      769,400                1.02             --              --     82,300               1.02      687,100              1.02              6.17       687,100              1.02

     Stock Option Plan March 7 2003         1,141,800               0.84              --              --    436,500               0.84      705,300              0.84              6.75       468,550              0.84

     Stock Option Plan September 5 2003     1,353,800                1.13             --              --     99,000               1.13     1,254,800             1.13              7.17       747,700              1.13

     Stock Option Plan March 12 2004        2,031,900               1.60              --              --     91,500               1.60     1,940,400             1.60              7.75      1,075,100             1.60

     Stock Option Plan June 8 2004          3,500,000               1.60              --              --              --              --   3,500,000             1.60              2.46      3,500,000             1.60

     Stock Option Plan September 6 2004     2,212,100                1.56             --              --     96,600               1.56     2,115,500             1.56              8.17       921,800              1.56

     Stock Option Plan March 11 2005        4,407,800               2.34              --              --    175,400               2.34     4,232,400             2.34              8.75      1,663,000             2.34

     Stock Option Plan September 6 2005     2,790,000                2.49             --              --     85,000               2.49     2,705,000             2.49              9.17       752,000              2.49
                             st
     Stock Option Plan 2006 1 tranche                                       2,765,000              2.50               --              --   2,765,000             2.50            10.01        331,800              2.50

     Stock Option Plan 2006 2nd tranche                                     2,765,000              2.47               --              --   2,765,000             2.47            10.50                 --              --

     Total                                 26,068,000               2.03    5,530,000              2.49    1,237,400              1.37 30,360,600                2.14              6.98     17,837,150             2.08


     TREASURY STOCK HELD

     Stock Option Plan January 11 2005     11,550,000               2.15              --              --    200,000               2.15 11,350,000                2.15              3.33     11,350,000             2.15

     Total                                 11,550,000               2.15              --              --    200,000               2.15 11,350,000                2.15              3.33     11,350,000             2.15



     Grand total                           37,618,000               2.07    5,530,000              2.49    1,437,400              1.48 41,710,600                2.14              5.99     29,187,150             2.11




78            Consolidated Financial Statements
12.d. PROVISIONS FOR RISKS AND LOSSES

The breakdown and changes in the non-current part of these provisions is as follows:

                                                Provision for             Provision for          Provisions for        Total
(in thousands of euro)
                                         disputes in progress    restructuring charges      miscellaneous risks
Balance at December 31 2005                           19,925                   15,597                    6,943       42,465
Sums set aside during the period                      2,938                     5,488                    2,680       11,106
Withdrawals                                           (1,696)                 (14,941)                  (1,520)     (18,157)
Exchange rate differences                               (140)                       14                     (11)        (137)
Other changes                                         (3,952)                    (253)                   5,609        1,404
Balance at December 31 2006                          17,075                     5,905                   13,701       36,681

The breakdown and changes in the current part of these provisions is as follows:

                                                 Provision for             Provision for         Provisions for        Total
(in thousands of euro)
                                          disputes in progress    restructuring charges     miscellaneous risks
Balance at December 31 2005                             5,326                     2,829                35,451        43,606
Sums set aside during the period                       1,961                     2,301                  11,671       15,933
Withdrawals                                            (3,341)                  (1,327)                 (6,957)     (11,625)
Other changes                                          2,867                       253                  (3,571)        (451)
Balance at December 31 2006                            6,813                     4,056                  36,594       47,463

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


13.       CURRENT LIABILITIES


13.a. OTHER BORROWINGS

(in thousands of euro)                                                                     31.12.2006             31.12.2005
Loans from banks secured by collateral                                                         43,339                12,023
Other loans from banks                                                                         30,211               109,811
Leasing                                                                                         2,602                 2,910
Other borrowings                                                                               57,752                50,887
Loans from subsidiaries                                                                           230                   250
Total                                                                                         134,134               175,881




                                                                                           Consolidated Financial Statements   79
     The item “Other loans from banks” at December 31 2005 included a loan of € 80,000 thousand
     made in 2001 to Sogefi and repaid in December 2006.


     13.b. TRADE PAYABLES

     (in thousands of euro)                                                 31.12.2006        31.12.2005
     Payables - subsidiaries                                                   16,928            16,560
     Payables - affiliated companies                                              639                 694
     Payables - suppliers                                                     730,658           629,809
     Advance payments                                                             627                2,052
     Payables in the form of notes                                                 49                 651
     Total                                                                    748,901           649,766

     The item “Payables - subsidiaries” refers mainly to the trade payable due by Sorgenia S.p.A. to
     Tirreno Power S.p.A..

     Trade payables are settled on average between 60 and 90 days and are not subject to interest.


     13.c. OTHER PAYABLES

     (in thousands of euro)                                                 31.12.2006        31.12.2005
     Due to employees                                                          65,913            58,617
     Tax payables                                                             111,267            60,555
     Social security payables                                                  34,385            32,635
     Other payables                                                            62,397            61,961
     Total                                                                    273,962           213,768




80   Consolidated Financial Statements
INCOME STATEMENT: NOTES


14.         REVENUES

BREAKDOWN BY BUSINESS SECTOR

(in millions of euro)                                           2006                                     2005                Change
                                                     amount                 %                amount               %              %
Utilities                                            1,916.1              46.3               1,225.2            36.2            56.4
Media                                                1,102.6              26.7               1,079.9            31.9              2.1
Automotive components                                1,018.6              24.6               1,023.4            30.3             (0.5)
Healthcare                                              99.2               2.4                  53.8             1.6            84.4
Others                                                    0.3                --                  0.4              --             n.s.
Total consolidated revenues                          4,136.8             100.0               3,382.7        100.0               22.3



BREAKDOWN BY GEOGRAPHICAL AREA

(in millions of euro)
2006                              Total      Italy    Other European                North      South              Asia         Other
                              revenues                      countries             America     America                       Countries
Utilities                      1,916.1    1,913.3                2.8                    --          --                 --           --
Media                         1,102.6     1,102.6                   --                  --          --                 --           --
Automotive components         1,018.6       98.5                757.5                25.1       123.4             9.6             4.5
Healthcare                        99.2      99.2                    --                  --          --                 --           --
Others                             0.3        0.3                   --                  --          --                 --           --
Total consolidated revenues   4,136.8     3,213.9               760.3                25.1       123.4             9.6             4.5
Percentage                    100.0%       77.7%                18.4%               0.6%        3.0%             0.2%           0.1%



(in millions of euro)
2005                              Total      Italy    Other European                North      South              Asia         Other
                              revenues                      countries             America     America                       Countries
Utilities                      1,225.2    1,225.2                   --                  --          --                 --           --
Media                         1,079.9     1,079.9                   --                  --          --                 --           --
Automotive components         1,023.4      111.9                756.2                29.9       112.2             9.7             3.5
Healthcare                        53.8      53.8                    --                  --          --                 --           --
Others                             0.4        0.4                   --                  --          --                 --           --
Total consolidated revenues   3,382.7     2,471.2               756.2                29.9       112.2             9.7             3.5
Percentage                    100.0%       73.1%                22.3%               0.9%        3.3%             0.3%           0.1%


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




                                                                                             Consolidated Financial Statements           81
     15.     OPERATING COSTS AND REVENUES


     15.a. COSTS FOR THE PURCHASE OF GOODS

     This item rose from € 1,818,934 thousand in 2005 to € 2,457,185 thousand in 2006.
     The increase recorded (+35.1%) is mainly attributable on the one hand to the Sorgenia group, be-
     ing closely connected to the rate of revenue growth in the utilities sector (+56.4%), and on the
     other hand to the Sogefi group as a result of the rise in the cost of steel and in production volumes.


     15.b. COSTS FOR SERVICES

     This item rose from € 674,847 thousand in 2005 to € 711,792 thousand in 2006, as can be seen
     from the following breakdown:

     (in thousands of euro)                                                        2006              2005
     Technical and professional consulting                                       95,407             83,977
     Distribution and transportation costs                                       45,727             47,508
     Outsourcing                                                                110,514            127,524
     Other expenses                                                             460,144            415,838
     Total                                                                      711,792            674,847

     The rise in costs for services (+5.5%) was however in part due to the increased turnover of the
     Group which in turn led to a greater need for external services.


     15.C. PERSONNEL EXPENSES

     Personnel expenses totalled € 575,342 thousand in 2006 (€ 545,777 thousand in 2005).

     The Group had an average of 10,654 employees in 2006.

     (in thousands of euro)                                                        2006              2005
     Salaries and wages                                                         396,869            375,378
     Social security contributions                                              121,902            117,329
     Severance and leaving indemnity                                             14,099             14,800
     Retirement and similar benefits                                              4,007              5,238
     Valuation of stock option plans                                              9,726             11,000
     Other costs                                                                 28,739             22,032
     Total                                                                      575,342            545,777




82   Consolidated Financial Statements
15.d. OTHER OPERATING REVENUES

This item can be broken down as follows:

(in thousands of euro)                                                   2006                  2005
State grants and contributions                                           6,608               21,916
Capital gains on disposals                                               5,008                1,201
Non-recurring gains and other income                                    68,647               69,326
Total                                                                   80,263               92,443

The item “Non-recurring gains and other income” was positively affected by the penalties billed
by the Sorgenia group to the EPC Contractor as “liquidated damage cost”.


15.e. OTHER OPERATING COSTS

This item can be broken down as follows:

(in thousands of euro)                                                   2006                  2005
Write-downs and losses on receivables                                   12,070               10,289
Provisions made for risks and losses                                     9,430               13,018
Indirect taxes                                                          17,589               15,727
Taxes relating to prior periods                                             24               16,371
Restructuring charges                                                    5,234               12,513
Capital losses on disposal of assets                                      209                 1,172
Non-recurring losses and other charges                                  22,095               13,358
Total                                                                   66,651               82,448

The balance of the item “Taxes relating to prior periods” for 2005 included € 16,059 thousand of
taxes for the year 1989, relating to charges and tax credits concerning voting rights on shares.
These tax liabilities were the result of an unfavourable ruling by the Tax Commission against
which an appeal has been lodged.

The item “Restructuring charges” went down by € 7,279 thousand from the previous year because
less restructuring was carried out than in the previous year mainly in the Sogefi group.




                                                                    Consolidated Financial Statements   83
     16.     FINANCIAL INCOME AND EXPENSES


     16.a. FINANCIAL INCOME

     The item “Other income” includes the following:

     (in thousands of euro)                                                    2006              2005
     Interest income on bank accounts                                         15,048           18,813
     Interest on securities                                                   20,924           14,446
     Other interest income                                                    14,968           14,404
     Interest rate derivatives                                                 4,801           16,728
     Gains from exchange rate differences                                      3,721           12,867
     Other financial income                                                    7,714            6,254
     Total                                                                    67,176           83,512



     16.b. FINANCIAL EXPENSES

     This item includes the following:

     (in thousands of euro)                                                    2006              2005
     Interest expense on bank accounts                                        27,759           14,608
     Interest expense on bonds                                                63,455           75,169
     Other interest expense                                                   21,638           19,533
     Interest rate derivatives                                                  944             1,187
     Losses from exchange rate differences                                     8,352            6,498
     Other financial expenses                                                  7,615           14,662
     Total                                                                   129,763          131,657

     The item “Interest rate derivatives” for the sum of € 944 thousands includes € 101 thousand which
     refers to the net fair value estimation of hedging transactions.


     16.c GAINS FROM TRADING SECURITIES

     The breakdown of “Gains from trading securities” is the following:

     (in thousands of euro)                                                    2006              2005
     Shares and options - subsidiaries                                         1,069            5,646
     Shares and options - other companies                                     44,536           50,621
     Other securities and other gains                                         50,934           38,827
     Total                                                                    96,539           93,094




84   Consolidated Financial Statements
16.d. LOSSES FROM TRADING SECURITIES

The breakdown of “Losses from trading securities” is the following:

(in thousands of euro)                                                                            2006             2005
Shares and options - subsidiaries                                                                2,384             4,175
Shares and options - other companies                                                            40,061           49,957
Other securities and other losses                                                               11,585           11,395
Total                                                                                           54,030           65,527




17.     INCOME TAXES

Income taxes can be broken down as follows:

(in thousands of euro)                                                                        2006                  2005
Current taxes                                                                              104,447                77,483
Deferred taxes                                                                              (14,969)             (12,730)
Total                                                                                        89,478               64,753



The following chart shows the reconciliation of the ordinary tax rate and the effective tax rate for
financial year 2006:

 (in thousands of euro)                                                                                            2006
 Pre-tax income resulting from financial statements                                                             303,918
 Theoretical income taxes                                                                                       100,294
 Tax effect of non-deductible costs                                                                              13,508
 Tax effect of losses of prior periods that generate deferred tax assets in the period                          (39,491)
 Tax effect of losses of prior periods that did not generate deferred tax assets                                  2,763
 Tax effect on interest rate differentials of foreign companies                                                   (6,065)
 Non-taxable grants                                                                                                (998)
 Other                                                                                                            (8,629)
 Income taxes                                                                                                    61,382
 Average effective tax rate                                                                                     20.20%
 Theoretical tax rate                                                                                           33.00%
 IRAP and other taxes                                                                                            28,096
 Total taxes from financial statements                                                                           89,478



18.     EARNINGS PER SHARE

The basic earnings per share is calculated by dividing the net income for the period attributable to
ordinary Shareholders by the weighted average number of shares in circulation. The diluted earn-
ings per share is calculated by dividing the net income for the period attributable to ordinary



                                                                                         Consolidated Financial Statements   85
     Shareholders by the weighted average number of ordinary shares in circulation during the period,
     adjusted for the capital dilution effects of any options outstanding. The calculation of the shares in
     circulation does not include own shares held as treasury stock.
     The company has only one category of potential ordinary shares, which are those shares resulting
     from the stock options assigned to employees.
     To determine the average number of options, the average fair value of the shares for the period
     under examination (financial year 2006) was used. The average fair value of CIR ordinary shares
     in 2006 was € 2.391 compared to an average fair value of € 2.311 in 2005.

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

                                                                                   2006               2005
     Net income attributable to the Shareholders (in thousands of euro)         101,120             87,675
     Weighted average number of ordinary shares in circulation               748,300,414        758,420,760
     Earnings per share (euro)                                                   0.1351             0.1156



                                                                                   2006               2005
     Net income attributable to the Shareholders (in thousands of euro)         101,120             87,675
     Weighted average number of ordinary shares in circulation               748,300,414        758,420,760
     Weighted average number of options                                       38,608,367         35,125,550
     Fair value of weighted average number of options                          4,575,961          4,891,852
     Adjusted weighted average number of shares circulation                  752,876,375        763,312,612
     Diluted earnings per share (euro)                                           0.1343             0.1149




     OTHER INFORMATION


     19.     GUARANTEES AND COMMITMENTS

     At December 31 2006 the guarantee and commitment position was as follows:

     CIR S.p.A.

     - Guarantees issued in favour of the ENI group following the agreements for the supply of Nor-
       wegian and Libyan gas starting from October 2001. Supply contracts generally include take or
       pay clauses with purchase price revision based on the trend of certain oil products. These
       clauses are substantially in line with normal market conditions;
     - Guarantees in favour of Inland Revenue for VAT credits totalling € 6,781 thousand;
     - Government securities pledged as collateral for financial option transactions for a total of
       € 19,500 thousand;
     - Commitments for investment in private equity funds made by CIR International for € 20,000
       thousand.




86   Consolidated Financial Statements
Sorgenia Group

Guarantees issued

As collateral for loans obtained by the companies Energia Molise S.p.A. and Energia Modugno
S.p.A. (a loan currently being finalized), the shares of the two companies have been pledged in
favour of the lenders for € 78,000 thousand (equal to 100% of the capital) and € 24,458 thousand
(equal to 90% of the capital) respectively.

Guarantees

These refer to guarantees issued by banks in favour of suppliers of electricity and gas to protect
supply contracts.

Commitments

Sorgenia S.p.A. has also issued a guarantee in favour of the banks lending to Energia Molise
S.p.A., following the administrative appeals pending with the Molise Administrative Court
(TAR). This commitment for the amount of € 305,986,273 corresponds to the principal amount of
the loan obtained by Energia Molise S.p.A. at December 31 2006.

Espresso group

Guarantees issued totalled € 8,507 thousand and referred to guarantees made by the parent com-
pany of the Group and the subsidiaries Elemedia, Editoriale La Nuova Sardegna and A. Manzoni
& C. for the lease of their respective premises and by the subsidiary Ksolutions in favour of Pub-
lic Administration clients with whom they have service contracts.
Commitments outstanding, for a total of € 3,351 thousand, referred to:
- contracts for the purchase of plant and equipment (€ 2,213 thousand) mainly for Repubblica
    and Editoriale La Nuova Sardegna as part of the full-colour project;
- risks linked to a ruling in the court case in which Editoriale FVG is involved (€ 1,138 thou-
    sand).

Sogefi group

Operating Leases

For accounting purposes, leasing and hire contracts are classified as operating leases when the fol-
lowing conditions apply:
- a significant part of the risks and benefits of ownership are maintained by the lessor;
- there are no options giving the right to buy the leased property at a price that does not represent
   the presumed market value of the same at the close of the period ;
- the duration of the contract does not extend over most of the useful life of the property rented
   or hired.
The rental payments for operating leases are recognized to the income statement in line with the
underlying contracts.

The main operating lease recorded refers to a contract signed by the American subsidiary Allevard
Spring U.S.A. Inc. for the lease of the production site situated in Prichard (West Virginia). The
contract terminates on October 27 2018 and the remaining instalments total USD 4,792 thousand,
of which USD 386 thousand by the end of the year.




                                                                        Consolidated Financial Statements   87
     Against this contract Sogefi S.p.A. has issued a guarantee for approximately 50% of the remain-
     ing lease instalments which is renewed at the end of each year on the basis of the remaining
     amount. There are no restrictions of any kind connected with this kind of leasing and at the end of
     the contract the US company will have the right to buy the property at a market price.

     Future lease payments in relation to the operating lease contracts of the Sogefi group at December
     31 2006 are as follows:

      (in thousands of euro)                                                2006                  2005
      Up to 1 year                                                          4,265                3,831
      Over 1 year but up to 5                                              11,594                8,589
      Over 5 years                                                          3,148                3,487
      Total                                                                19,007               15,907

     Commitments for investments

     At December 31 2006 there were commitments for investments for a total of € 1,014 thousand.

     Guarantees issued

     The detail of these guarantees is as follows:

      (in thousands of euro)                                                        2006           2005
      Guarantees in favour of third parties                                         3,008         2,601
      Other guarantees in favour of third parties                                   9,714         9,714
      Collateral security provided for debt shown on the balance sheet              5,681         5,905

     Guarantees issued refer to borrowings and are recognized at the value of the commitment out-
     standing as of the date of these accounts.
     The item Other guarantees in favour of third parties refers to the commitment of LPDN GmbH
     towards the employee pension fund of the two business divisions at the time of the acquisition
     made in 1996. This commitment is covered by contractual obligations on the part of the vendor, a
     prime German economic operator.
     Collateral security refers to bonds or privileges granted to lenders against loans obtained for the
     purchase of assets.

     Other risks

     At December 31 2006 the Sogefi group had assets belonging to third parties on the premises of its
     companies for € 4,700 thousand.


     20.      JOINT VENTURES

     The only company of the Group consisting of a joint venture is Tirreno Power. International ac-
     counting standards give two methods for consolidating holdings in joint ventures:
     . the reference method, which involves consolidation pro-rata;
     . the alternative method allowed, which is the equity method.
     The Group has adopted valuation according to the equity method for the sake of consistency with
     the way the accounts have been presented until now.


88   Consolidated Financial Statements
The chart below shows the key financial figures according to Italian accounting principles for the
company Tirreno Power:

 (in millions of euro)                   Financial year       Financial year            Change in          Change
                                                 2006                 2005         absolute terms              %
 Income Statement
 Electricity sold (TWh)                          12.4                  11.7                  0.7              6.0
 Revenues from sales and services               988.4                 772.7                215.7             27.9
 Gross operating margin (EBIT)                  229.0                 164.9                 64.1             38.9
 Net income                                      57.4                  15.4                 42.0            272.7



                                          31.12.2006            31.12.2005                               Change in
                                                                                                    absolute terms
 Balance Sheet
 Net capital invested                         1,260.9                1,286.4                                 25.5
 Net financial debt                             978.2                  981.2                                  (3.0)
 Shareholders’ equity                           282.7                  305.2                                (22.5)
 No. of employees                                626                    651                                  25.0

The pertinent part of the earnings of Tirreno Power, consolidated using the equity method on the
basis of values determined by the application of IAS/IFRS accounting standards, totalled € 33
million in 2006, up from € 19.8 million in 2005.

In accordance with the terms of the revised IAS 38, the goodwill of Tirreno Power was subjected
to an impairment test at December 31 2006.


21.      BUSINESS COMBINATIONS

Regarding business combinations, it should be remembered that on June 7 2006 the HSS group
acquired the Anni Azzurri group.

The following chart shows the balance sheet of the Anni Azzurri group at June 30 2006:

(in thousands of euro)
 Asset items                                              Equity and liability items
 Intangible assets                       103,750          TFR Fund                                         5,014
 Tangible assets                              882         Payables                                       148,389
 Financial assets                        117,308          Total payables                                153,403
 Total fixed assets                      221,940          Shareholders’ equity                           91,370
 Current assets                           22,833
 Total assets                            244,773          Total equity and liabilities                  244,773

The excess amount paid for acquiring the identifiable assets and liabilities as well as any potential
liabilities as of the date of the acquisition represents goodwill which in the case of the Anni
Azzurri group was recognized to the extent of € 50,615 thousand.




                                                                                 Consolidated Financial Statements    89
     During July 2006 the HSS group also acquired the companies Meia S.r.l. and Medipass S.p.A..
     The financial highlights at December 31 2006 of these companies are shown in the following
     chart:

      (in thousands of euro)                                                                               Medipass S.p.A.               Meia S.r.l.
      Fixed assets                                                                                                   14,923                  3,484
      Working capital                                                                                                 4,063                   (588)
      Net financial debt                                                                                            (16,443)                  (566)
      Non-current liabilities                                                                                         (1,311)                 (701)
      Shareholders’ equity                                                                                            1,232                  1,629


     From the acquisition of the above companies goodwill was recognized for € 2,840 thousand and €
     5,050 thousand respectively, which adequately represents the capacity of the companies to gener-
     ate future income and which were subjected to an impairment test at the end of the year.


     22.        NET FINANCIAL POSITION

     The net financial position can be broken down as follows:

     (in thousands of euro)                                                                                       31.12.2006            31.12.2005
     A.     Cash and bank deposits                                                                                    446,484              762,289
     B.     Other free cash flow                                                                                      372,867              362,930
     C.     Securities held for trading                                                                               654,248              467,959
     D.     Cash and cash equivalents (A) + (B) + (C)                                                               1,473,599            1,593,178
     E.     Current financial receivables                                                                              21,354               26,513
     F.     Current bank borrowings                                                                       (*)        (338,730)            (176,796)
     G.     Current part of non-current debt                                                                           (60,353)             (53,797)
     H.     Other current borrowings                                                                                      (231)                (250)
     I.     Current financial debt (F) + (G) + (H)                                                                   (399,314)            (230,843)
     J.     Net current financial position (I) + (E) + (D)                                                          1,095,639            1,388,848
     K.     Non-current bank borrowings                                                                   (**)       (728,444)            (631,131)
     L.     Bonds issued                                                                                           (1,187,750)          (1,199,251)
     M.     Other non-current borrowings                                                                  (**)        (30,070)             (23,654)
     N.     Non-current financial debt (K) + (L) + (M)                                                             (1,946,264)          (1,854,036)
     O.     Net financial position (J) + (N)                                                                         (850,625)            (465,188)

     (*) The amount of € 73,350 thousand (€ 338,730 - € 265,180) is included in the Balance Sheet under the item “Other borrowings”..
     (**) Classified under the item “Other borrowings” – Non-current liabilities



     23.       LEGAL DISPUTES

     Some companies of the Group have legal proceedings outstanding against which their respective
     Boards have set aside risk provisions for amounts considered to be appropriate, taking into ac-
     count the opinion of their consultants, based on the degree of likelihood that significant liabilities
     will actually occur.




90   Consolidated Financial Statements
24.         CHART SHOWING THE KEY FIGURES OF THE FINANCIAL STATEMENTS OF THE PARENT COMPANY
            COFIDE S.p.A.
            (Art. 2497-bis paragraph 4 Civil Code)



BALANCE SHEET
(in euro)


 ASSETS                                                                                    31.12.2005
 NON-CURRENT ASSETS                                                                      571,317,323
 CURRENT ASSETS                                                                            116,11,365
 TOTAL ASSETS                                                                              687,28,688



 LIABILITIES AND SHAREHOLDERS’ EQUITY                                                      31.12.2005
 SHAREHOLDERS’ EQUITY                                                                    569,283,982
 NON-CURRENT LIABILITIES                                                                  10,096,075
 CURRENT LIABILITIES                                                                     108,548,631
 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY                                              687,928,688



INCOME STATEMENT
(in euro)
                                                                                                 2005
 MISCELLANEOUS REVENUES AND INCOME                                                          1,816,056
 COSTS FOR PURCHASE OF GOODS                                                                   (63,256)
 COSTS FOR SERVICES                                                                        (2,545,774)
 PERSONNEL COSTS                                                                           (1,185,374)
 OTHER OPERATING COSTS                                                                       (363,560)
 AMORTIZATION, DEPRECIATION AND WRITE-DOWNS                                                   (45,925)
 OPERATING RESULT                                                                          (2,387,833)

 FINANCIAL INCOME                                                                           1,834,854
 FINANCIAL EXPENSES                                                                        (4,029,905)
 DIVIDENDS                                                                                 20,315,131
 GAINS FROM TRADING SECURITIES                                                                  31,800
 LOSSES FROM TRADING SECURITIES                                                              (296,860)
 ADJUSTMENTS TO THE VALUE OF FINANCIAL ASSETS                                                  (59,352)
 INCOME / (LOSS) BEFORE TAXES                                                              15,407,835
 INCOME TAXES                                                                                  15,817
 NET INCOME (LOSS) FOR THE YEAR                                                            15,423,652

The financial highlights of the parent company COFIDE S.p.A. are shown in the chart above,
which is required by article 2497-bis of the Civil Code, and are extrapolated from the financial
statements of that company for the year ended December 31 2005. For a correct and full under-
standing of the equity and financial situation of COFIDE S.p.A. at December 31 2005, and of the
results the company obtained in the year ended as of that date, we would refer readers to the fi-
nancial statements in question which of course include the Report of the Statutory Auditors and
that of the Independent Auditors and are available at the Company offices or with Borsa Italiana.


                                                                     Consolidated Financial Statements    91
                              CIR GROUP


Consolidated Financial Statements of directly controlled subsidiaries
                     as of December 31 2006




                         SORGENIA GROUP
                         ESPRESSO GROUP
                         SOGEFI GROUP
                         HSS GROUP




                                                                        93
     SORGENIA GROUP



     CONSOLIDATED BALANCE SHEET
     (in thousands of euro)

     ASSETS                                                31.12.2006    31.12.2005

     NON-CURRENT ASSETS
     Intangible assets                                        13,011         8,554
     Tangible assets                                         507,524       365,042
     Investments in companies valued at equity               187,055       193,745
     Other equity investments                                  2,899         2,284
     Other non-current receivables                           219,710       246,063
     Advance taxes                                            11,004         6,051
     TOTAL NON-CURRENT ASSETS                                941,203       821,739

     CURRENT ASSETS
     Inventories                                              65,956        18,995
     Trade current receivables                               444,818       275,891
     Other current receivables                               117,142        46,844
     Cash and cash equivalents                                59,756        17,968
     Shareholder receivables for capital to be called up         420           495
     TOTAL CURRENT ASSETS                                    688,092       360,193
     TOTAL ASSETS                                          1,629,295     1,181,932




     LIABILITIES AND SHAREHOLDERS' EQUITY                  31.12.2006    31.12.2005

     SHAREHOLDERS'EQUITY
     Share capital                                              8,077        8,009
     Other accrued reserves                                  371,613       358,002
     Payments on account dividends minority shareholders       (8,513)           --
     Net income (loss) for the year                           69,217        36,802
     Retained earnings (losses) - group                       76,709        55,180
     TOTAL SHAREHOLDERS'EQUITY                               517,103       457,993
     of which:
     SHAREHOLDERS' EQUITY - GROUP                             396,906       345,188
     MINORITY INTERESTS                                       120,196       112,805

     NON-CURRENT LIABILITIES
     Deferred tax liabilities                                  1,337           739
     Personnel provisions                                      1,730         1,535
     Provisions for risks and losses                           5,358             --
     Non-current bank borrowings                             428,276       412,703
     TOTAL NON-CURRENT LIABILITIES                           436,701       414,977

     CURRENT LIABILITIES
     Current bank borrowings                                 233,347        35,137
     Other current borrowings                                      9         1,081
     Current trade payables                                  379,110       256,528
     Other current liabilities                                52,927        12,703
     Provisions for current risks and losses                  10,098         3,513
     TOTAL CURRENT LIABILITIES                               675,491       308,962
     TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY            1,629,295     1,181,932




94
SORGENIA GROUP



CONSOLIDATED INCOME STATEMENT
(in thousands of euro)

                                                                2006          2005

SALES REVENUES                                             1,916,085     1,225,178


Change in inventories                                         46,812        11,817
Costs for purchase of goods                                (1,847,333)   (1,211,854)
Costs for services                                            (42,624)      (15,116)
Personnel costs                                               (18,715)      (12,544)
Other operating income                                        49,249        49,468
Other operating costs                                         (16,098)      (11,509)
Adjustments to the value of investments valued at equity      33,018        19,762
Amortization, depreciation and write-downs                     (7,731)       (2,883)

OPERATING INCOME (LOSS)                                      112,663        52,319

Financial income                                              12,509        12,034
Financial expenses                                            (21,322)      (14,283)
Dividends                                                          24            25
INCOME (LOSS) BEFORE TAXES FROM
OPERATING ACTIVITY                                           103,874        50,095

Income taxes                                                  (34,657)      (13,293)

INCOME (LOSS) AFTER TAXES FROM
OPERATING ACTIVITY                                            69,217        36,802

Income (Loss) from businesses sold                                  --            --

NET INCOME (LOSS) FOR THE YEAR                                69,217        36,802
of which:
  - NET INCOME (LOSS) - MINORITY INTERESTS                    56,264        29,061
  - NET INCOME (LOSS) - THE GROUP                             12,953         7,741




                                                                                       95
     ESPRESSO GROUP



     CONSOLIDATED BALANCE SHEET
     (in thousands of euro)

     ASSETS                                          31.12.2006   31.12.2005

     Intangible assets with indefinite useful life     638,163      633,552
     Other intangible assets                             4,432        4,476
     Intangible assets                                 642,595      638,028
     Tangible assets                                   233,337      249,975
     Investments valued at equity                       27,007       23,925
     Other equity investments                            4,043        4,072
     Non-current receivables                             3,075        2,610
     Deferred tax asset receivables                     68,667       47,494
     NON-CURRENT ASSETS                                978,724      966,104

     Inventories                                        35,631       32,186
     Trade receivables                                 285,804      266,391
     Securities                                             50           52
     Financial receivables                              37,205       59,921
     Other receivables                                  25,437       22,631
     Cash and cash equivalents                         172,643      204,942
     CURRENT ASSETS                                    556,770      586,123

     TOTAL ASSETS                                    1,535,494    1,552,227



     LIABILITIES                                     31.12.2006   31.12.2005

     Share capital                                      65,150       65,072
     Reserves                                          344,215      342,462
     Retained earnings (losses)                         49,828       26,138
     Net income (loss) for the year                    103,561      116,336
     Total equity - Group                              562,754      550,008
     Minority interests                                 10,526       10,775
     SHAREHOLDERS' EQUITY                              573,280      560,783

     Borrowings                                        413,898      432,606
     Provisions for risks and losses                    12,018       13,369
     TFR and other personnel provisions                107,704      104,954
     Deferred tax liability payables                   110,818      102,556
     NON-CURRENT LIABILITIES                           644,438      653,485

     Borrowings                                         21,517       25,015
     Provisions for risks and losses                    12,500       10,029
     Trade payables                                    175,989      196,707
     Taxes payable                                      22,769       16,145
     Other payables                                     85,001       90,063
     CURRENT LIABILITIES                               317,776      337,959
     TOTAL LIABILITIES                                 962,214      991,444

     TOTAL LIABILITIES AND SHAREHOLDERS'EQUITY       1,535,494    1,552,227




96
ESPRESSO GROUP



CONSOLIDATED INCOME STATEMENT
(in thousands of euro)

                                                 2006         2005

Revenues                                     1,102,565    1,079,919
Change in product inventories                     (327)       2,094
Other operating income                         17,284       34,454
Purchasing costs                              (171,407)    (158,921)
Service costs                                 (439,622)    (433,297)
Other operating expenses                       (17,021)     (19,463)
Valuation of investments at equity               1,407        1,344
Personnel costs                               (288,464)    (283,890)
Amortization, depreciation and write-downs     (41,165)     (44,772)
Operating income (loss)                       163,250      177,468
Net financial income (expenses)                (19,601)     (25,560)
Income before taxes                           143,649      151,908
Taxes                                          (39,750)     (35,116)

NET INCOME                                    103,899      116,792

Net income - minority interests                  (338)        (456)
Net income - the group                        103,561      116,336

Basic earnings per share                         0.243        0.271
Diluted earning per share                        0.234        0.262




                                                                       97
     SOGEFI GROUP

     CONSOLIDATED BALANCE SHEET
     (in thousands of euro)

     ASSETS                                                          31.12.2006    31.12.2005
     CURRENT ASSETS
        Cash and cash equivalents                                        51,519        55,390
        Securities and financial assets held for trading                    160         2,116
        Working capital
        Inventories                                                     111,709       107,793
        Trade receivables                                               226,992       232,803
        Other receivables                                                 6,010         4,250
        Tax receivables                                                  10,952        13,824
        Other assets                                                      2,391         2,438
        TOTAL WORKING CAPITAL                                           358,054       361,108
     TOTAL CURRENT ASSETS                                               409,733       418,614
     NON-CURRENT ASSETS
     FIXED ASSETS
        Land                                                             15,623        15,972
        Property, plant and machinery                                   229,176       239,249
        Other tangible assets                                             4,450         4,684
        Of which in leasing                                              18,259        19,605
        Intangible assets                                               117,403       113,878
     TOTAL FIXED ASSETS                                                 366,652       373,783
     OTHER NON-CURRENT ASSETS
        Equity investments in affiliated companies                          101         3,372
        Other financial assets available for sale                           450           443
        Financial receivables                                               301             --
        Other receivables                                                 5,305         3,540
        Advance taxes                                                    26,819        26,779
     TOTAL OTHER NON-CURRENT ASSETS                                      32,976        34,134
     TOTAL NON-CURRENT ASSETS                                           399,628       407,917
     NON-CURRENT ASSETS HELD FOR SALE                                     2,646             --
     TOTAL ASSETS                                                       812,007       826,531



     LIABILITIES AND SHAREHOLDERS' EQUITY                            31.12.2006    31.12.2005
     CURRENT LIABILITIES
       Current bank borrowings                                           13,278        26,353
       Current portion of long-term borrowings and other loans           18,578        93,876
       of which leasing                                                   1,186         1,213
       TOTAL SHORT-TERM FINANCIAL DEBT                                   31,856       120,229
       Other short term borrowings for cash flow hedges                       --          132
       TOTAL SHORT-TERM FINANCIAL DEBT AND CASH FLOW HEDGES              31,856       120,361
       Trade and other payables                                         234,514       224,050
       Taxes payable                                                      8,210         7,897
       Other current liabilities                                          2,359         2,558
     TOTAL CURRENT LIABILITIES                                          276,939       354,866
     NON-CURRENT LIABILITIES
     TOTAL MEDIUM/LONG-TERM DEBT AND CASH FLOW HEDGES
       Bank borrowings                                                  128,402        83,549
       Other medium/long-term borrowings                                 18,000        20,755
       of which leasing                                                  15,306        17,199
       TOTAL MEDIUM/ LONG-TERM DEBT                                     146,402       104,304
       Other medium/long-term debt for cash flow hedges                       --          139
     TOTAL MEDIUM/LONG-TERM DEBT AND CASH FLOW HEDGES                   146,402       104,443
     OTHER LONG-TERM LIABILITIES
       Long term provisions                                              68,465        83,969
       Other payables                                                         --           21
       Deferred tax liabilities                                          24,478        21,946
     TOTAL OTHER LONG-TERM LIABILITIES                                   92,943       105,936
     TOTAL NON-CURRENT LIABILITIES                                      239,345       210,379
     SHAREHOLDERS' EQUITY
       Share capital                                                     58,826        58,338
       Reserves and retained earnings (losses)                          170,013       143,930
       Net Income (loss) for the year - group                            50,767        44,660
     TOTAL SHAREHOLDERS' EQUITY ATTRIBUTABLE TO THE PARENT COMPANY      279,606       246,928
       Minority interests                                                16,117        14,358
     TOTAL SHAREHOLDERS' EQUITY                                         295,723       261,286
     TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                         812,007       826,531

98
SOGEFI GROUP

CONSOLIDATED INCOME STATEMENT
(in thousands of euro)

                                                       2006         2005

Sales revenues                                     1,018,579    1,023,421
Variable sales costs                                653,215      657,636
CONTRIBUTION MARGIN                                 365,364      365,785
Manufacturing and R&D overheads                     114,264      115,641
Amortization and depreciation                        45,036       45,911
Distribution, marketing and sales fixed costs        37,719       39,362
Administrative costs and overheads                   61,761       59,237
OPERATING INCOME                                    106,584      105,634
Restructuring costs                                   5,234       12,637
Capital losses (gains) on disposals                   (3,969)         (75)
Exchange rate (gains) losses                            843           (58)
Other non-operating costs (revenues)                 21,010       12,150
- of which non-recurring                              6,547            --
EBIT                                                 83,466       80,980
Net financial expenses (income)                      10,182       11,547
Losses (gains) from equity investments                (1,594)       2,349
INCOME BEFORE TAXES AND MINORITY INTERESTS           74,878       67,084
Income taxes                                         21,543       21,179
NET INCOME BEFORE MINORITY INTERESTS                 53,335       45,905
Loss (income) attributable to Minority Interests      (2,568)      (1,245)
NET INCOME OF THE GROUP                              50,767       44,660
Earning per share (euro):
Basic                                                  0.457        0.406
Diluted                                                0.454        0.404




                                                                             99
      HSS GROUP


      CONSOLIDATED BALANCE SHEET *
      (in thousands of euro)


      ASSETS                                                                                                              31.12.2006                          31.12.2005

      NON-CURRENT ASSETS                                                                                                     175.576                               31.541
      INTANGIBLE ASSETS                                                                                                       74.589                               19.707
      TANGIBLE ASSETS                                                                                                         96.168                               11.130
      OTHER EQUITY INVESTMENTS                                                                                                    10                                    9
      OTHER RECEIVABLES                                                                                                        1.332                                  240
      SECURITIES                                                                                                               1.252                                    --
      DEFERRED TAX ASSETS                                                                                                      2.225                                  455
      CURRENT ASSETS                                                                                                           52.852                              32.609
      INVENTORIES                                                                                                               1.044                                 585
      TRADE RECEIVABLES                                                                                                        39.252                              13.495
      OTHER RECEIVABLES                                                                                                         3.898                               1.404
      CASH AND CASH EQUIVALENTS                                                                                                 8.658                              17.125
      NON-CURRENT ASSETS HELD FOR SALE                                                                                         44.943                                      --
      TOTAL ASSETS                                                                                                           273.371                               64.150




      LIABILITIES AND SHAREHOLDERS'EQUITY                                                                                 31.12.2006                          31.12.2005

      SHAREHOLDERS' EQUITY                                                                                                     64.060                              27.774
      SHARE CAPITAL                                                                                                             4.286                                2.428
      RESERVES                                                                                                                 69.635                              30.716
      RETAINED EARNINGS (LOSSES)                                                                                              (10.435)                              (5.933)
      TOTAL EQUITY - GROUP                                                                                                     63.486                              27.211
      MINORITY INTERESTS                                                                                                           574                                 563
      NON-CURRENT LIABILITIES                                                                                                  83.271                              11.802
      OTHER BORROWINGS                                                                                                         74.825                              10.304
      OTHER PAYABLES                                                                                                            1.178                                   --
      DEFERRED TAX LIABILITIES                                                                                                    917                                 676
      PERSONNEL PROVISIONS                                                                                                      6.351                                 822
      CURRENT LIABILITIES                                                                                                      89.698                              24.574
      BANK OVERDRAFT FACILITIES                                                                                                 9.776                                 694
      BONDS                                                                                                                         --                                  --
      OTHER BORROWINGS                                                                                                         34.763                               1.942
      TRADE PAYABLES                                                                                                           31.266                              17.377
      OTHER PAYABLES                                                                                                           12.571                               4.287
      PROVISIONS FOR RISKS AND LOSSES                                                                                           1.322                                 274
      LIABILITIES DIRECTLY ASSOCIATED WITH NON-CURRENT ASSETS
      HELD FOR DISPOSAL                                                                                                        36.342                                      --
      TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                                                             273.371                               64.150




      * This consolidated balance sheet was prepared solely for the purpose of drawing up the CIR Consolidated Financial Statements, since the parent company HSS S.p.A.
        is exempt from the obligation to prepare consolidated accounts according to Art. 27 of D.L. no. 127/91




100
 HSS GROUP

 CONSOLIDATED INCOME STATEMENT *
 (in thousands of euro)

                                                                                                                           2006                                2005

 REVENUES FROM SALES AND SERVICES                                                                                        99.189                              53.798
 CHANGE IN INVENTORIES                                                                                                       161                                      --
 COSTS FOR PURCHASE OF GOODS                                                                                              (8.308)                            (4.884)
 COSTS FOR SERVICES                                                                                                     (57.071)                            (39.474)
 PERSONNEL COSTS                                                                                                        (23.162)                             (7.108)
 OTHER OPERATING INCOME                                                                                                    1.752                              1.915
 OTHER OPERATING EXPENSE                                                                                                  (6.111)                            (3.796)
 ADJUSTMENTS TO THE VALUE OF INVESTMENTS
 VALUED AT EQUITY                                                                                                               --                                    --
 AMORTIZATION DEPRECIATION AND WRITE-DOWNS                                                                                (4.110)                            (1.143)

 OPERATING RESULT - (EBIT)                                                                                                2.340                                (692)

 FINANCIAL INCOME                                                                                                            372                                263
 FINANCIAL EXPENSES                                                                                                       (3.656)                               (550)
 DIVIDENDS                                                                                                                      --                                    --
 GAINS FROM TRADING SECURITIES                                                                                                  --                                    --
 LOSSES FROM TRADING SECURITIES                                                                                                 --                                    --
 ADJUSTMENTS TO THE VALUE OF FINANCIAL ASSETS                                                                                   --                                    --
 INCOME/(LOSS) BEFORE TAXES                                                                                                 (944)                              (979)

 INCOME TAXES                                                                                                             (2.934)                               (397)

 INCOME/(LOSS) FROM DISCONTINUED OPERATIONS
 AND BUSINESSES HELD FOR DISPOSAL                                                                                           (933)                                     --
 NET INCOME/(LOSS) FOR THE PERIOD INCLUDING MINORITY INTERESTS                                                            (4.811)                            (1.376)

   - NET INCOME/LOSS - MINORITY INTERESTS                                                                                   (379)                                (14)
   - NET INCOME/LOSS - THE GROUP                                                                                          (4.432)                            (1.362)




* The consolidated income statement was prepared solely for the purpose of drawing up the CIR Consolidated Financial Statements since the parent company HSS S.p.A.
  is exempt from the obligation to prepare consolidated accounts according to Art. 27 of D.L. no. 127/91




                                                                                                                                                                           101
                CIR S.p.A.

Statutory Financial Statements
   as of December 31 2006


               BALANCE SHEET

             INCOME STATEMENT

           CASH FLOW STATEMENT

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY




                                               CIR S.p.A.   103
       1.          BALANCE SHEET
       (in euro)

       ASSETS                                       Notes           31.12.2006                     31.12.2005


       NON-CURRENT ASSETS                                                  968,361,309                  919,464,511
       INTANGIBLE ASSETS                             (5.a)                        80,583                         55,667
       TANGIBLE ASSETS                               (5.b)                    4,575,792                   11,911,546
       REAL-ESTATE INVESTMENTS                       (5.c)                   17,604,580                    6,944,487
       EQUITY INVESTMENTS                            (5.d)                 944,482,717                   898,728,609
       MISCELLANEOUS RECEIVABLES                     (5.e)                       188,832                        211,859
       DEFERRED TAX ASSETS                           (5.f)                    1,428,805                    1,612,343

       CURRENT ASSETS                                                      357,257,579                  409,885,235
       MISCELLANEOUS RECEIVABLES                     (6.a)                   86,031,991                   52,328,165
            of which with related parties            (6.a)   34,450,292                    6,522,269
       BONDS                                         (6.b)                 206,493,818                   180,962,954
       CASH AND CASH EQUIVALENTS                     (6.c)                   64,731,770                  176,594,116
       TOTAL ASSETS                                                       1,325,618,888                1,329,349,746



       LIABILITIES AND SHAREHOLDERS' EQUITY                                  31.12.2006                   31.12.2005


       SHAREHOLDERS' EQUITY                                                940,738,402                  953,217,713
       SHARE CAPITAL                                 (7.a)                 390,239,534                   389,620,834
       RESERVES                                      (7.b)                 311,985,099                   369,175,921
       RETAINED EARNINGS (LOSSES)                    (7.c)                 201,816,767                   189,622,482
       NET INCOME FOR THE YEAR                                               36,697,002                    4,798,476

       NON-CURRENT LIABILITIES                                             297,378,012                  297,286,488
       BONDS                                         (8.a)                 295,640,119                   295,483,269
       DEFERRED TAX LIABILITIES                      (5.f)                       179,863                        340,908
       PERSONNEL OBLIGATIONS                         (8.b)                    1,558,030                    1,462,311

       CURRENT LIABILITIES                                                  87,502,474                    78,845,545
       BANK OVERDRAFT FACILITIES                                                   1,903                             --
       BORROWINGS FROM RELATED PARTIES               (9.a)                   43,756,650                   42,102,350
       OTHER PAYABLES                                (9.b)                   40,709,217                   33,708,491
       PROVISIONS FOR RISKS AND LOSSES               (9.c)                    3,034,704                    3,034,704
       TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                         1,325,618,888                1,329,349,746




104   CIR S.p.A.
2.      INCOME STATEMENT
(in euro)

                                                         Notes            2006                          2005

MISCELLANEOUS REVENUES AND INCOME                         (10)                   6,276,030                     7,149,870
      of which from related parties                       (10)    5,560,164                     5,296,000
COSTS FOR SERVICES                                        (11)                   (9,719,835)                   (8,874,996)
     of which with related parties                        (11)   (1,955,000)                   (1,777,000)
PERSONNEL COSTS                                           (12)                   (9,090,746)                 (10,567,262)
OTHER OPERATING COSTS                                     (13)                   (1,771,695)                   (1,552,276)
AMORTIZATION, DEPRECIATION AND WRITE-DOWNS                                        (547,683)                     (211,994)
OPERATING INCOME (LOSS)                                                        (14,853,929)                  (14,056,658)

FINANCIAL INCOME                                          (14)                 12,728,507                     12,213,754
FINANCIAL EXPENSES                                        (15)                 (20,958,308)                  (19,092,713)
     of which with related parties                                1,953,683                     1,335,446
DIVIDENDS                                                 (16)                 61,079,051                     42,791,314
     of which from related parties                        (16)   61,045,596                    42,747,274
GAINS FROM TRADING SECURITIES                             (17)                   1,520,047                       688,750
LOSSES FROM TRADING SECURITIES                            (18)                   (4,913,463)                    (282,188)
ADJUSTMENTS TO THE VALUE OF FINANCIAL ASSETS              (19)                   (6,972,689)                   (6,710,323)
INCOME / (LOSS) BEFORE TAXES AND NON-RECURRING CHARGES                         27,629,216                    15,551,936
TAX EXPENSES FROM PRIOR PERIODS                           (20)                            --                 (16,058,875)
INCOME / (LOSS) BEFORE TAXES                                                   27,629,216                       (506,939)
INCOME TAXES                                              (21)                   9,067,786                     5,305,415
NET INCOME FOR THE YEAR                                                        36,697,002                      4,798,476




BASIC EARNINGS PER SHARES (in euro)                                                 0.0490                        0.0063
EARNINGS PER SHARE (in euro)                                                        0.0487                        0.0063




                                                                                                             CIR S.p.A.      105
      3.          CASH FLOW STATEMENT
      (in euro)

                                                                                                     2006                          2005

      OPERATING ACTIVITY
      NEET INCOME FOR THE YEAR                                                                             36,697,002                     4,798,476
      ADJUSTMENTS:
        AMORTIZATION, DEPRECIATION AND WRITE-DOWNS                                                            547,683                       211,994
        LOSSES/(GAINS) FROM THE SALE OF EQUITY INVESTMENTS
        AND CURRENT SECURITIES                                                                              4,135,940                     4,179,031
        ACTUARIAL VALUATION OF STOCK OPTION PLANS                                                           2,212,607                     5,736,787
        PROVISIONS TO SEVERANCE AND LEAVING INDEMNITY FUND (TFR)                                              239,739                       232,368
        ADJUSTMENTS TO THE VALUE OF FINANCIAL ASSETS                                                        6,972,689                     6,710,323
        (INCREASE) REDUCTION IN NET WORKING CAPITAL                                                       (24,846,430)                    7,908,220
                                                  of which with related parties            (27,928,023)                   10,291,090
        OTHER NON-MONETARY CHANGES                                                                                   --                  (9,328,415)
      CASH FLOW FROM OPERATING ACTIVITY                                                                    25,959,230                   20,448,784
      of which:
      - interest received (paid out)                                                                        (6,182,035)                   (8,765,173)
      - dividends received                                                                                 61,079,051                    42,791,314
      - inflows (disbursements) for income taxes *                                                           9,527,755                     3,602,464


      INVESTING ACTIVITY

      PURCHASE OF CURRENT SECURITIES                                                                      (35,440,285)                  (63,581,537)
      PURCHASE OF FIXED ASSETS                                                                            (50,850,254)                  (26,292,766)
      CASH FLOW FROM INVESTING ACTIVITY                                                                   (86,290,539)                  (89,874,303)


      FINANCING ACTIVITY
      PROCEEDS FROM CAPITAL INCREASES                                                                       1,695,042                     3,614,613
      PAYMENT OF SEVERANCE AND LEAVING INDEMNITY                                                             (144,020)                     (132,280)
      BUY-BACK OF OWN SHARES                                                                              (15,563,782)                  (35,878,184)
      DIVIDENDS PAID TO SHAREHOLDERS                                                                      (37,520,180)                  (38,008,840)
      OTHER CHANGES                                                                                                  --                     507,757

      CASH FLOW FROM FINANCING ACTIVITY                                                                   (51,532,940)                  (69,896,934)

      INCREASE (DECREASE) IN NET CASH AND CASH EQUIVALENTS                                            (111,864,249)                    (139,322,453)

      NET CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                                176,594,116                  315,916,569

      NET CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                       64,729,867                  176,594,116




      * The amounts refer to current tax receivables received from the tax consolidation




106   CIR S.p.A.
4.          STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY



(in euro)                                                                           Share             Reserves            Retained            Net income                   Total
                                                                                   capital                         earnings (losses)         for the year

BALANCE AT JANUARY 1 2005                                                  388,278,784          385,186,096           213,553,049            26,644,945        1,013,662,874
Capital increases                                                             1,342,050            2,272,563                       --                    --            3,614,613
Dividends to Shareholders                                                                --                   --       (12,071,908)         (25,936,932)          (38,008,840)
Portion of net income available to Board of Directors                                    --                   --                   --           (708,013)               (708,013)
AGM resolution to buy back own shares                                                    --       11,858,659           (11,858,659)                      --                    --
Buy-back of own shares                                                                   --      (35,878,184)                      --                    --       (35,878,184)
Notional recognition of stock options                                                    --        5,736,787                       --                    --            5,736,787
Net income for the year                                                                  --                   --                   --         4,798,476                4,798,476

BALANCE AT DECEMBER 31 2005                                                389,620,834          369,175,921           189,622,482             4,798,476          953,217,713
Capital increases                                                               618,700            1,076,342                       --                    --            1,695,042
Dividends to Shareholders                                                                --                   --       (32,721,704)          (4,798,476)          (37,520,180)
Cancellations of AGM resolution of April 27
2005 to buy-back own shares                                                              --      (54,815,390)          54,815,390                        --                    --
Buy-back of own shares                                                                   --   (*) (5.664.381)           (9,899,401)                      --       (15,563,782)
Notional recognition of stock options                                                    --        2,212,607                       --                    --            2,212,607
Net income for the year                                                                  --                   --                   --        36,697,002               36,697,002

BALANCE AT DECEMBER 31 2006                                                390,239,534          311,985,099           201,816,767            36,697,002          940,738,402




(*) Reduction of the reserve for "Buy-back of own shares" (note 11.b. consolidated financial statements and note 7.b. statutory financial statements of CIR S.p.A.)




                                                                                                                                                                 CIR S.p.A.         107
EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS OF THE PARENT
COMPANY




1.     ACCOUNTING PRINCIPLES APPLIED

These financial statements have been prepared in accordance with international accounting stan-
dards (IAS/IFRS) and their respective interpretations (Standing Interpretation Committee) pub-
lished by the International Accounting Standards Boards (IASB) and are expressed in euro.


1.a.   Intangible assets (IAS 38)

Intangible assets are recognized only if they can be separately identified, if it is probable that they
will generate future economic benefits and if the cost can be measured reliably.
Intangible assets with a finite useful life are valued at purchase or production cost net of deprecia-
tion and impairment.

Intangible assets are initially recognized at purchase or production cost. Purchase cost is repre-
sented by the fair value of payments and any additional cost directly incurred for preparing the as-
set for use. The purchase cost is the equivalent price in cash as of the date of the acquisition and,
where payment is deferred beyond normal terms of credit, the difference compared with the cash
price is recognized as interest for the whole period of deferment.

Amortization is calculated on a straight-line basis following the expected useful life of the asset
and starts when the asset is ready for use.

The carrying value of intangible assets is maintained as long as there is evidence that this value
can be recovered through use; to this end at least once a year an impairment test is carried out to
check that the intangible asset is able to generate future cash flows.
Intangible assets with an indefinite useful life are not amortized but are constantly monitored for
any permanent loss of value. It is mainly the newspaper and magazine titles and frequencies of the
Espresso Group that are considered as intangible assets with an indefinite useful life.

Development costs are recognized as intangible assets when their cost can be measured reliably,
when there is a reasonable assumption that the asset can be made available for use or for sale and
that it is able to generate future benefits. Once a year or any time there are reasons which justify
it, capitalized costs are subjected to an impairment test.
Research costs are charged to the income statement as and when they are incurred.
Trademarks and licenses, which are initially recognized at cost, are subsequently accounted for
net of amortization and any impairment. The period of amortization is defined as the lower of the
contractual duration for use of the license and the useful life of the asset.
Software licenses, including associated costs, are recognized at cost and are recorded net of amor-
tization and of any impairment.




                                                                                              CIR S.p.A.   109
      1.b.    Tangible assets (IAS 16)

      Tangible assets are measured at purchase price or at production cost and are recognized net of any
      accrued depreciation.

      Cost includes associated expenses and any direct and indirect costs incurred at the moment of ac-
      quisition and necessary to make the asset ready for use.

      Fixed assets are depreciated on a straight-line basis for each year in relation to their remaining
      useful life.

      For some categories the values determined in this way can be doubled in the first three years of
      use. This is a technical and economic kind of depreciation which has no tax effect. The total net
      values are considered to be representative of the remaining useful life of the various assets.

      Extraordinary maintenance costs which determine an increase in the value or the functionality or
      the useful life of the assets, such as costs for improvements, renovations and conversions which
      increase value, are allocated directly to the assets to which they refer and are depreciated over the
      residual useful of the assets.
      Ordinary maintenance costs are charged to the income statement.

      Real estate (investment properties) not held for instrumental or operating purposes is classified
      under a special item of assets and is accounted for on the basis of the terms of IAS 40 “Investment
      properties”.

      Should there be any events which one can assume will cause a lasting reduction in the value of an
      asset, its carrying value is checked against its recoverable value, which is the higher of fair value
      and value in use.

      Fair value is defined on the basis of values expressed by the active market, by recent transactions
      or from the best information available to determine the potential amount obtainable from the sale
      of the asset.

      Value in use is determined from the net present value of cash flows resulting from the use ex-
      pected of the same asset, applying the best estimates of its residual useful life and a rate that also
      takes into account the implicit risk of the specific business sectors in which the Group operates.
      This valuation is carried out for each individual asset or for the smallest identifiable cash generat-
      ing unit (CGU).

      Where there is a negative difference between the values stated above and the carrying value then
      the asset’s carrying value is written down, while as soon as the reasons for such loss in value
      cease to exist then the asset is revaluated. Write-downs and revaluations are posted to the income
      statement.


      1.c.    Real estate investments/investment property (IAS 40)

      An investment property is a property, either land or building – or part of a building – or both, o-
      wned by the owner or by the lessee, with a financial leasing agreement, for the purpose of receiv-
      ing lease payments or for obtaining a gain on the capital invested or for both of these reasons, ra-



110   CIR S.p.A.
ther than for the purpose of directly using it for the production or supply of goods or services or
for administration of the company or for sales, in ordinary business activities.
The cost of an investment property is represented by its purchase price, any improvements made,
and any replacement and extraordinary maintenance.
According to the cost method, estimation is made net of depreciation and of any impairment.

At the moment of disposal or in the event of permanent non-use of the assets, all related income
and expenses will be charged to the income statement.


1.d.   Impairment of tangible assets (IAS 36)

Periodically and whenever events or changes in circumstance make it appropriate, tangible assets
are subjected to an impairment test to see whether they have undergone any loss in value.

The impairment test consists of an estimate of the recoverable value of the asset which is then
compared with its net carrying amount. If the recoverable value is lower than the carrying amount,
the latter is written down and the impairment loss is charged to the statement of income.
If at a later date the reasons for the write-down cease to exist, the original carrying amount is re-
stored and with the relative gain posted to the income statement.


1.e.    Investments in subsidiaries (IAS 27)

In accounting for investments in subsidiaries the cost method was adopted rather than fair value
measurement.


1.f.   Other equity investments

Investments in companies where the Company does not exercise a significant influence are ac-
counted under IAS 39 and are therefore classified as available-for-sale investments and are meas-
ured at fair value or at cost if it is not possible to determine a fair value or a market price.


1.g.   Receivables and payables (IAS 32 and 39)

Receivables are recognized at amortized cost and measured at their presumed realization value,
while payables are recognized at amortized cost.
Receivables and payables in foreign currencies, which are originally recognized at the spot rates
of the transaction date, are adjusted to the year-end spot exchange rates and any exchange gains
and losses are recognized to the income statement. Any net gain is recorded in a specific equity
reserve and cannot be distributed until it is realized.


1.h.   Securities (IAS 32 and 39)

In accordance with IAS 32 and IAS 39 investments in companies other than subsidiaries and af-
filiates are classified as available-for-sale financial assets and are measured at fair value.




                                                                                            CIR S.p.A.   111
      Gains and losses resulting from fair value adjustments are recorded in a special equity reserve. In
      the event of permanent losses of value or of disposal, the gains and losses recognized previously
      to shareholders’ equity are then posted to the income statement.

      This category also includes financial assets either bought or issued and then held for trading
      purposes or classified at fair value through profit and loss in application of the so-called fair
      value option.
      For a more complete description of the treatment of financial instruments we would refer readers
      to the note specially prepared on the subject.


      1.i.    Income taxes (IAS 12)

      Current taxes are recorded and determined on the basis of a realistic estimate of taxable income
      according to current tax regulations and taking into account any exemptions that apply.

      Deferred taxes are calculated on the basis of time differences, which are taxable or deductible, be-
      tween the carrying values of assets and liabilities and their tax bases and are classified under non-
      current assets and liabilities.
      A deferred tax asset is recognized to the extent that it is probable that future taxable profit will be
      available against which the temporary differences can be utilized.
      The carrying value of deferred tax assets is subject to periodic analysis and is reduced to the ex-
      tent to which it is no longer probable that there will be sufficient taxable income to allow the
      benefit of this deferred asset to be utilized.


      1.l.    Cash and cash equivalents (IAS 32 and 39)

      Cash and cash equivalents include cash in hand, call deposits and short-term and high-liquidity
      financial assets, which are easily convertible into cash and which have a risk of change in value
      that is irrelevant.


      1.m. Shareholders’ equity

      Ordinary shares are recorded at nominal value. Costs directly attributable to the issuance of new
      shares are deducted from the shareholders’ equity reserves, net of any related tax benefit.

      Own shares are classified in a special item and are deducted from reserves; any subsequent trans-
      action of sale, re-issuance or cancellation will have no impact on the income statement but will
      affect only shareholders’ equity.

      Unrealized gains and losses, net of tax, on financial assets classified as “available for sale” are re-
      corded in shareholders’ equity in the fair value reserve.
      The reserve is reversed to the income statement when the asset is realized or when a permanent
      impairment loss to the said asset is recognized.

      The item “Retained earnings (losses)” includes accrued income and losses and the transfer of bal-
      ances from other equity reserves when these become free of any limitations to which they have




112   CIR S.p.A.
been subject. This item also shows the cumulative effect of the changes in accounting principles
and/or the correction of errors which are accounted for in accordance with IAS 8.


1.n.   Borrowings (IAS 32 and 39)

Loans are initially recognized at cost, represented by their fair value net of ancillary costs in-
curred. Subsequently loans are measured at amortized cost calculated by applying the effective
interest rate, taking into consideration any issuance costs incurred and any premium or discount
applied at the time in which the instrument is settled.


1.o.   Provisions for risks and losses (IAS 37)

Provisions for risks and losses refer to liabilities which are extremely likely but where the amount
and/or maturity is uncertain. These are the result of past events which will cause a future dis-
bursement. Provisions are recognized exclusively in the presence of a current obligation, either
legal or constructive, towards third parties which implies an outflow and when a reliable estimate
of the amount involved can be made. The amount recognized as a provision is the best estimate of
the outflow required to fulfil the obligation as of the date of the financial statements. The provi-
sions recognized are re-examined at the closing date of each accounting period and are adjusted to
represent the best current estimate. Changes in the estimate are recognized to the income state-
ment.
When the estimated disbursement relating to the obligation is expected in a time horizon longer
than normal payment terms and the discount factor is significant, the provision represents the pre-
sent value, discounted at a risk-free interest rate, of the expected future payments necessary to dis-
charge the obligation.

Contingent assets and liabilities (possible assets and liabilities, or those not recognized because no
reliable estimate can be made) are not recognized. However specific disclosure on such items is
given.


1.p.   Revenue recognition (IAS 18)

Revenues for the rendering of services are recognized at the moment when the service is rendered,
with reference to the state of completion of the activity as of the date of the financial statements.

Dividend and interest income are recognized as follows:
- Dividends, when the shareholder’s right to receive payment is established (with an offset in re-
  ceivables at the resolution date);
- Interest, using the effective interest rate method (IAS 39).


1.q.   Employee benefits (IAS 19)

Benefits to be paid to employees after the termination of their employment and other long term
benefits are subject to actuarial valuation.
Following this methodology, liabilities recognized represent the present value of the obligation
adjusted for any actuarial gains or losses which have not been accounted for.



                                                                                             CIR S.p.A.   113
      The instruments underlying the above mentioned benefits can be distinguished between “defined
      contribution plans” and “defined benefit plans”, where in the first case the obligation of the com-
      pany is limited to paying the contributions (to Government, to funds or to other separate legal en-
      tities) and is determined on the basis of the contributions owed, while in the second case liabilities
      are determined on the basis of actuarial calculations.


      1.r.    Derivative instruments (IAS 32 and 39)

      Derivative financial instruments are measured at fair value.
      Derivatives not for hedging purposes are classified as financial instruments at fair value through
      profit and loss (FVTPL).

      The classification of a derivative as a hedge must be formally documented and the degree of “ef-
      fectiveness” of the hedge must be specified.
      For accounting purposes hedging transactions can be classified as:

      - Fair value hedges – where the effects of the hedge are recognized to the income statement;

      - Cash flow hedges – where the effective portion of the hedge is recognized directly to share-
        holders’ equity while the non-effective part is recognized to income statement;

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

      As of December 31 2006 there were no hedging derivatives on the books.


      1.s.    Foreign currency translation (IAS 21)

      The Company’s functional currency is the euro, which is the currency in which its financial state-
      ments are prepared and published.

      Transactions carried out in foreign currencies are initially recognized at the spot exchange rate on
      the date of the transaction.

      At the date of the close of the reporting period monetary assets and liabilities denominated in for-
      eign currency are translated at the spot exchange rate prevailing on that date.

      Non-monetary items measured at historical cost in a foreign currency are translated using the his-
      torical exchange rate prevailing on the date of the transaction.
      Non-monetary items measured at fair value are translated using the spot exchange rate at the date
      on which the measurements are determined for the financial statements.

      There were no assets or liabilities in foreign currencies recorded in the financial statements as of
      December 31 2006.




114   CIR S.p.A.
1.t. Adoption of new accounting standards

It should be stated that in financial year 2006 the Group adopted the following Principles, Inter-
pretations and Updates to the standards already published:
- IAS 39 – Financial instruments Recognition and Measurement. This principle was amended by
Regulation no. 1864 of November 15 2005 effective January 1 2006 (fair value option), which
partly revised the classification of financial assets and liabilities; in particular the revision lim-
ited the use of the initial designation option for financial assets and liabilities other than deriva-
tives and those held for trading, as items measured at fair value directly to the income statement to
those instruments that meet the following requirements:
    a) The fair value option designation eliminates or significantly reduces an accounting mis-
         match, or
    b) A group of financial assets, financial liabilities, or both is managed and its performance is
         evaluated on a fair value basis, in accordance with a documented investment risk man-
         agement strategy, and
    c) An instrument contains an implicit derivative that fulfils particular conditions.
- IAS39 – Financial instruments. Recognition and measurement. This principle was amended by
Regulation no. 2106 of December 21 2005 which partly revised the basic assumptions regarding
intercompany transactions;
- IFRS6 – Exploration for and Evaluation of Mineral Resources. This principle is not relevant for
the business of the Group;
- IFRIC4 – Checking the requisites for a contract to be considered as a leasing contract;
- IFRIC5 – Rights to interest arising from decommissioning, restoration and environmental reha-
bilitation funds. This interpretation is not relevant for the Group;
- IFRIC6 – Liabilities arising from Participating in a Specific market: Waste Electrical and Elec-
tronic Equipment. This interpretation is not relevant for the Group.

Moreover the Group did not opt for the early adoption of the following Principles, Interpretations
and Updates to principles already published, which will become obligatory in the next few years:
- IFRIC7 – Applying the Restatement Approach under IAS 29. This interpretation will take effect
for financial years following March 1 2006. This interpretation is not relevant for the Group;
IFRIC8 – Scope of IFRS2. This interpretation will take effect for financial years following May 1
2006. This interpretation is not relevant for the Group;
- IFRIC9 – Reassessment of Embedded Derivatives. This interpretation will take effect for finan-
cial years following June 1 2006. The interpretation is not relevant for the Group.
- IFRIC10 – Interim Financial Reporting and Impairment. This interpretation will take effect for
financial years following November 1 2006;
- IFRS7 – Financial instruments: Disclosures. This principle introduces new information to be
provided for financial instruments and will take effect as from January 1 2007.


1.u. Earnings per share (IAS 33)

Basic earnings per share are determined by dividing the net income attributable to the ordinary
shareholders of the Parent Company by the weighted average number of ordinary shares in circu-
lation during the period.

Diluted earnings per share are calculated by adjusting the weighted average number of ordinary
shares in circulation to take into account the effect of all potential ordinary shares.




                                                                                             CIR S.p.A.   115
      2.      FINANCIAL INSTRUMENTS

      Financial instruments take on a particular significance in the economic and financial structure of
      the CIR Group; for this reason, in order to give a better and clearer understanding of financial is-
      sues, it was considered useful to devote a special section to the accounting treatment of IAS 32
      and IAS 39.

      According to IAS 32 financial instruments are classified in four categories:
          a) Financial instruments that are valued at fair value through profit and loss (FVTPL) in ap-
              plication of the fair value option, which are held for trading purposes;
          b) Investments held to maturity (HTM);
          c) Loans and receivables (L&R);
          d) Available-for-sale financial assets (AFS).
      Classification depends on Financial Management’s intended use of the financial instrument in the
      business context and each involves a different measurement for accounting purposes; financial
      transactions are recognized on the basis of their value date.

      Financial instruments at fair value through profit and loss
      Instruments are classified as such if they satisfy one of the following conditions:
      - They are held for trading purposes;
      - They are a financial asset designated on adoption of the fair value option, the fair value of
          which can be reliably determined.
      Trading generally means frequent buying and selling with the aim of generating profit on price
      movements in the short term.
      Derivatives are included in this category unless they are designated as hedge instruments.
      The initial designation of financial instruments, other than derivatives and those held for trading,
      as instruments at fair value through profit and loss in adoption of the fair value option is limited to
      those instruments that meet the following conditions:
          a) Designation according to the fair value option eliminates or significantly reduces account-
              ing mismatches;
          b) A group of financial assets, financial liabilities or both are managed and their performance
              is measured on the basis of their fair value following a documented investment risk strat-
              egy, and
          c) An instrument contains an implicit derivative which meets particular conditions.

      The designation of an individual instrument to this category is definitive, is made at the moment
      of initial recognition and cannot be modified.

      Investments held to maturity
      This category includes non-derivative instruments with fixed payments or payments that can be
      determined and that have a fixed maturity, and which it is intended and possible to hold until ma-
      turity.
      These instruments are measured at amortized cost and constitute an exception to the general
      measurement principle of fair value.
      Amortized cost is determined by applying the effective interest rate of the financial instrument,
      taking into account any discounts or premiums received or paid at the moment of purchase, and
      recognizing them throughout the whole life of the instrument until its final maturity.
      Amortized cost represents the initial recognition value of a financial instrument, net of any capital
      repayments and of any impairment, plus or minus the cumulated amount of the differences be-




116   CIR S.p.A.
tween its initial net value and the nominal amount at maturity calculated using the effective inter-
est rate method.
The effective interest rate method is a calculation criterion used to assign financial expenses to
their appropriate time period.
The effective interest rate is the rate that gives a correct present value to expected future cash
flows until maturity, so as to obtain the net present carrying value of the financial instrument.
If even one single instrument belonging to this category is sold before maturity, for a significant
amount and where there is no special justification for this, the tainting rule is applicable and re-
quires that the whole portfolio of securities classified as Held To Maturity be reclassified and
measured at fair value, and this category cannot be used in the two following years.

Loans and receivables
This refers to financial instruments which are not derivatives, have payments that are either fixed
or can be determined, which are not quoted on an active market and which are not intended to be
traded.
This category includes trade receivables (and payables), which are classified as current assets with
the exception of the part due in over 12 months from the date of the financial statements.
The measurement of these instruments is made by applying the method of amortized cost, using
the effective interest rate and taking into account any discounts or premiums obtained or paid at
the moment of acquisition and recognizing them throughout the whole life of the instrument until
its final maturity.

Available-for-sale financial assets
This is a “residual” category which includes non-derivative financial instruments that are desig-
nated as available for sale and are not included in any of the previous categories.
Financial instruments held for trading are recognized at their fair value plus any transaction costs.
Gains and losses are recognized to a separate item of equity until the financial instruments are
sold or have been impaired. In such cases the profit or loss accrued under shareholders’ equity is
released to the income statement.

Fair value is the amount for which an asset can be exchanged or a liability can be settled, between
knowledgeable, willing parties in a transaction at arm’s length.
In the case of securities listed on regulated markets, the fair value is the bid price at the close of
trading on the last day of the accounting period.
Where no market prices are available, fair value is determined either on the basis of the fair value
of another financial instrument that is substantially similar or by using appropriate financial tech-
niques (for example the discounted cash flow method).
Investments in financial assets can be eliminated from the balance sheet, or derecognized, only
when the contractual rights to receive their respective financial cash flows have expired or when
the financial asset is transferred to third parties together with all its associated risks and rewards.


4.    FINANCIAL RISK MANAGEMENT

Financial risk management is carried out by the central finance and treasury function of the group
headed by the Company, on the basis of policies approved by Management. Reference should
therefore be made to the appropriate section of the Explanatory Notes to the Consolidated Finan-
cial Statements for a full description of this area.




                                                                                              CIR S.p.A.   117
      FINANCIAL RISK MANAGEMENT

      (in thousands of euro)                <1 year        >1<2        >2<3        >3<4        >4<5        >5              Total

      INTEREST BEARING
      Fixed Rate
      Trade receivables                               --          --          --          --          --          --          --
      Other receivables                         5,550             --          --          --          --          --      5,550
      Financial receivables                           --          --          --          --          --          --          --
      Securities                               45,065             --     1,099                        --          --     46,164
      Available-for-sale financial assets             --          --          --          --          --          --          --
      Cash & cash equivalents                         --          --          --          --          --          --          --
      Bank overdraft facilities                       --          --          --          --          --          --          --
      Bonds                                           --          --          --          --          --   (295,640)   (295,640)
      Other borrowings                        (43,757)            --          --          --          --          --    (43,757)
      Trade payables                                  --          --          --          --          --          --          --
      Other payables                                  --          --          --          --          --          --          --


      Floating Rate
      Trade receivables                               --          --          --          --          --          --          --
      Other receivables                               --          --          --          --          --          --          --
      Financial receivables                           --          --          --          --          --          --          --
      Securities                                      --      7,526           --    12,058      19,980       61,334     100,898
      Available-for-sale financial assets             --          --          --          --          --          --          --
      Cash and cash equivalents                64,732             --          --          --          --          --     64,732
      Bank overdraft facilities                    (2)            --          --          --          --          --         (2)
      Bonds                                           --          --          --          --          --          --          --
      Other borrowings                                --          --          --          --          --          --          --
      Trade payables                                  --          --          --          --          --          --          --
      Other payables                                  --          --          --          --          --          --          --


      NON INTEREST BEARING
      Trade receivables                        29,383             --          --          --          --          --     29,383
      Other receivables                        51,098             --          --          --          --        188      51,286
      Financial receivables                           --          --          --          --          --          --          --
      Securities                               39,532             --          --          --     9,890       10,010      59,432
      Available-for-sale financial assets             --          --          --          --          --          --          --
      Cash and cash equivalents                       --          --          --          --          --          --          --
      Bank overdraft facilities                       --          --          --          --          --          --          --
      Bonds                                           --          --          --          --          --          --          --
      Other borrowings                                --          --          --          --          --          --          --
      Trade payables                           (4,474)            --          --          --          --          --     (4,474)
      Other payables                                        (36,234)          --          --          --          --    (36,234)


      In accordance with the requirements of IAS 32 paragraph 74, the above chart shows the informa-
      tion on interest rate risk with a breakdown by asset and liability group and by year of maturity.
      This information is shown over a time horizon of 5 years on the basis of the way the interest ac-
      crues.




118   CIR S.p.A.
5. ACCOUNTING PRINCIPLES, CHANGES IN ACCOUNTING ESTIMATES AND ERRORS

The criteria for making estimates and measurements are re-examined on a regular basis and are
based on historical experience and on other factors such as expectations of possible future events
that are reasonably likely to take place.

If the initial application of a principle affects the current year or the previous one, its effect is rec-
ognized by indicating the change resulting from any transitional rules, the nature of the change,
the description of the transitional rules, which may also affect future years, and the amount of any
adjustments relating to years preceding those being presented.

If a voluntary change of a principle affects the current or previous year this effect is shown by in-
dicating the nature of the change, the reasons for the adoption of the new principle, and the
amount of any adjustments made for years preceding those being presented.

In the event of a new principle/interpretation issued but not yet endorsed, an indication is given of
the fact, of its potential impact, the reason for the principle/interpretation, the date on which it will
take effect and the date on which it will first be applied.

A change in accounting estimates involves an indication of the nature and the impact of the
change. Estimates are used mainly to show impairment of assets recorded, provisions made for
risks, employees benefits, taxes and other provisions and reserves. Estimates and assumptions are
reviewed regularly and the effects of any such changes are reflected in the income statement.

Lastly, the treatment of accounting errors involves an indication of the nature of the error, the a-
mount of the adjustments to be made at the beginning of the first accounting period after it was
discovered.




                                                                                                 CIR S.p.A.   119
      BALANCE SHEET



      5.        NON-CURRENT ASSETS


      5.a       INTANGIBLE ASSETS



      2005                                                              Opening balances
                                                             Original    Accrued amortization        Balance
      (in thousands of euro)                                    cost          and write-downs    01.01.2005
      Concessions, licenses, trademarks and similar rights      406                      (347)            59




      2006                                                              Opening balances
                                                             Original    Accrued amortization        Balance
      (in thousands of euro)                                    cost          and write-downs    31.12.2005
      Concessions, licenses, trademarks and similar rights      421                      (365)            56




                            AMORTIZATION RATES

      Description                                                 %

      Concessions, licenses, trademarks and similar rights    5-30%
      Other intangible assets                                16-30%




120   CIR S.p.A.
            Changes for the period                                        Closing balances
Purchases      Disposals                Amortization and    Original   Accrued amortization        Balance
               cost      acc.amort.        write-downs         cost        and write-downs     31.12.2005
      15          --               --                (18)      421                     (365)           56




            Changes for the period                                       Closing Balances
Purchases      Disposals                Amortization and    Original   Accrued amortization        Balance
               cost      acc.amort.        write-downs         cost        and write-downs     31.12.2006
      53          --               --                (28)      474                    (393)            81




                                                                                               CIR S.p.A.    121
      5.b.         TANGIBLE ASSETS



      2005                                                     Opening balances                      Changes for the period
                                                    Original   Accrued depreciation        Balance                Purchases
      (in thousands of euro)                           cost        and write-downs     01.01.2005
      Land                                             723                        --          723                         --
      Buildings                                      4,132                   (4,095)            37                        9
      Plant and machinery                              747                     (735)            12                       35
      Other assets                                   3,276                   (1,947)        1,329                       336
      Assets in process and advance payments        13,313                        --       13,313                     3,255
      Total                                         22,191                   (6,777)       15,414                     3,635




      2006                                                     Opening balances                      Changes for the period
                                                    Original   Accrued depreciation        Balance                Purchases
      (in thousands of euro)                           cost        and write-downs     31.12.2005
      Land                                           1,961                        --        1,961                        --
      Buildings                                      4,179                   (4,100)            79                      66
      Plant and machinery                              782                     (743)            39                     208
      Other assets                                   3,623                   (2,022)        1,601                      452
      Assets in process and advance payments         8,231                        --        8,231                        --
      Total                                         18,776                   (6,865)       11,911                      726



      Tangible assets rose from € 11,911 thousand at December 31 2005 to € 4,576 thousand at
      December 31 2006.
      The reduction is essentially due to classification under "Real estate investments"
      following completion of work on a building located in Milan




                                      DEPRECIATION RATES

      Description                                                                 %

      Buildings and real-estate investments                                 3.00%
      Equipment and machinery                                        10.00-25.00%

      Other assets:
      - Electronic office equipment                                         20.00%
      - Furniture and fittings                                              12.00%
      - Motor vehicles                                                      25.00%




122   CIR S.p.A.
                   Changes for the period                                       Closing balances
Reclassification        Disposals              Depreciation and      Original   Accrued depreciation        Balance
                        cost    acc. deprec.      write-downs           cost       and write-downs      31.12.2005
          1,238            --             --                   --     1,961                        --        1,961
             38            --             --                  (5)     4,179                  (4,100)            79
              --           --             --                  (8)       782                    (743)            39
             11            --             --                (75)      3,623                  (2,022)         1,601
         (8,337)           --             --                   --     8,231                        --        8,231
         (7,050)           --             --                (88)     18,776                  (6,865)        11,911




                   Changes for the period                                       Closing balances
Reclassification        Disposals              Depreciation and      Original   Accrued depreciation        Balance
                        cost    acc. deprec.      write-downs           cost       and write-downs      31.12.2006
              --           --             --                    --    1,961                        --        1,961
              --           --             --                   (5)    4,245                  (4,105)           140
              8          (29)            29                  (39)       969                    (753)           216
            305        (101)            101                  (99)     4,279                  (2,020)         2,259
         (8,231)           --             --                    --         --                      --             --
         (7,918)       (130)            130                (143)     11,454                  (6,878)         4,576




                                                                                                        CIR S.p.A.     123
       5.c.        REAL-ESTATE INVESTMENTS




       2005                                               Opening balances                       Changes for the period
                                               Original   Accrued depreciation        Balance                  Purchases
       (in thousands of euro)                     cost        and write-downs     01.01.2005
                                                                             --             --                            --




       2006                                               Opening balances                       Changes for the period
                                               Original   Accrued depreciation        Balance                  Purchases
       (in thousands of euro)                     cost        and write-downs     31.12.2005
                                                7.050                    (106)         6.944                      3.119




       Real-estate investments rose from € 6,944 thousand at December 31 2005 to € 17,604 thousand
       at December 31 2006. The increases during the period refer to the completion of renovation work on
       a building situated in the centre of Milan, carried out during the year for € 3,119 thousand and re-
       classifield from the item Assets in process and advance payments to this item for € 7,918 thousand.
       The carrying value of this property is very close to market value.




124   CIR S.p.A.
                   Changes for the period                                    Closing balances
Reclassification        Disposals              Depreciaton and    Original   Accrued depreciation        Balance
                        cost    acc. deprec.      write-downs        cost        and write-downs     31.12.2005
         7,050             --             --              (106)    7,050                     (106)        6,944




                   Changes for the period                                    Closing balances
Reclassification        Disposals              Depreciaton and    Original   Accrued depreciation        Balance
                        cost    acc. deprec.      write-downs        cost        and write-downs     31.12.2006
         7,918             --             --              (377)   18,087                     (483)       17,604




                                                                                                      CIR S.p.A.   125
5.d.           EQUITY INVESTMENTS 2005



(in thousands of euro)                   Opening balances                                                                   Changes for the year                                       Closing balances
                                                                                                                                                                  Write-downs/
                                                                                                                                                                   Revaluation
                                                 01.01.2005                Reclassification                  Increases                      Decreases              Val.restored             31.12.2005
                                      no. of shares     amount        no. of shares      amount     no. of shares        amount     no. of shares       amount         amount      no. of shares      amount
Subsidiaries

GRUPPO EDITORIALE
L’ESPRESSO S.p.A.                     218,825,235      333,862                    --          --                --            --               --           --               --    218,825,235      333,862

ENERGIA HOLDING S.p.A.                 86,424,197      173,376                    --           --    1,913,612           11,482                 --           --              --     88,337,809      184,858

SOGEFI S.p.A.                          65,194,962      105,193                    --           --               --            --                --           --              --     65,194,962      105,193


HOLDING SANITÀ E SERVIZI S.p.A.                  --             --               --           --     1,889,382           32,790                --           --               --      1,889,382        32,790

DRY PRODUCTS S.p.A.                        55,000               --                --           --               --            --                --           --              --         55,000               --

CIR INTERNATIONAL S.A.                 25,000,000      238,686                    --          --                --            --                --           --              --     25,000,000      238,686

CIRINVEST B.V. (in liquidation)
(formerly Sasib International B.V.)        18,152               --                --           --               --          30                  --           --             (6)         18,152              24


COFIDEFIN SERVICOS LDA                     93,000             180                 --           --              --             --               --           --               --         93,000             180


INTERGEFI S.r.l.                         500,000              512                 --           --               --            --                --           --              --       500,000              512

CIR VENTURE S.r.l.                         10,000               2                 --           --               --        4,183                 --           --         (4,175)         10,000              10


SCALA CAPITAL S.p.A.
(formerly Mantegna SGR S.p.A.)                   --             --                --           --    1,000,000            1,000                --           --               --      1,000,000            1,000

JUPITER FINANCE S.p.A.                           --             --                --           --      592,800            1,482                --           --               --       592,800             1,482


Total subsidiaries                                     851,811                                 --                        50,967                             --          (4,181)                     898,597
Other companies

C IDC S.p.A.
(in liquidation and arrangement
before bankruptcy)                      1,231,319                --               --           --               --            --                --           --               --     1,231,319                --

EMITTENTI TITOLI S.p.A.                  232,000              132                 --          --                --            --                --           --               --      232,000              132

CAAF DELL’INDUSTRIA
DELL'EMILIA CENTRALE S.p.A.                 5,000               2                 --          --                --            --         (5,000)            (2)              --               --             --

FILIPPO FOCHI S.p.A.
(in receivership)                        409,520                 --               --           --               --            --                --           --               --      409,520                 --

IST. EDIL. ECONOM.
POPOLARE S.r.l.                             1,350               1                 --          --                --            --                --           --               --         1,350               1
Total other companies                                         135                              --                              --                           (2)              --                            133
TOTAL EQUITY INVESTMENTS                               851,946                                --                         50,967                             (2)         (4,181)                     898,730




   126             CIR S.p.A.
5.d.           EQUITY INVESTMENTS 2006



(in thousands of euro)               Opening balances                                                                  Changes for the year                                         Closing balances
                                                                                                                                                              Write-downs/
                                                                                                                                                               Revaluation
                                            31.12.2005                 Reclassification                 Increases                       Decreases              Val.restored              31.12.2006
                                  no. of shares         amount no. of shares      amount       no. of shares        amount    no. of shares         amount         amount       no. of shares      amount
Subsidiaries

GRUPPO EDITORIALE
L’ESPRESSO S.p.A.                 218.825.235      333.862                 --             --     1.950.000           7.818               --             --               --     220.775.235       341.680


ENERGIA HOLDING S.p.A.             88.337.809      184.858                 --             --              --             --               --             --              --      88.337.809       184.858


SOGEFI S.p.A.                      65.194.962      105.193                 --             --               --            --               --             --              --      65.194.962       105.193


HOLDING SANITÀ E SERVIZI S.p.A.     1.889.382           32.790             --             --     1.765.363          38.838               --             --               --       3.654.745        71.628


DRY PRODUCTS S.p.A.                    55.000                --            --             --               --            --               --             --              --          55.000                  --


CIR INTERNATIONAL S.A.             25.000.000      238.686                 --             --               --            --               --             --              --      25.000.000       238.686


CIRINVEST B.V. (in liquidation)        18.152               24             --             --               --            --       (18.152)              (5)            (19)                --                --


COFIDEFIN SERVICOS LDA                 93.000             180              --             --              --             --              --             --               --          93.000             180


INTERGEFI S.r.l.                      500.000             512              --             --               --            --               --             --              --        500.000              512


CIR VENTURE S.r.l.                     10.000               10             --             --               --            6                --             --             (6)          10.000              10


CIRINVEST S.p.A.
(formerly Scala Capital S.p.A.)     1.000.000            1.000             --             --              --             --      (878.250)*             --            (878)         121.750             122

JUPITER FINANCE S.p.A.                592.800            1.482             --             --              --          296                --             --            (296)        592.800             1.482


Total subsidiaries                                 898.597                                --                        46.958                              (5)         (1.199)                       944.351
Other companies

C IDC S.p.A.
(in liquidation and arrangement
before bankruptcy)                  1.231.319                --            --             --               --            --               --             --               --      1.231.319                  --

EMITTENTI TITOLI S.p.A.               232.000             132              --             --               --            --               --             --               --       232.000              132

FILIPPO FOCHI S.p.A.
(in receivership)                     409.520                --            --             --               --            --               --             --               --       409.520                   --

IST. EDIL. ECONOM.
POPOLARE S.r.l.                         1.350                1             --             --               --            --               --             --               --          1.350                  1
Total other companies                                     133                             --                             --                             --               --                             133
TOTAL EQUITY INVESTMENTS                           898.730                                --                        46.958                              (5)         (1.199)                       944.484



The changes during the period were mainly to do with the purchase of shares in Gruppo Editoriale L'Espresso S.p.A. following favourable conditions in the
market and to the subscription of a capital increase in HSS to finance its development, particularly for the acquisition of the company Anni Azzurri.
The decrease during the period was mainly due to the write-off of the capital of the company Scala Capital S.p.A. renamed Cirinvest S.p.A..




                                                                                                                                                                               CIR S.p.A.              127
      LIST OF INVESTMENTS IN SUBSIDIARIES AS OF DECEMBER 31 2006
      (ART. 2427 no. 5, Civil Code)

       (in thousands of euro)                                  Head        Share            Total            Result      Percentage                Carrying
                                                              Office      Capital          equity            for the             of                   value
       Name                                                                                                    year       ownership
       GRUPPO EDITORIALE L’ESPRESSO S.p.A.                     Rome       65,150         332,802             85,928          50.83 (*)             341,680
       ENERGIA HOLDING S.p.A.                                  Turin     120,351         259,519               6,362         73.40                 184,858
       SOGEFI S.p.A.                                          Mantua      58,826         250,108             22,284          57.53 (**)            105,193
       DRY PRODUCTS S.p.A. (***)                               Milan         100           1,552              1,032          55.00                       --
       CIR INTERNATIONAL S.A.                             Luxembourg     250,000         270,385               1,112        100.00                 238,686
       COFIDEFIN SERVICOS DE CONSULTORIA LDA                 Madeira         125           6,264              6,038          74.40                     180
       INTERGEFI S.r.l.                                        Milan         500             790                 146        100.00                     512
       CIR VENTURE S.r.l.                                      Milan          10               1                   (9)      100.00                      10
       HSS - HOLDING SANITÀ E SERVIZI S.p.A.                   Milan       4,286          68,532             (2,837)         85.28                  71,628
       JUPITER FINANCE S.p.A.                                  Milan         600             748                (779)        98.80                   1,482
       CIRINVEST S.p.A. (formerly Scala Capital S.p.A.)        Milan         122            (134)            (1,094)        100.00                     122

       (*)      52.20% of voting rights
      (**)      58.41% of voting rights
      (***)     For financial year ended March 31 2006




      5.e.        MISCELLANEOUS RECEIVABLES

      The balance at December 31 2006 includes security deposits with a nominal value of € 166 thou-
      sand (€ 179 thousand at December 31 2005) and tax advances on severance and leaving indemnity
      (TFR), revalued in accordance with the law, for € 23 thousand (€ 33 thousand at December 31
      2005).


      5.f.      DEFERRED TAXES

      The breakdown of “Deferred tax assets and liabilities” by type of temporary difference is as fol-
      lows:

       (in thousands of euro)                                                       31.12.2006                                        31.12.2005
                                                                             Amount                   Tax                      Amount                 Tax
                                                                       of temporary                 effect               of temporary               effect
                                                                         differences                                       differences
       Deferred tax assets:
       Write-down of fixed assets                                            1,751                   578                        7,836               2,586
       Risk provision and other                                              2,579                   851                       (2,987)               (974)
       Total deferred tax assets                                                                    1,429                                          1,612
       Deferred tax liabilities:
       Valuation of financial instruments                                       (54)                  (19)                            (54)             (19)
       Capital gain on sale of property                                      (3,068)                 (161)                     (6,135)               (322)
       Total deferred tax liabilities                                                                (180)                                           (341)
       Total net deferred taxes                                                                     1,249                                          1,271

      During the year no deferred taxes were recognized directly to shareholders’ equity neither were
      there any prior losses for which the company has not set aside deferred taxes.



128   CIR S.p.A.
6.       CURRENT ASSETS


6.a.       MISCELLANEOUS RECEIVABLES

(in thousands of euro)                                                   31.12.2006    31.12.2005
Tax receivables                                                             18,977        39,719
Financial receivables with related parties                                  34,450          6,522
Other receivables with related parties                                      29,357          2,929
Receivables others                                                            3,248         3,158
Total                                                                       86,032        52,328

The item “Financial receivables with related parties” can be broken down as follows:

(in thousands of euro)                                                   31.12.2006    31.12.2005
Jupiter Finance S.p.A.                                                      31,122              --
Intergefi S.r.l.                                                             3,328          2,992
Dry Products S.p.A.                                                              --         3,530
Total                                                                       34,450          6,522

The item “Other receivables with related parties” refers to receivables from companies that took
part in the tax consolidation and specifically € 23,767 from companies of the Sorgenia group and
€ 5,590 thousand from the Espresso group. The financial receivables due from the company Jupi-
ter Finance S.p.A. were for providing operational support in its start-up phase.


6.b.     SECURITIES

The item “Securities” includes the following categories of securities:

(in thousands of euro)                                                   31.12.2006    31.12.2005
Italian Government securities and similar securities                        21,204        37,085
Investment funds and similar funds                                          35,556              --
Bonds                                                                       21,079        51,627
Miscellaneous securities                                                   124,679        89,070
Interest on securities                                                        3,976         3,181
Total                                                                      206,494       180,963


(in thousands of euro)                                                   31.12.2006    31.12.2005
Of which are held for trading                                              188,882       161,343
Of which were in application of the fair value option because
of the presence of an implied derivative                                    17,612        19,620
Total                                                                      206,494       180,963

The fair value measurement of the item “securities” involved making a negative adjustment to the
income statement of € 5,774 thousand of which € 3,766 thousand were from securities held for
trading.


                                                                                         CIR S.p.A.   129
      “Miscellaneous securities” contains investments of liquidity in the short term which have a rating
      of “double A” or higher.


      6.c.    CASH AND CASH EQUIVALENTS

      Cash and cash equivalents declined by € 111,862 thousand from € 176,594 thousand to € 64,732
      thousand. A breakdown of this change is shown in the cash flow statement.


      7.      SHAREHOLDERS’ EQUITY


      7.a.    SHARE CAPITAL

      Share capital rose from € 389,620,833.50 at December 31 2005 (779,241,667 shares each with
      nominal value of € 0.50) to € 390,239,533.50 (780,479,067 shares) at December 31 2006 as a re-
      sult of the issuance of 1,237,400 shares following the exercise of stock option plans.

      At December 31 2006 the Company owned 34,094,000 of its own shares (4.37% of capital) for a
      total value of € 76,884 thousand compared to 27,216,642 shares owned at December 31 2005.
      In application of IAS 32, since January 1 2005 treasury stock held by the Parent Company is be-
      ing deducted from shareholders’ equity.

      The share capital is fully subscribed and paid up. No shares have any rights, privileges or limita-
      tions on the distribution of dividends with the exception of the own shares held as treasury stock.

      It should be noted that the Board of Directors was authorized for a period of five years starting
      from April 27 2005 to increase once or more the share capital up to a maximum € 500 million
      (nominal value) and by a further maximum of € 20 million (nominal value) in favour of employ-
      ees of the Company, its subsidiaries and parent companies.




130   CIR S.p.A.
             7.b.       RESERVES

             The breakdown of the item “Reserves” is as follows:

              (in thousands of euro)                    Additional paid-in      Legal   Statutory      Reserve    Reserve for   Own shares         “First     Stock     Reserve for       Total
                                                                   capital    reserve    reserves      for own    buy-back of      held as    adoption of    option   future capital   reserves
                                                                  reserve                           shares held   own shares         stock         IFRS”    reserve       increases
                                                                                                                                                 reserve

              Balance at January 1 2005                            7,699     115,969          21       25,442        97,369        (25,442)     162,210      1,915                3    385,186
              Capital increases                                    2,273           --          --            --            --            --            --        --               --     2,273
              Buy-back of own shares                                    --         --          --      35,879       (35,879)       (35,879)            --        --               --   (35,879)
              AGM resolution to buy back own shares               (3,553)          --          --            --      15,412              --            --        --               --    11,859
              Notional cost of stock options credited                   --         --          --            --            --            --                  5,737                --     5,737

              Balance at December 31 2005                          6,419     115,969          21       61,321        76,902        (61,321)     162,210      7,652                3    369,176
              Capital increases                                    1,076           --          --            --            --            --            --        --               --     1,076
              Buy-back of own shares                                    --         --          --      15,563         (5,664)      (15,563)            --        --               --    (5,664)
              Cancellation of AGM resolution of
              April 27 2005 to buy back own shares                16,422           --          --            --      (71,238)            --            --        --               --   (54,816)
              Notional cost of stock options credited                  --          --          --            --            --            --            --    2,213                --     2,213

              Balance at December 31 2006                         23,917     115,969          21       76,884              --      (76,884)     162,210      9,865                3    311,985
CIR S.p.A.
131
      It should be remembered that on April 27 2006 the General Ordinary Meeting of the Shareholders
      voted to cancel the previous resolution of April 27 2005 to buy back own shares and to give a new
      authorization for eighteen months from that date to buy back a maximum of 25,000,000 own
      shares at a minimum unit price of € 0.50 and a maximum of € 4.00.

      The “Stock option reserve” refers to the value of the notional cost of the stock options assigned to
      employees, which were approved after November 7 2002.


      7.c.      RETAINED EARNINGS (LOSSES)

      The changes in Retained earnings (losses) are shown in the “Statement of Changes in Sharehold-
      ers’ Equity”.


      INFORMATION AS PER ART. 2427 – 7BIS – CIVIL CODE

      The following chart gives a breakdown of the items of shareholders’ equity and shows how they
      can be utilized:

      (in thousands of euro)
                                                         Balance at            Possibility of            Part             Summary of uses made
                                                  December 31 2006                       use        available           in the last three periods (*)
                                                                                                                For covering        For distributing    Other
                                                                                                                      losses           as dividends

       CAPITAL                                               390,239              --                       --              --                     --       --
       Capital reserves:
       Additional paid in capital reserve                      23,917            ABC                       --              --                     --       --
       Legal reserve                                           12,678             B                        --              --                     --       --
       Capital reserve                                               3            A                        --              --                     --       --

       Earnings reserves:
       Legal reserve                                         103,291              B                        --              --                     --       --
       Statutory reserve                                            21           ABC                       --              --                     --       --
       “First adoption of IFRS” reserve                      162,210             ABC                       --              --                     --       --
       Stock option reserve                                     9,865            ABC                       --              --                     --
       Retained earnings                                     201,817             ABC                       --              --              12,072          --
       TOTAL                                                 904,041                                       --              --              12,072          --

      Key = A: for capital increases; B: for covering losses; C: for distribution to shareholders

      (*) The uses shown are those that caused the reduction in total equity




132   CIR S.p.A.
8.      NON CURRENT LIABILITIES


8.a.    BONDS

At December 31 2006 the item “Bonds” totalled € 295,640 thousand, compared to € 295,483
thousand at December 31 2005 and referred to the Bond issued by the Company in December
2004 for a nominal € 300 million, with a maturity of 2024 and a fixed rate of interest of 5.75%.
Using the amortized cost method this bond was accounted for including the interest accruing for
the period and subtracting the issuance discount and expense. The effective interest rate is 5.90%.
The bonds are quoted on the Luxembourg Bourse. The fair value of the Bond was € 280,494 thou-
sand at December 31 2006 and € 291,668 thousand at December 31 2005.


8.b.    PERSONNEL PROVISIONS

The changes in the provision “Employee severance and leaving indemnity” (TFR) are shown be-
low:

(in thousands of euro)                                                 31.12.2006        31.12.2005
Starting balance                                                            1,462             1,362
Amount accrued                                                               240               232
Sums paid out                                                                (144)             (132)
Total                                                                      1,558              1,462




9.      CURRENT LIABILITIES


9.a.    FINANCIAL LIABILITIES WITH RELATED PARTIES

The balance at December 31 2006 of € 43,756 thousand (€ 42,102 at December 31 2005) refers to
a loan from CIR International S.A., including € 1,654 thousand of interest at a rate of 4% accrued
during the year.


9.b.      OTHER PAYABLES

(in thousands of euro)                                                 31.12.2006        31.12.2005
Tax payables                                                              30,779            13,496
Payables related parties                                                    2,570           15,172
Trade payables suppliers                                                    1,904             1,509
Other payables                                                              5,456             3,532
Total                                                                     40,709            33,709




                                                                                           CIR S.p.A.   133
      The item “Tax payables”, totalling € 30,779 thousand, includes the Inland Revenue payable of
      € 17,733 thousand resulting from the tax consolidation.

      The item “Payables related parties” refers mainly to amounts payable to the companies that took
      part in the tax consolidation and specifically € 70 thousand to companies of the Espresso group,
      € 1,472 thousand to companies of the Sogefi group, € 229 thousand to companies of the Sorgenia
      group and € 599 to companies of the HSS group.


      9.c.    PROVISIONS FOR RISKS AND LOSSES

      “Provisions for risks and losses” totalled € 3,035 thousand at December 31 2006, unchanged from
      the previous year.




134   CIR S.p.A.
INCOME STATEMENT


10.       MISCELLANEOUS REVENUES AND INCOME

This item consists of the following:

(in thousands of euro)                                                    2006              2005
Services to subsidiaries                                                 5,044              4,795
Services to parent company                                                 516               501
Income from real estate                                                    640                 38
Other income and recovery of costs                                          76               168
Other non-recurring revenues                                                 --             1,648
Total                                                                    6,276              7,150


Revenues from services provided to subsidiaries are the chargeback of fees for strategic and man-
agement support and special administrative, financial and tax assistance supplied to them. The
services provided to the parent company were mainly of an administrative and financial nature.

Income from services supplied to companies of the Group in 2006 can be broken down as fol-
lows:

(in thousands of euro)                                               31.12.2006        31.12.2005
COFIDE S.p.A.                                                              516               501
Gruppo Editoriale L'Espresso S.p.A.                                      2,440              2,370
Sorgenia S.p.A.                                                            700               600
Sogefi S.p.A.                                                            1,850              1,795
Holding Sanità e Servizi S.p.A.                                             50                 30
Jupiter Finance S.p.A.                                                       4                  --
Total                                                                    5,560              5,296



The balance of the item “Other non-recurring income” the previous year referred mainly to the re-
versal of provisions set up in previous periods for disputes in progress, which were settled in
2005.




                                                                                         CIR S.p.A.   135
      11.     COSTS FOR SERVICES

      This item can be broken down as follows:

      (in thousands of euro)                                                                         2006               2005
      Administrative, fiscal, legal and corporate governance consulting fees                         3,158             3,029
      Services provided by the parent company COFIDE S.p.A.                                          1,955             1,777
      Directors’ and Statutory Auditors’ fees                                                        1,792             1,560
      Other expenses                                                                                 2,814             2,509
      Total                                                                                          9,720             8,875



      12.     PERSONNEL COSTS

      Personnel costs declined by € 1,476 thousand from € 10,567 thousand in 2005 to € 9,091 thousand
      in 2006. This item includes the notional cost of € 2,213 thousand (€ 5,737 thousand in 2005) from
      the valuation of existing stock option plans, approved after November 7 2002.

      The chart below shows the changes in the number of employees in the different categories during
      the year:

                                                31.12.2005                     Hires   Departures   31.12.2006    Average for
                                                                                                                     the year
      Executives                                         10                       --           1              9             9
      Managers and Office Staff                          18                       --           --            18           18
      Total                                              28                       --           1             27           27



      13.     OTHER OPERATING COSTS

      (in thousands of euro)                                                                         2006               2005
      Non-deductible VAT and other taxes                                                              823                802
      Other charges and non-operating expenses                                                        935                650
      Other non-recurring charges                                                                       13               100
      Total                                                                                          1,771             1,552




136   CIR S.p.A.
14.      FINANCIAL INCOME

This item consists of the following:

(in thousands of euro)                                                      2006            2005
Interest income from securities                                             9,822           5,947
Interest income from deposits                                               2,021           4,502
Interest income from subsidiaries                                            181             446
Other interest income                                                        704            1,319
Total                                                                      12,728         12,214



The breakdown of the interest income from subsidiaries is the following:

(in thousands of euro)                                                      2006            2005
Dry Products S.p.A.                                                           20             277
Intergefi S.r.l.                                                             118             112
Jupiter Finance S.p.A.                                                        43                --
CIR Ventures S.r.l.                                                            --              47
Sasib Packaging North America Inc.                                             --              10
Total                                                                        181             446



15.      FINANCIAL EXPENSES

This item consists of the following:

(in thousands of euro)                                                      2006            2005
Interest expense on bonds                                                  17,354         17,348
Interest expense on borrowings from subsidiaries                            1,953           1,335
Other interest expense and bank charges                                     1,651            409
Total                                                                      20,958         19,092


The item “Interest expense on borrowings from subsidiaries” for 2006 refers for € 1,654 thousand
to interest accrued on the loan made by CIR International S.A. and for € 299 thousand to interest
due to companies of the Group who took part in the tax consolidation process (€ 70 thousand due
to the Espresso group and € 229 thousand to companies of the Sorgenia group).




                                                                                         CIR S.p.A.   137
      16.     DIVIDENDS

      This item can be broken down as follows:

      (in thousands of euro)                                                                  2006      2005

      Dividends from related parties:
      Gruppo Editoriale L’Espresso S.p.A.                                                    31,730    28,447
      Energia Holding S.p.A.                                                                  3,666         --
      Sogefi S.p.A.                                                                          11,409    10,431
      CIR International S.A.                                                                 10,000         --
      Cofidefin Serviços de Consultoria                                                       4,241     3,869
      Total dividends from related parties                                                   61,046    42,747
      Dividends from other companies                                                             33        44
      Total dividends                                                                        61,079    42,791



      17.     GAINS FROM TRADING SECURITIES

      These total € 1,520 thousand (€ 689 thousand in 2005) and refer for € 1,069 thousand to premium
      transactions on equities and for € 451 thousand to bond trading.


      18.     LOSSES FROM TRADING SECURITIES

      These total € 4,913 thousand (€ 283 thousand in 2005) and refer for € 326 thousand to premium
      transactions on equities, for € 4,563 thousand to bond trading and for € 24 thousand to trading in-
      vestment funds and similar funds.


      19.     ADJUSTMENTS TO THE VALUE OF FINANCIAL ASSETS

      This item includes the following:

      (in thousands of euro)                                                                  2006       2005
      Write-down of bonds                                                                    (6,627)    (4,955)
      Write-down of investments in subsidiaries                                              (1,199)    (4,181)
      (Increases to) / Withdrawals from provisions covering losses from equity investments        --    2,110
      Revaluation of bonds                                                                     268        315
      Revaluation of investment funds and similar funds                                        585           --
      Total                                                                                  (6,973)    (6,711)




138   CIR S.p.A.
20.      TAX EXPENSE FROM PRIOR PERIODS

The amount of € 16,059 thousand in 2005 refers to IRPEG and ILOR tax claims for 1989 from
Sasib, a company merged by incorporation into CIR in 1998. The amount includes taxes, fines
and interest payments resulting from the unfavourable ruling (no. 312/2/04) of the Provincial Tax
Commission of Bologna relating to charges recorded in the financial statements and tax credits
relating to the purchase of dividend rights on shares carried out in past years.
A first demand for tax was received in June 2005 for an amount of € 4.8 million and was duly
paid, a second demand was notified at the beginning of 2006 for an amount of € 11.3 million. An
appeal was made against both of these demands. For the second one in particular, an application
was made for suspension of the payment.


21.      INCOME TAXES

This item includes the following:

(in thousands of euro)                                                                                            2006                        2005
Current taxes                                                                                                    9,090                       8,312
Deferred taxes                                                                                                      (22)                     (3,006)
Total                                                                                                            9,068                       5,306



RECONCILIATION OF THEORETICAL AND ACTUAL TAX LIABILITY

                                                                                       Taxable income        Tax rate %            Amount of tax
 RESULT BEFORE TAXES                                                                           27,629                 33                   9,117
 Effect of increases (decreases) compared to ordinary tax rate
 - Dividends                                                                                   (58,025)               33                 (19,148)
 - Temporary differences deductible in subsequent years                                          3,051                33                   1,007
 - Deductible temporary differences from prior periods                                          (3,410)               33                  (1,125)
 - Non-deductible costs                                                                          5,549                33                   1,831
 Other miscellaneous permanent differences                                                           --               33                       --
 SUB-TOTAL                                                                                     (25,206)               33                  (8,318)
 Adjustments to taxable income for participation in national tax consolidation                 (2,340)                33                    (772)
 Taxable income / Income tax for the year                                                      (27,546)               33                  (9,090)

Note: Because of its specific characteristics, IRAP was not considered for the purposes of this chart, which refers just to IRES



22.      GUARANTEES AND COMMITMENTS

At December 31 2006 the guarantee and commitment position was as follows:

-     Guarantees issued in favour of the ENI group following agreements for the supply of Norwe-
      gian and Libyan gas as from October 2001. Commercial contracts generally contain take or
      pay clauses and a price revision based on the trend of certain oil products. These clauses are
      substantially in line with normal market conditions;



                                                                                                                                          CIR S.p.A.   139
      -     A guarantee for € 613 million issued to Banks on behalf of CIR International for bond issues;
      -     Guarantees in favour of Inland Revenue for VAT credits totalling € 6,781 thousand;
      -     Government securities pledged as collateral for financial option transactions for a total of
            € 19,500 thousand.


      23.      RELATED PARTY TRANSACTIONS

      Information regarding the impact that related party transactions have on the financial and equity
      situation and on the result for the year are given in the comment on the individual items of the fi-
      nancial statements.

      The paragraph “Other information” in the Management Report shows the different types of re-
      lated party transactions, the amounts of which are given in the Explanatory Notes.


      24.      NET FINANCIAL POSITION

      The net financial position can be broken down as follows:

      (in thousands of euro)                                                  31.12.2006       31.12.2005
      A.    Cash and banks                                                       64,732           176,594
      B.    Other free cash flow                                                       --               --
      C.    Securities held for trading                                         206,494           180,963

      D.    Cash and cash equivalents (A) + (B) + (C)                           271,226           357,557

      E.    Current financial receivables                                              --               --
      F.    Current bank borrowings                                                   (2)               --
      G.    Current part of non-current borrowings                                     --               --
      H.    Other current borrowings                                             (43,757)         (42,102)

      I.    Current financial debt (F) + (G) + (H)                               (43,759)         (42,102)

      J.    Net current financial position (I) + (E) + (D)                      227,467           315,455

      K.    Non-current bank borrowings                                                --               --
      L.    Bonds issued                                                        (295,640)        (295,483)
      M.    Other non-current borrowings                                               --               --

      N.    Non-current financial debt (K) + (L) + (M)                          (295,640)        (295,483)

      O.    Net financial position (J) + (N)                                     (68,173)          19,972




140   CIR S.p.A.
25.        OTHER INFORMATION


EMOLUMENTS PAID TO DIRECTORS, STATUTORY AUDITORS AND GENERAL MA-
NAGERS

The chart below shows the information required by Article 78 of Consob Resolution no. 11971 of
May 14 1999 and subsequent amendments and additions.

 (in thousands of euro)
 Last name and first name           Position held                      Dates position               Expiry of            Emoluments     Non-monetary       Bonuses           Other Notes
                                                                                 held               mandate          for the position         benefits    and other           fees
                                                                                                                     in the company                      incentives
                                                                                                                       preparing the
                                                                                                                Financial statements
 DE BENEDETTI CARLO                 Chairman of the Board           1.1.06-31.12.06      Appr. Fin. St. 2007                       --            130              --            --     (1)
 DE BENEDETTI RODOLFO               Chief Executive Officer and
                                    General Manager                 1.1.06-31.12.06      Appr. Fin. St. 2007                    720                 --            --     2.969         (2)
 PIASER ALBERTO                     General Manager                 1.1.06-31.12.06                        --                      --               --            --          403      (2)
 BRACCHI GIAMPIO                    Director                        1.1.06-31.12.06      Appr. Fin. St. 2007                      20                --            --            --
 DEBENEDETTI FRANCO                 Director                        1.1.06-31.12.06      Appr. Fin. St. 2007                      20                --            --            --
 FERRERO PIERLUIGI                  Director                        1.1.06-31.12.06      Appr. Fin. St. 2007                      70                --                         63      (3)
 GERMANO GIOVANNI                   Director                        1.1.06-31.12.06      Appr. Fin. St. 2007                      20                --            --           10      (3)
 GIRARD FRANCO                      Director                        1.1.06-31.12.06      Appr. Fin. St. 2007                      20                --            --           13      (3)
 MANCINELLI PAOLO                   Director                        1.1.06-31.12.06      Appr. Fin. St. 2007                      33                --            --            3      (3)
 PARAVICINI CRESPI LUCA             Director                        1.1.06-31.12.06      Appr. Fin. St. 2007                      33                --            --           30      (3)
 RECCHI CLAUDIO                     Director                        1.1.06-31.12.06      Appr. Fin. St. 2007                      33                --            --            --
 SEGRE MASSIMO                      Director                        1.1.06-31.12.06      Appr. Fin. St. 2007                      20                --            --          294      (4)
 TABELLINI GUIDO                    Director                        1.1.06-31.12.06      Appr. Fin. St. 2007                      20                --            --            --
 ZANNI UMBERTO                      Director                        1.1.06-31.12.06      Appr. Fin. St. 2007                      20                --            --            --
                                    Chairman Board of Statu-
 MANZONETTO PIETRO
                                    tory Auditors                   1.1.06-31.12.06       Appr. Fin. St. 2007                     50                --            --            --
 NANI LUIGI                         Statutory Auditor               1.1.06-31.12.06      Appr. Fin. St. 2007                      33                --            --            --
 ZINGALES RICCARDO                  Statutory Auditor               1.1.06-31.12.06      Appr. Fin. St. 2007                      33                --            --          157      (5)

(1) Fees of € 520 thousand as Chairman of CIR S.p.A. and € 10 thousand as Chairman of the subsidiary Sogefi S.p.A. and € 357 thousand as Director of the subsidiary Gruppo
    Editoriale L’Espresso S.p.A are paid to ROMED S.p.A..
(2) Other fees include emoluments for the position of Director in other companies of the Group and employee salary
(3) Other fees include emoluments for the position of Director in other companies of the Group


(4) Other fees refer to fees for professional services
(5) Other fees include emoluments for the position of Statutory Auditor in other companies of the Group




Stock Option Plans

As required by Consob Resolution no. 11971 of May 14 1999 and subsequent amendments and
additions, it should be stated that CIR has set up stock option plans for employees of the Group.
At December 31 2006 stock option plans issued as from the year 2000 were still valid for a total
of 30,360,600 options, as can be seen from the chart on page 78 of the Explanatory Notes to the
Consolidated Financial Statements.

With reference to the plans issued in the last three years, it should be said that:




                                                                                                                                                            CIR S.p.A.               141
      -    On March 12 2004 the Board of Directors voted to assign to executives of the Company and
           its parent company options for the subscription of shares according to the terms and condi-
           tions laid down in the Regulation of “Stock Option Plan March 12 2004”, which was ap-
           proved at the same meeting. This plan gives the beneficiaries the right to exercise an option to
           subscribe a total maximum of 2,545,000 newly issued shares at a given price and within a
           predefined period of time. The Regulation also requires that in order to be entitled to exercise
           the option the beneficiaries must be employed by the Company or its parent company at the
           moment in which the option is exercised except in cases of retirement, permanent invalidity or
           death. The subscription price was fixed at € 1.60. The options can be exercised by each bene-
           ficiary starting from September 30 2004, at three-monthly intervals until the final maturity of
           September 30 2014.

      -    On September 6 2004 the Board of Directors voted to assign options to subscribe a further
           2,595,000 newly issued shares at the unit price of € 1.56 reserved for subscription by execu-
           tives of the Company and its parent company who are beneficiaries of the “Stock Option Plan
           September 6 2004”, approved at the same meeting. The Regulation of this plan stipulates
           terms and conditions identical to those of the previous plan except for the date on which the
           options become exercisable (February 28 2005) and the final expiration date of the same op-
           tions (February 28 2015).

      -    Furthermore on June 8 2004 the Board of Directors approved the award of further options for
           the subscription of 4,150,000 shares at the price of € 1.60 per share reserved for the executives
           of the Company and its parent company who are beneficiaries of “Stock Option Plan June 8
           2004” approved during that same meeting. The Regulations of this plan stipulate that the op-
           tions can be exercised at any time from June 15 2004 to June 15 2009.

      -    On January 11 2005 the Board of Directors voted to award options for the purchase of
           11,700,000 shares at the price of € 2.15 per share – shares which are currently in the portfolio
           of CIR – to executives of the Company and its parent company, in accordance with the terms
           and conditions set forth in the document “Regulation of Extraordinary Stock Option Plan
           January 11 2005”. The options can be exercised at any time from April 30 2005 to April 30
           2010.

      -    On March 11 2005 the Board of Directors voted to assign to executives of the Company and
           its parent company options for the subscription of shares according to the terms and condi-
           tions laid down in the Regulation of “Stock Option Plan March 11 2005”, which was ap-
           proved at the same time. This plan gives the beneficiaries the right to exercise options to sub-
           scribe a total maximum of 2,670,000 newly issued shares at a given price and within a prede-
           fined period of time. The Regulation also requires that in order to be entitled to exercise the
           options the beneficiaries must be employed by the Company or its parent company at the
           moment when the option is exercised except in cases of retirement, permanent invalidity or
           death. The subscription price was fixed at € 2.34 per share. The options can be exercised by
           each beneficiary starting from September 30 2005, at three-monthly intervals, until the final
           maturity of September 30 2015. On the same date a resolution was also passed assigning
           1,760,000 newly issued shares at the price of € 2.34 to employees of CIR S.p.A., of its sub-
           sidiary CIR International and of its parent company, who are beneficiaries of “Stock Option
           Plan 2005”, which was approved at the same time. The regulation of this plan gives terms,
           conditions and exercise periods identical to those of “Stock Option Plan 11.03.2005”.




142   CIR S.p.A.
-   On September 6 2005 the Board of Directors voted to assign options to subscribe a further
    2,790,000 newly issued shares at the price of € 2.49 per share reserved for subscription by ex-
    ecutives of the Company and its parent company and the subsidiary Dry Products S.p.A., who
    are beneficiaries of “Stock Option Plan September 6 2005”, approved during the same meet-
    ing. The Regulation of this plan stipulates terms and conditions identical to those of the previ-
    ous plan except for the date on which the options become exercisable (February 28 2006) and
    the final expiration date of the same options (February 29 2016). It should be remembered that
    the Board of Directors Meetings as above approved the relative share capital increases (for a
    total maximum amount of € 3,610,000.00 through the issuance of a maximum of 7,220,000
    shares) on the basis of the authorization given by the Extraordinary Meetings of Shareholders
    held on May 12 2000 and April 27 2005.

- On April 27 2006 the Board of Directors voted to assign to executives of the Company, of its
  subsidiary Dry Products S.p.A. and of its parent company options to subscribe shares accord-
  ing to the terms and conditions defined in the Regulations of “Stock option plan 2006”, which
  was approved at the same time. This plan gives the beneficiaries the right to exercise options to
  subscribe a total of 5,530,000 newly issued shares at a given price and within a predefined pe-
  riod of time. The options will be divided into two tranches, each of 2,765,000 options. The
  Regulations also require that in order to be entitled to exercise the options the beneficiaries
  must be employed by the Company, its subsidiary or its parent company at the moment when
  the option is exercised except in cases of retirement, permanent invalidity or death. The sub-
  scription price was fixed at € 2.50 for the first tranche options and at € 2.47 for the second tra-
  nche options.

The following chart gives information on the stock options assigned to the Directors and General
Managers.




                                                                                             CIR S.p.A.   143
      STOCK OPTIONS ASSIGNED TO DIRECTORS AND GENERAL MANAGERS

                                                     Options held at beginning        Options assigned during          Options exercised during        Options             Options held at end
                                                            of the year                      the year                          the year              which expired             of the year
                                                                                                                                                      during year
 Last name and first name             Position Number of Average Average Number of Average Average Number of Average                    Average       Number of      Number of Average Average
                                       held     options strike price expiry date options strike price expiry date options strike price expiry date     options        options strike price expiry date
                                                                       (years)                          (years)                          (years)                                             (years)
                                      C.E.O. &
 DE BENEDETTI RODOLFO                 G.M.
 Stock Option Plan 7/3/2000                       1,500,000     3.70                                                                                                  1,500,000     3.70
 Stock Option Plan 30/1/2001                      1,000,000     2.62                                                                                                  1,000,000     2.62
 Stock Option Plan 7/9/2001                       2,000,000     1.28                                                                                                  2,000,000     1.28
 Stock Option Plan 14/3/2002                        340,000     1.20                                                                                                    340,000     1.20
 Stock Option Plan 13/9/2002                        460,000     1.02                                                                                                    460,000     1.02
 Stock Option Plan 7/3/2003                         652,500     0.84                                              (337,500)     0.84        2.523                       315,000     0.84
 Stock Option Plan /9/2003                          787,500     1.13                                                                                                    787,500     1.13
 Stock Option Plan 12/3/2004                      1,250,000     1.60                                                                                                  1,250,000     1.60
 Stock Option Plan 8/6/2004                       3,500,000     1.60                                                                                                  3,500,000     1.60
 Stock Option Plan 6/9/2004                       1,250,000     1.56                                                                                                  1,250,000     1.56
 Stock Option Plan 11/1/2005                     10,000,000     2.15                                                                                                 10,000,000     2.15
 Stock Option Plan 11/3/2005                      1,350,000     2.34                                                                                                  1,350,000     2.34
 Stock Option Plan 6/9/2005                       1,250,000     2.49                                                                                                  1,250,000     2.49
 Stock Option Plan 2006 1st tranche                                               1,250,000     2.50                                                                  1,250,000     2.50
 Stock Option Plan 2006 2nd tranche                                               1,250,000     2.47                                                                  1,250,000     2.47

 TOTAL                                           25,340,000     1.99       7.13   2,500,000    2.49       10.01   (337,500)    0.84         2.523                    27,502,500     2.05         6.6


 PIASER ALBERTO                       G.M.
 Stock Option Plan 14/3/2002                         32,000     1.20                                              (24,000)      1.20        2.523                         8,000     1.20
 Stock Option Plan 13/9/2002                         56,000     1.02                                              (24,000)      1.02        2.523                        32,000     1.02
 Stock Option Plan 7/3/2003                         100,000     0.84                                              (30,000)      0.84        2.523                        70,000     0.84
 Stock Option Plan 5/9/2003                         130,000     1.13                                              (30,000)      1.13        2.523                       100,000     1.13
 Stock Option Plan 12/3/2004                        192,000     1.60                                              (36,000)      1.60        2.523                       156,000     1.60
 Stock Option Plan 9/2004                           228,000     1.56                                              (36,000)      1.56        2.523                       192,000     1.56
 Stock Option Plan 11/3/2005                        400,000     2.34                                                                                                    400,000     2.34
 Stock Option Plan /9/2005                          300,000     2.49                                                                                                    300,000     2.49
 Stock Option Plan 2006 1st
 tranche                                                                           300,000      2.50                                                                    300,000     2.50
 Stock Option Plan 2006 2nd tranche                                                300,000      2.47                                                                    300,000     2.47

 TOTAL                                            1,438,000     1.86       8.47   600,000      2.49       10.01   (180,000)     1.26        2.523                     1,858,000     2.12         7.97


 FERRERO PIERLUIGI                    Dir.
 Stock Option Plan 7/3/2000                         220,000     3.70                                                                                                    220,000     3.70
 Stock Option Plan 30/1/2001                        125,000     2.62                                                                                                    125,000     2.62
 Stock Option Plan 7/9/2001                         100,000     1.28                                              (100,000)     1.28         2.53                              --    --

 TOTAL                                             445,000      2.85       5.50                                   (100,000)     1.28         2.53                      345,000      3.31         4.25




144         CIR S.p.A.
Statutory Financial Statements of directly controlled subsidiaries
                    as of December 31 2006


              ENERGIA HOLDING S.p.A.

              GRUPPO EDITORIALE L’ESPRESSO S.p.A.

              SOGEFI S.p.A.

              HSS – HOLDING SANITÀ E SERVIZI S.p.A.

              DRY PRODUCTS S.p.A.

              CIR INTERNATIONAL S.A.

              MEDINVEST Plc

              COFIDEFIN SERVIÇOS DE CONSULTORIA Lda

              INTERGEFI S.r.l.

              CIR VENTURE S.r.l.

              JUPITER FINANCE S.p.A.

              CIRINVEST S.p.A. (formerly SCALA CAPITAL S.p.A.)




                                                                     145
      ENERGIA HOLDING S.p.A.
      Headquarters: TURIN
      Share capital at December 31 2006: € 120,351,238.00


      BALANCE SHEET
      (in euro)

      ASSETS                                                       31.12.2006      31.12.2005
      A - SHAREHOLDER RECEIVABLES FOR PAYMENTS STILL DUE                     --              --
      B - FIXED ASSETS
          I Intangible assets
                   Start-up and expansion costs                         4,064           6,264
                   Concessions, licenses and traademarks                1,513           1,730
          Total intangible assets                                       5,577           7,994
            II    Tangible assets                                           --               --
            III Financial assets
                     Investments in subsidiaries                  254,582,461     252,870,557
            Total financial assets                                254,582,461     252,870,557
      TOTAL FIXED ASSETS                                          254,588,038     252,878,551
      C-    CURRENT ASSETS
            I Inventories                                                   --               --
            II Accounts receivable
                     Parent companies due in up to one year            34,711          56,420
                     Advanced taxes due in up to one year                   --              --
                     Others due in up to one year                       3,370           5,707
            Total receivables                                          38,081          62,127
            III Financial assets not classified as fixed assets             --              --
            IV Cash and cash equivalents
                    Bank and Post Office deposits                   5,016,322       5,341,708
            Total cash and cash equivalents                         5,016,322       5,341,708
      TOTAL CURRENT ASSETS                                          5,054,403       5,403,835
      D - ACCRUED INCOME AND PREPAID EXPENSES                               --               --
      TOTAL ASSETS                                                259,642,441     258,282,386




      LIABILITIES AND SHAREHOLDERS' EQUITY                         31.12.2006      31.12.2005
      A - SHAREHOLDERS' EQUITY
          I     Capital                                           120,351,238     120,351,238
          II    Additional paid-in capital                        131,485,190     131,485,190
          III   Revaluation reserves                                        --               --
          IV    Legal reserve                                       1,084,709         813,101
          V     Statutory reserve                                           --               --
          VI    Reserve for treasury stock held                             --               --
          VII   Other reserves                                         10,171          10,173
          VIII  Retained earnings (losses)                            226,278          60,293
          IX    Net income (loss) for the year                      6,361,741       5,432,169
      TOTAL SHAREHOLDERS' EQUITY                                  259,519,327     258,152,164
      B - PROVISIONS FOR RISKS AND LOSSES                                   --               --
      C - EMPLOYEE SEVERANCE AND LEAVING INDEMNITY FUND (TFR)               --               --
      D - ACCOUNTS PAYABLE
             Trade payables due in up to one year                     121,696         129,448
             Tax payables                                               1,418             774
      TOTAL PAYABLES                                                  123,114         130,222
      E-    ACCRUED EXPENSES AND DEFERRED INCOME                            --               --
      TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                  259,642,441     258,282,386


146
ENERGIA HOLDING S.p.A.
Headquarters: TURIN
Share capital at December 31 2006: € 120,351,238.00


INCOME STATEMENT
(in euro)

                                                           2006          2005


A - VALUE OF PRODUCTION
    Other revenues and income                                  --            --
TOTAL VALUE OF PRODUCTION                                      --            --

B - COSTS OF PRODUCTION
    Services                                             92,479      130,064
    Amortization, depreciation and write-downs
        Amortization of intangible assets                 2,416         3,380
    Miscellaneous operating costs                        25,325       134,687
TOTAL COSTS OF PRODUCTION                               120,220       268,131
OPERATING INCOME (LOSS)                                (120,220)     (268,131)

C-  FINANCIAL INCOME AND EXPENSES
    Income from equity investments
             Subsidiaries                             6,339,364     5,583,427
    Other financial income
        Income other than the above
             Other                                     148,992         88,126
    Interest and other financial charges
             Other                                            --          152
TOTAL FINANCIAL INCOME AND EXPENSES                   6,488,356     5,671,401
D - ADJUSTMENTS TO THE VALUE OF FINANCIAL ASSETS               --            --
E - EXTRAORDINARY GAINS AND LOSSES
    Gains                                              104,600         92,126
    Losses                                                   --         1,605
EXTRAORDINARY ITEMS                                    104,600         90,521

INCOME (LOSS) BEFORE TAXES                            6,472,736     5,493,791

     Income taxes for the year                         (110,995)       (61,622)
NET INCOME (LOSS) FOR THE YEAR                        6,361,741     5,432,169




                                                                                  147
      GRUPPO EDITORIALE L’ESPRESSO S.p.A.
      Headquarters: ROME
      Share capital at 31.12.2006: € 65,149,551.00


      BALANCE SHEET
      (in euro)

      ASSETS                                                    31.12.2006                    31.12.2005

      Intangible assets with an indefinite useful life                   220,660,859                   220,660,858
      Other intangible assets                                              2,811,161                     3,369,339
      Intangible assets                                                  223,472,020                   224,030,197
      Tangible assets                                                     68,035,523                    74,132,977
      Equity investments                                                 391,694,134                   379,552,649
      Non-current receivables                                                348,290                       727,242
      Deferred tax assets                                                 14,733,787                    16,670,202
      NON-CURRENT ASSETS                                                698,283,754                   695,113,267

      Inventories                                                         30,398,197                    27,790,838
      Trade receivables                                                  119,111,943                   118,860,859
         of which from associated companies              102,261,915                    98,782,928
      Tax receivables                                                     25,115,809                    38,765,743
         of which receivable from associated companies     2,437,298                     6,966,619
      Other receivables                                                   11,194,173                     9,893,993
      Cash and cash equivalents                                          219,313,119                   230,093,697
         of which with associated companies               59,859,659                    39,215,349
      CURRENT ASSETS                                                    405,133,241                   425,405,130

      TOTAL ASSETS                                                     1,103,416,995                 1,120,518,397




      LIABILITIES AND SHAREHOLDERS' EQUITY                      31.12.2006                    31.12.2005

      Share capital                                                       65,149,551                    65,071,648
      Reserves                                                           131,897,461                   163,351,911
      Retained earnings (losses)                                          49,826,975                    26,133,512
      Net income (loss) for the year                                      85,927,510                    83,128,474
      SHAREHOLDERS' EQUITY                                              332,801,497                   337,685,545

      Borrowings                                                         338,744,633                   345,249,565
      Provisions for risks and losses                                      6,969,941                     7,582,603
      TFR and other personnel funds                                       47,576,131                    45,555,983
      Deferred tax liabilities                                            40,676,591                    35,117,100
      NON-CURRENT LIABILITIES                                           433,967,296                   433,505,251

      Borrowings                                                         168,319,724                   168,377,992
        of which from associated companies               159,078,867                   159,283,247
      Provisions for risks and losses                                      2,847,972                     2,993,100
      Trade payables                                                     115,232,168                   132,589,349
        of which to associated companies                  23,847,651                    21,612,734
      Tax payables                                                        12,128,359                       6,804,244
        of which to associated companies                   6,188,844                      591,434
      Other payables                                                      38,119,979                    38,562,916
      CURRENT LIABILITIES                                               336,648,202                   349,327,601
      TOTAL LIABILITIES                                                 770,615,498                   782,832,852

      TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                       1,103,416,995                 1,120,518,397


148
GRUPPO EDITORIALE L’ESPRESSO S.p.A.
Headquarters: ROME
Share capital at 31.12.2006: € 65,149,551.00


INCOME STATEMENT
(in euro)

                                                         2006                             2005

Revenues                                                        657,905,137                      649,191,974
  of which from associated companies            3,176,940                       299,266,251
Change in product inventories                                     (1,011,526)                       2,042,701
Other operating income                                            7,222,198                       22,852,133
  of which from associated companies               97,926                           23,494
Costs for the purchase of goods                                 (122,957,111)                    (116,232,470)
  of which from associated companies              472,261                          343,061
Costs for services                                              (332,542,877)                    (334,793,421)
  of which from associated companies           (97,828,025)                     (92,279,608)
Other operating expenses                                          (6,242,749)                      (9,155,075)
  of which from associated companies                (4,476)                        (856,984)
Personnel costs                                                 (112,035,293)                    (111,836,004)
  of which from associated companies               67,359                           (70,962)
Amortization, depreciation and write-downs                       (13,251,245)                     (14,733,432)
Operating income                                                 77,086,534                       87,336,406
Net financial income (expenses)                                  (14,958,372)                     (21,503,583)
  of which from associated companies           (2,514,835)                         (418,421)
Dividends                                                        56,319,888                       47,175,878
  of which from associated companies           56,319,888                       47,175,878
Income before taxes                                             118,448,050                      113,008,701
Taxes                                                            (32,520,540)                     (29,880,227)

NET INCOME (LOSS)                                                85,927,510                       83,128,474

Basic earnings per share                                               0.201                            0.193
Diluted earnings per share                                             0.195                            0.187




                                                                                                                 149
      SOGEFI S.p.A.
      Headquarters: MANTUA
      Share capital at 31.12.2006: € 58,926,707.84

      BALANCE SHEET
      (in euro)

      ASSETS                                                                 31.12.2006     31.12.2005
      CURRENT ASSETS
         Cash and cash equivalents                                             6,201,827     19,599,084
         Centralized treasury accounts with subsidiaries                      21,460,909     10,027,842
         Securities and available-for-sale financial assets                        4,442         25,344
         Loans and similar financial receivables with subsidiaries            26,123,308     20,163,332
         WORKING CAPITAL
         Trade receivables                                                     2,304,693      2,275,442
         of which with subsidiaries                                            1,773,649      2,009,224
         of which with the parent company                                        529,804        266,219
         Other receivables                                                       130,437        179,352
         Tax assets                                                              275,643        314,860
         Other assets                                                            215,594        186,758
         of which with subsidiaries                                              139,316        113,109
      TOTAL WORKING CAPITAL                                                    2,926,367      2,956,412
      TOTAL CURRENT ASSETS                                                    56,716,853     52,772,014
      NON-CURRENT ASSETS
      FIXED ASSETS
         Real estate investment: land                                         12,154,000     12,154,000
         Real estate investment: other buildings                              15,173,100     15,173,100
         Other tangible assets                                                   101,090        118,123
         Intangible assets                                                        47,049         40,742
      TOTAL FIXED ASSETS                                                      27,475,239     27,485,965
      OTHER NON-CURRENT ASSETS
         Investments in subsidiaries                                         256,420,932    256,996,593
         Other available-for-sale financial assets                                10,180          2,954
         Loans and similaar financial receivables                             91,759,986     91,800,000
         of which with subsidiaries                                           91,459,301     91,800,000
         of which other medium/long term assets for cash flow hedging            300,685              --
         Other receivables                                                         2,513          1,105
         Advanced taxes                                                        1,415,582      1,417,406
      TOTAL OTHER NON-CURRENT ASSETS                                         349,609,193    350,218,058
      TOTAL NON-CURRENT ASSETS                                               377,084,432    377,704,023
      TOTAL ASSETS                                                           433,801,285    430,476,037



      LIABILITIES AND SHAREHOLDERS' EQUITY                                   31.12.2006     31.12.2005
      CURRENT LIABILITIES
        Current bank borrowings                                                7,098,833        148,844
        Centralized treasury accounts with subsidiaries                       58,205,452     32,792,250
        Current part of long-term loans and other borrowings                   2,750,444     95,847,728
        TOTAL SHORT-TERM FINANCIAL LIABILITIES                                68,054,729    128,788,822
        Other financial liabilities for cash flow hedging                              --       131,870
        TOTAL BORROWINGS AND SHORT-TERM CASH-FLOW HEDGING                     68,054,729    128,920,692
        Trade payables and other payables                                      5,840,632      3,188,975
        of which with subsidiaries                                              763,866        221,533
        Taxes payable                                                            230,443      2,556,991
        Other current liabilities                                                435,618        376,074
      TOTAL CURRENT LIABILITIES                                               74,561,422    135,042,732
      NON-CURRENT LIABILITIES
      MEDIUM-LONG TERM DEBT AND CASH FLOW HEDGING
        Bank borrowings                                                      102,634,967     43,928,994
        Other medium-long term debt                                                    --     1,824,350
        TOTAL MEDIUM-LONG TERM DEBT AND CASH FLOW HEDGING                    102,634,967     45,753,344
        Other medium-long term financial liabilities for cash flow hedging             --       138,710
      TOTAL MEDIUM-LONG TERM DEBT AND CASH FLOW HEDGING                      102,634,967     45,892,054
      OTHER LONG-TERM LIABILITIES
        Long-term provisions                                                   1,464,715      1,248,935
        Deferred tax liabilities                                               5,032,080      5,056,578
      TOTAL OTHER LONG-TERM LIABILITIES                                        6,496,795      6,305,513
      TOTAL NON-CURRENT LIABILITIES                                          109,131,762     52,197,567
      SHAREHOLDERS' EQUITY
        Share capital                                                         58,826,348     58,337,652
        Reserves and retained earnings (losses)                              168,997,307    105,336,180
        Net income (loss) for the year                                        22,284,446     79,561,906
      TOTAL SHAREHOLDERS' EQUITY                                             250,108,101    243,235,738
      TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                             433,801,285    430,476,037


150
SOGEFI S.p.A.
Headquarters: MANTUA
Share capital at 31.12.2006: € 58,926,707.84


INCOME STATEMENT
(in euro)

                                                                                    2006            2005

FINANCIAL INCOME AND EXPENSES
1) Income from equity investments
   - dividends and other income from subsidiaries                              28,744,713      27,160,378
   - dividends and other income from other companies                                  270             179
TOTAL                                                                          28,744,983      27,160,557
2) Other financial income
   - from securities held for trading included in current assets                   36,534         110,936
   - income other than the above
        interest income and commissions from subsidiaries                       5,830,120       5,439,589
        interest income and commissions from others and miscellaneous income      461,350         448,736
        foreign exchange gains                                                    503,193         529,644
TOTAL                                                                           6,831,197       6,528,905
3) Interest expense and other financial charges
   - subsidiaries                                                               1,155,049         248,173
   - others                                                                     5,489,882       7,568,203
   - foreign exchange losses                                                      945,270       1,698,007
TOTAL                                                                           7,590,201       9,514,383
ADJUSTMENTS TO THE VALUE OF FINANCIAL ASSETS
4) Revaluations                                                                         --               --
5) Write-downs                                                                  1,346,557        6,976,463
TOTAL ADJUSTMENTS                                                              (1,346,557)      (6,976,463)
6) OTHER OPERATING INCOME                                                       9,974,550      10,527,793
    of which from subsidiaries                                                 9,718,535        9,848,080
OTHER OPERATING COSTS
7) Non-financial services                                                       5,791,708       5,389,485
     of which from subsidiaries                                                   476,806         245,644
     of which from parent company                                               1,850,000       1,795,000
8) Lease and rental                                                               385,402         446,187
9) Personnel costs                                                              4,277,725       4,676,375
10) Amortization, depreciation and write-downs                                     42,702          43,278
11) Risk provisions                                                                     --              --
12) Other provisions                                                                    --              --
13) Operating costs                                                             1,142,168       1,145,514
TOTAL OTHER OPERATING COSTS                                                    11,639,705      13,741,483
OPERATING INCOME                                                               24,974,267      16,025,570
NON-OPERATING INCOME AND EXPENSES
14) Income                                                                                --   62,175,468
      of which non-recurring                                                             --    62,175,468
15) Expenses                                                                     3,116,430         552,210
      of which non-recurring                                                    2,171,515                --
NON-OPERATING INCOME (LOSS)                                                     (3,116,430)    61,623,258
INCOME BEFORE TAXES                                                            21,857,837      77,648,828
16) Income taxes for the year                                                     (426,609)     (1,913,078)
NET INCOME FOR THE YEAR                                                        22,284,446      79,561,906




                                                                                                              151
      HSS - HOLDING SOCIETÀ E SERVIZI S.p.A.
      Headquarters: MILAN
      Share capital at 31.12.2006: € 4,285,610.00



      BALANCE SHEET
      (in euro)

      ASSETS                                                              31.12.2006     31.12.2005
      A - SHAREHOLDER RECEIVABLES FOR PAYMENTS STILL DUE                            --             --
      B - FIXED ASSETS
          I Intangible assets
                   Start-up and expansion costs                                    --           718
                   Concessions, licenses, trademarks and similar rights      317,606         61,563
                   Other assets                                               37,091              --
          Total intangible assets                                            354,697         62,281
          II Tangible assets
                   Land and buildings                                      1,524,553      1,524,553
                   Plant and machinery                                        13,339          3,326
                   Industrial and commercial equipment                         4,196              --
                   Other assets                                              239,182         61,455
                   Assets in process and advance payments                  7,180,053      2,141,779
          Total tangible assets                                            8,961,323      3,731,113
          III Financial assets
                   Investments in subsidiaries                            46,753,095     13,098,779
                   Receivables
                       Subsidiaries - up to 12 months                      8,729,141      1,125,240
                       Subsidiaries - over 12 months                          26,718         26,718
                       Other companies - up to 12 months                         310            310
                       Other companies - over 12 months                      415,437        181,567
          Total financial assets                                          55,924,701     14,432,614
      TOTAL FIXED ASSETS                                                  65,240,721     18,226,008
      C - CURRENT ASSETS
          I Inventories                                                             --             --
          II Accounts receivable
                   Clients - up to 12 months                                  18,587         18,546
                   Subsidiaries - up to 12 months                          3,529,742      1,424,381
                   Parent companies - up to 12 months                        893,798        469,265
                   Tax assets                                                779,648        308,805
                   Advanced taxes                                                  --             --
                   Other - up to 12 months                                   561,815        109,400
          Total receivables                                                5,783,590      2,330,397
          III Financial assets not classified as fixed assets                      --             --
          IV Cash and cash equivalents
                   Bank and Post office deposits                           1,871,932     11,251,445
                   Cash and valuables on hand                                    694            778
          Total cash and cash equivalents                                  1,872,626     11,252,223
      TOTAL CURRENT ASSETS                                                 7,656,216     13,582,620
      D - ACCRUED INCOME AND PREPAID EXPENSES
                   Accrued income                                                  --             --
                   Prepaid expenses                                           53,562         25,920
      TOTAL ACCRUED INCOME AND PREPAID EXPENSES                               53,562         25,920
      TOTAL ASSETS                                                        72,950,499     31,834,548


      LIABILITIES AND SHAREHOLDERS' EQUITY                                31.12.2006     31.12.2005
      A - Shareholders' equity
          I Capital                                                         4,285,610      2,427,729
          II Additional paid-in capital                                   69,402,258     30,510,282
          III Revaluation reserve                                                   --             --
          IV Legal reserve                                                          --             --
          V Statutory reserves                                                      --             --
          VI Reserve for treasury stock held                                        --             --
          VII Other reserves                                                        1              --
          VIII Retained earnings (losses)                                  (2,318,130)    (1,492,847)
          IX Net income (loss) for the year                                (2,837,300)      (825,283)
      TOTAL SHAREHOLDERS' EQUITY                                          68,532,439     30,619,881
      B - PROVISIONS FOR RISKS AND LOSSES                                           --             --
      C - EMPLOYEE SEVERANCE AND LEAVING INDEMNITY FUND (TFR)                  81,595         36,025
      D - ACCOUNTS PAYABLE
                   Trade payables up to 12 months                          2,125,058        919,336
                   Payables - subsidiaries up to 12 months                     7,363         43,631
                   Taxes payable up to 12 months                              82,474         68,846
                   Social security payables up to 12 months                   94,454         62,511
                   Social security payables over 12 months                    50,870              --
                   Other payables up to 12 months                          1,227,692         80,130
                   Other payables over 12 months                             662,960              --
      TOTAL PAYABLES                                                       4,250,871      1,174,454
      E - ACCRUED EXPENSES AND DEFERRED INCOME
                   Other accrued expenses and deferred income                 85,594          4,188
      TOTAL ACCRUED EXPENSES AND DEFERRED INCOME                              85,594          4,188
      TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                          72,950,499     31,834,548


      MEMORANDUM ACCOUNTS                                                 31.12.2006     31.12.2005
      (in euro)
            Guarantees issued
                Guarantees
                    Subsidiaries                                          54,207,508      9,693,728
                    Other                                                    515,785        913,351
      TOTAL MEMORANDUM ACCOUNTS                                           54,723,293     10,607,079

152
HSS - HOLDING SOCIETÀ E SERVIZI S.p.A.
Headquarters: MILAN
Share capital at 31.12.2006: € 4,285,610.00



INCOME STATEMENT
(in euro)

                                                        2006          2005



A - VALUE OF PRODUCTION
    Revenues from sales and services                       --            --
    Other revenues and income                      1,443,685       279,371
TOTAL VALUE OF PRODUCTION                          1,443,685       279,371

B - COSTS OF PRODUCTION
    Services                                       2,493,526       516,032
    Lease and rental                                 149,466       110,140
    Personnel costs
       Salaries and wages                          1,178,789       631,931
       Social contributions                          366,763       202,025
       Severance and leaving indemnity                71,571        40,928
       Other costs                                         --            --
    Amortization, depreciation and write-downs
       Amortization of intangible assets               29,679        22,261
       Depreciation of tangible assets                 35,282        18,126
    Miscellaneous operating costs                     645,123       179,153
TOTAL COSTS OF PRODUCTION                           4,970,199     1,720,596
OPERATING INCOME (LOSS)                            (3,526,514)   (1,441,225)

C - FINANCIAL INCOME AND EXPENSES
    Income from equity investments
        Subsidiaries                                 174,141        24,640
    Total revenues from equity investments           174,141        24,640
    Other financial income
        Financial income other than the above
        From other receivables                       197,162       171,800
    Total other financial income                     197,162       171,800
    Interest and other financial expenses
        Other creditors                             (191,932)       (3,499)
    Foreign exchange gains and losses                      --            --
TOTAL FINANCIAL INCOME AND EXPENSES                  179,371       192,941
D - ADJUSTMENTS TO THE VALUE OF FINANCIAL ASSETS           --            --
E - EXTRAORDINARY GAINS AND LOSSES
    Gains                                                   --            --
    Losses
        Capital losses on disposals                 (328,600)             --
TOTAL EXTRAORDINARY GAINS AND LOSSES                 (328,600)            --
INCOME BEFORE TAXES                                (3,675,743)   (1,248,284)
   Income taxes for the year
       Current taxes                                        --           --
       Deferred and advanced taxes                    838,443      423,002
NET INCOME (LOSS) FOR THE YEAR                     (2,837,300)    (825,282)




                                                                               153
      DRY PRODUCTS S.p.A.
      Headquarters in Milan: Via Ciovassino 1
      Share capital at March 31 2006: € 100,000.00


      BALANCE SHEET
      (in euro)

      ASSETS                                                           31.03.2006 *            31.03.2005
      A)  SHAREHOLDER RECEIVABLES FOR PAYMENTS STILL DUE                           --                    --
      B)  FIXED ASSETS
          I     Intangible assets                                                  --                    --
          II    Tangible assets
                    Other assets                                              1,299                 1,570
          Total tangible assets                                               1,299                 1,570
          III Financial assets
                    Investments in subsidiaries                             188,000             4,843,834
          Total financial assets                                            188,000             4,843,834
      TOTAL FIXED ASSETS                                                    189,299             4,845,404
      C) CURRENT ASSETS
          I     Inventories                                                        --                    --
          II    Receivables                                     **                      **
                    Subsidiaries                                  --              --      --    1,684,912
                    Parent companies                             --          40,000      --             --
                    Others                                        --        138,089       --    1,623,926
          Total receivables                                       --        178,089       --    3,308,838
          III Financial assets not classified as fixed assets
                    Financial receivables - subsidiaries                           --             519,151
          Total financial assets                                                   --             519,151
          IV Cash and cash equivalents
                    Bank and Post Office deposits                         3,198,268               349,450
                    Cash and valuables on hand                                  403                    14
          Total cash and cash equivalents                                 3,198,671               349,464
      TOTAL CURRENT ASSETS                                                3,376,760             4,177,453
      D) ACCRUED INCOME AND PREPAID EXPENSES                                  2,095                 2,097
      TOTAL ASSETS                                                        3,568,154             9,024,954



      LIABILITIES AND SHAREHOLDERS' EQUITY                             31.03.2006 *            31.03.2005
      A)  SHAREHOLDERS' EQUITY
          I    Capital                                                      100,000               100,000
          II   Additional paid-in capital                                          --                    --
          III Revaluation reserves                                                 --                    --
          IV Legal reserve                                                   50,955                37,898
          V    Reserve for treasury stock held                                     --                    --
          VI Statutory reserves                                                    --                    --
          VII Other reserves                                                       --                    --
          VIII Retained earnings (losses)                                   368,957               120,867
          IX Net income (loss) for the year                               1,032,401               261,147
      TOTAL SHAREHOLDERS' EQUITY                                          1,552,313               519,912
      B) PROVISIONS FOR RISKS AND LOSSES
               Other                                                              --            1,488,073
      TOTAL PROVISIONS FOR RISKS AND LOSSES                                       --            1,488,073
      C) EMPLOYEE SEVERANCE AND LEAVING INDEMNITY FUND                       25,284                21,499
      D) ACCOUNTS PAYABLE                                       **                      **
               Trade payables                                    --          51,202      --         4,310
               Payables - parent companies                       --       1,897,427      --     6,918,159
               Tax payables                                      --           5,750      --        13,124
               Social security payables                          --           7,340      --        13,595
               Other payables                                    --          28,838      --        46,282
      TOTAL PAYABLES                                             --       1,990,557      --     6,995,470
      E) ACCRUED EXPENSES AND DEFERRED INCOME                                     --                    --
      TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                          3,568,154             9,024,954

      *   Financial year ended March 31 2006
      * * of which due in over 12 months
154
DRY PRODUCTS S.p.A.
Headquarters in Milan: Via Ciovassino 1
Share capital at March 31 2006: € 100,000.00


INCOME STATEMENT
(in euro)

                                                                                    2006 *          2005
A)  VALUE OF PRODUCTION
         Other revenues and income                                                1,572,701     1,292,852
TOTAL VALUE OF PRODUCTION                                                         1,572,701     1,292,852
B) COSTS OF PRODUCTION
         Services                                                                    32,035      278,618
         Lease and rental                                                            15,776       29,122
         Personnel costs:
             Salaries and wages                                                     166,641      172,715
             Social contributions                                                    54,805       53,126
             Severance and leaving indemnity                                          9,225        9,123
         Amortization, depreciation and write-downs                                     559      176,042
         Risk provisions                                                                  --      49,000
         Miscellaneous operating costs                                               27,813      128,783
TOTAL COSTS OF PRODUCTION                                                           306,854      896,529
OPERATING INCOME (LOSS)                                                           1,265,847      396,323
C) FINANCIAL INCOME AND EXPENSES
         Other financial income:
             Income other than the above
                  Interest and commissions from subsidiaries                         10,464       24,430
                  Interest and commissions from others and miscellaneous income       3,430        1,813
         Total other financial income                                                13,894       26,243
         Interest expense and other financial charges
             Parent companies                                                      191,268       481,565
                Others                                                                 269          2,262
            Total interest expense and other financial sharges                     191,537       483,827
            Foreign exchange gains and losses                                           31         (4,619)
TOTAL FINANCIAL INCOME AND EXPENSES                                                (177,612)     (462,203)
D)    ADJUSTMENTS TO THE VALUE OF FINANCIAL ASSETS
          Revaluation:
              of equity investments                                                       --     505,928
          Write-downs:
              of equity investments                                                       --     279,000
TOTAL ADJUSTMENTS TO THE VALUE OF FINANCIAL ASSETS                                        --     226,928
E)    EXTRAORDINARY GAINS AND LOSSES
            Gains:
                Capital gains on disposals                                                --     414,161
            Losses:
                Capital losses on disposals                                           5,834            --
                Other charges                                                        50,000      314,062
TOTAL EXTRAORDINARY GAINS AND LOSSES                                                (55,834)     100,099
INCOME (LOSS) BEFORE TAXES                                                        1,032,401      261,147

      Income taxes for the year                                                            --           --
      Net income (loss) for the year                                              1,032,401      261,147




*     Financial year ended March 31 2006




                                                                                                             155
      CIR INTERNATIONAL S.A.
      Headquarters: LUXEMBOURG
      Share capital at 31.12.2006: € 250,000,000.00


      BALANCE SHEET
      (in euro)


      ASSETS                                           31.12.2006    31.12.2005

      Fixed assets
      - tangible assets                                     4,536           695
      - investments                                    94,077,977    64,542,798
                                                       94,082,513    64,543,493
      Current assets
      - receivables                                    61,518,209    57,616,985
      - marketable securities                         660,136,205   525,619,868
      - cash at banks and in hand                      76,886,207   268,922,737
                                                      798,540,621   852,159,590
      Prepaid expenses and accrued income              32,266,160    28,567,847
      Total assets                                    924,889,294   945,270,930




      LIABILITIES AND SHAREHOLDERS’ EQUITY             31.12.2006    31.12.2005


      Share capital                                   250,000,000   250,000,000
      Legal reserve                                     3,684,059      2,127,106
      Profit (Loss) brought forward                    15,588,730     (3,993,385)
      Profit for the year                                 693,651    31,139,068
      Total shareholders’ equity                      269,966,440   279,272,789
      Provisions for risks and charges                 31,865,154    38,260,549
      Long term debt                                  585,000,000   585,000,000
      CURRENT LIABILITIES
      - short term debt                                   230,022       249,841
      - other liabilities                               6,863,947     6,029,509
                                                        7,093,969     6,279,350
      Accrued expenses and deferred income             30,963,731    36,458,242
      Totale liabilities                              654,922,854   665,998,141
      Total liabilities and shareholders' equity      924,889,294   945,270,930




156
CIR INTERNATIONAL S.A.
Headquarters: LUXEMBOURG
Share capital at 31.12.2006: € 250,000,000.00


INCOME STATEMENT
(in euro)


                                                      2006          2005

INCOME
Fixed asset income                               20,259,080    23,542,580
Current asset income                            149,916,272   124,497,147
Other income                                      1,925,000    18,559,232

Total income                                    172,100,352   166,598,959

EXPENSES
Value adjustment on
- tangible assets                                     1,715           874
- investments                                     1,263,138       246,428
- marketable securities                           6,733,486     4,270,603
                                                  7,998,339     4,517,905

Interest and other financial expenses           158,098,964   126,970,938
Other expenses                                    5,189,398     3,833,048
Extraordinary expenses                             120,000       138,000
Profit for the year                                693,651     31,139,068
Total expenses                                  172,100,352   166,598,959




                                                                            157
      MEDINVEST Plc
      Headquarters: DUBLIN
      Share capital at 31.12.2006: $US 361,498.87


      BALANCE SHEET
      (in US dollars)

      STATEMENT OF NET ASSETS                                                   31.12.2006       31.12.2005

      Current Assets
      Investments in securities                                                 491,065,525      428,148,446
      Other debtors                                                                 656,657           43,183
      Cash                                                                          174,576        6,303,074
      Receivable for investments sold                                                     --               --
                                                                                491,896,758      434,494,703

      Liabilities - Amounts falling due within one year
      Financial liabilities at fair value through profit or loss                       (3,834)             --
      Cash - overdrawn                                                            (7,578,612)              --
      Sundry payables and accrued expenses                                        (4,818,901)     (3,762,022)
      Total liabilities                                                         (12,401,347)      (3,762,022)

      Net assets attributable to holders of redeemable participating shares     479,495,411      430,732,681

      Participating shares in issue                                                 361,490          361,490

      Net asset value per participating share                                          1,326           1,192




      STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO
                                                                                31.12.2006       31.12.2005
      HOLDERS OF REDEEMABLE PARTICIPATING SHARES

      Net assets attributable to holders of redeemable
      participating shares at beginning of year                                 430,732,681      349,425,350

      Share capital transaction                                                            --     50,000,000

      Increase/(decrease) in net assets attributable to holders of redeemable
      preference shares from operations                                          48,762,730       31,307,331

      Net assets attributable to holders of redeemable
      participating shares at end of year                                       479,495,411      430,732,681




158
MEDINVEST Plc
Headquarters: DUBLIN
Share capital at 31.12.2006: $US 361,498.87


INCOME STATEMENT
(in US dollars)

                                                                                                  2006           2005

Income
Bank interest                                                                                 176,569          160,487
Other income                                                                                   21,386           33,097
Net gain/(loss) on financial assets and liabilities at fair value through profit or loss   58,739,765       39,329,895
                                                                                           58,937,720       39,523,479

Expenses
Investment management fee                                                                   (6,787,207)     (5,744,667)
Administration fee                                                                            (100,000)       (100,000)
Performance fee                                                                             (2,960,683)     (2,098,852)
Custodian fee                                                                                 (104,902)       (104,439)
Transaction fees                                                                                  (6,475)       (10,898)
Directors' fees                                                                                 (18,098)        (25,192)
Audit fee                                                                                      (46,464)        (35,985)
Other expenses                                                                                 (52,216)        (50,539)
Total operating expenses                                                                   (10,076,045)     (8,170,572)

Total operating profit                                                                     48,861,675       31,352,907

Finance costs - Distribution                                                                   (98,945)        (45,576)

Increase/(decrease) in net assets attributable to holders of redeemable
preference shares from operations                                                          48,762,730       31,307,331




                                                                                                                           159
      COFIDEFIN SERVICOS de CONSULTORIA Lda
      Headquarters: MADEIRA
      Share capital at 31.12.2006: € 125,000.00


      BALANCE SHEET
      (in euro)


      ASSETS                                       31.12.2006     31.12.2005

      Debts
      Other debtors                                          --            --
      Total current assets                                   --            --

      Bank deposits and cash
      Time deposits                                 3,396,950      3,292,531
      Current accounts                                 57,119         14,874
      Total banks deposits and cash                 3,454,069      3,307,405

      Accruals and deferred items
      Accruals and income                           3,571,112      3,117,952
      Deferred costs                                        --             4
      Total accruals and deferred items             3,571,112      3,117,956
      TOTAL ASSETS                                  7,025,181      6,425,361




      LIABILITIES AND SHAREHOLDERS’ EQUITY         31.12.2006     31.12.2005

      SHAREHOLDERS’ EQUITY
      Share capital                                   125,000        125,000
      Legal reserve                                    25,000         25,000
      Results carried forward                          76,127         96,857
      Results for the financial year                6,037,709      5,679,270
      Total shareholders’ equity                    6,263,836      5,926,127

      Debts to third parties - Short-term
      Debts to credit institutions                           --            --
      Total current liabilities                              --            --

      Accruals deferred items
      Cost accruals                                  761,345        499,234
      Total liabilities                               761,345        499,234
      TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY    7,025,181      6,425,361




160
COFIDEFIN SERVICOS de CONSULTORIA Lda
Headquarters: MADEIRA
Share capital at 31.12.2006: € 125,000.00


INCOME STATEMENT
(in euro)


                                                2006        2005

INCOME
Services provided                           7,596,422   6,593,359
Financial income                               60,704      69,660
Total income                                7,657,126   6,663,019

EXPENSES
Financial expenses                            137,782      1,588
General and administrative expenses         1,481,634    982,161
Total expenses                              1,619,416    983,749


PROFIT (LOSS) FOR THE YEAR                  6,037,710   5,679,270

Total expenses                              7,657,126   6,663,019




                                                                    161
      INTERGEFI S.r.l.
      Headquarters: MILAN
      Share capital at 31.12.2006: € 500,000.00


      BALANCE SHEET
      (in euro)

      ASSETS                                                      31.12.2006    31.12.2005

      A-    SHAREHOLDER RECEIVABLES FOR PAYMENTS STILL DUE                 --            --
      B-    FIXED ASSETS
            I   Intangible assets                                          --            --
            II Tangible assets                                             --            --
            III Financial assets                                           --            --
      TOTAL FIXED ASSETS                                                   --            --
      C - CURRENT ASSETS
          I    Inventories
                    Finished buildings                             4,239,358     4,239,358
          Total inventories                                        4,239,358     4,239,358
          II Accounts receivable
                    Clients up to 12 months                         381,490       118,732
                    Tax assets up to 12 months                       12,739         1,847
                    Tax assets over 12 months                           364           365
                    Others                                              463           668
            Total receivables                                       395,056       121,612
            III Financial assets not classified as fixed assets            --            --
            IV Cash and cash equivalents
                      Bank and post office deposits                       --       10,777
                      Cash and valuables on hand                        465           465
          Total cash and cash equivalents                                465        11,242
      TOTAL CURRENT ASSETS                                         4,634,879     4,372,212
      D - ACCRUED INCOME AND PREPAID EXPENSES
               Other accrued income and prepaid expenses                   --            --
      TOTAL ACCRUED INCOME AND PREPAID EXPENSES                            --            --
      TOTAL ASSETS                                                 4,634,879     4,372,212



      LIABILITIES AND SHAREHOLDERS' EQUITY                        31.12.2006    31.12.2005

      A-    SHAREHOLDERS' EQUITY
            I    Share capital                                      500,000       500,000
            II Additional paid-in capital                                  --            --
            III Revaluation reserve                                        --            --
            IV Legal reserve                                         20,000        10,000
            V Statutory reserves                                           --            --
            VI Reserve for treasury stock held                             --            --
            VII Other reserves                                      123,732         2,158
            VIII Retained earnings (losses)                                --            --
            IX Net income (loss) for the year                       146,119       131,575
      TOTAL SHAREHOLDERS' EQUITY                                    789,851       643,733
      B - PROVISIONS FOR RISKS AND LOSSES                                  --            --
      C - EMPLOYEE SEVERANCE AND LEAVING INDEMNITY FUND                    --            --
      D - ACCOUNTS PAYABLE
              Bank borrowings up to 12 months                        240,491       230,709
              Bank borrowings over 12 months                         249,089       486,453
              Other borrowings                                            91            91
              Trade payables                                          13,797        11,648
              Payables - parent companies                          3,328,090     2,992,400
              Tax payables                                            12,638         6,002
      TOTAL PAYABLES                                               3,844,196     3,727,303
      E - ACCRUED EXPENSES AND DEFERRED INCOME                           832         1,176
      TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                   4,634,879     4,372,212



162
INTERGEFI S.r.l.
Headquarters: MILAN
Share capital at 31.12.2006: € 500,000.00


INCOME STATEMENT
(in euro)


                                                                       2005         2005
A-  VALUE OF PRODUCTION
        Revenues from sales and services                            349,595      344,025
        Other revenues and income                                     1,161        1,054
TOTAL VALUE OF PRODUCTION                                           350,756      345,079
B - COSTS OF PRODUCTION
        Raw materials, secondary materials, consumables and goods         --          11
        Services                                                     23,605      244,430
        Personnel costs
             Salaries and wages                                             --           --
             Social contributions                                           --           --
             Severance and leaving indemnity                                --           --
        Changes in inventories of raw materials
        secondary materials, consumables and goods                        --     (215,014)
        Miscellaneous operating costs                                32,306        29,955
TOTAL COSTS OF PRODUCTION                                            55,911        59,382
OPERATING INCOME (LOSS)                                             294,845       285,697
C - FINANCIAL INCOME AND EXPENSES
    Income from equity investments                                         --           --
      Other financial income
           Income other than the above
                Other                                                  9,641        3,305
      Total financial income                                           9,641        3,305
    Interest and other financial charges
              Parent companies                                       117,690      111,697
              Others                                                  28,040       33,406
    Total interest and other financial charges                       145,730      145,103
TOTAL FINANCIAL INCOME AND EXPENSES                                 (136,089)    (141,798)
D - ADJUSTMENTS TO THE VALUE OF FINANCIAL ASSETS                           --           --
E - EXTRAORDINARY GAINS AND LOSSES
    Gains
         Miscellaneous                                                     1            1
    Losses
         Miscellaneous                                                    --           --
TOTAL EXTRAORDINARY GAINS AND LOSSES                                      1            1
INCOME BEFORE TAXES                                                 158,757      143,900

     Income taxes for the year                                       (12,638)     (12,325)
NET INCOME(LOSS) FOR THE YEAR                                       146,119      131,575




                                                                                              163
      CIR VENTURE S.r.l.
      Headquarters: MILAN
      Share capital at December 31 2006: € 10,000.00


      BALANCE SHEET
      (in euro)

      ASSETS                                                    31.12.2006     31.12.2005

      A - SHAREHOLDER RECEIVABLES FOR PAYMENTS STILL DUE                  --             --
      B - FIXED ASSETS
          I Intangible assets                                             --             --
          II Tangible assets                                              --             --
          III Financial assets                                            --             --
      TOTAL FIXED ASSETS                                                  --             --
      C - CURRENT ASSETS
          I Inventories                                                  --             --
          II Receivables                                                 --             --
                  Receivables up to 12 months                       3,197             23
              Total receivables                                     3,197             23
          III Financial assets not classified as fixed assets            --             --
          IV Cash and cash equivalents                              2,886          8,801
      TOTAL CURRENT ASSETS                                          6,083          8,824
      D - ACCRUED INCOME AND PREPAID EXPENSES                             --             --
      TOTAL ASSETS                                                  6,083          8,824




      LIABILITIES AND SHAREHOLDERS' EQUITY                      31.12.2006     31.12.2005

      A - SHAREHOLDERS' EQUITY
            I          Capital                                     10,000          10,000
            II         Additional paid-in capital                        --             --
            III        Revaluation reserves                              --             --
            IV         Legal reserve                                     --             --
            V          Statutory reserves                                --             --
            VI         Reserve for treasury stock held                   --             --
            VII        Other reserves - Cover of losses                  --     4,174,636
            VIII       Retained earnings (losses)                        --             --
            IX         Net income (loss) for the year               (9,231)    (4,180,212)
      TOTAL SHAREHOLDERS' EQUITY                                      769          4,424
      B - PROVISIONS FOR RISKS AND LOSSES                                --             --
      C - EMPLOYEE SEVERANCE AND LEAVING INDEMNITY FUND                  --             --
      D - ACCOUNTS PAYABLE
                   Payables up to 12 months                         5,314          4,400
      TOTAL PAYABLES                                                5,314          4,400
      E-    ACCRUED EXPENSES AND DEFERRED INCOME                         --             --
      TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                    6,083          8,824




164
CIR VENTURE S.r.l.
Headquarters: MILAN
Share capital at December 31 2006: € 10,000.00


INCOME STATEMENT
(in euro)

                                                            2006           2005
A - VALUE OF PRODUCTION                                          --             --

B - COSTS OF PRODUCTION
    Services                                               6,831         44,516
    Miscellaneous operating costs                          2,436            810
TOTAL COSTS OF PRODUCTION                                  9,267         45,326

OPERATING INCOME (LOSS)                                    (9,267)       (45,326)

C - FINANCIAL INCOME AND EXPENSES
    Other financial income
         Financial income other than the above:
              from other receivables                          79              87
    Total other financial income                              79              87
    Interest and other financial charges
         Other creditors                                      (43)       (47,595)
    Total interest and other financial charges                (43)       (47,595)
TOTAL FINANCIAL INCOME AND EXPENSES                            36        (47,508)

D - ADJUSTMENTS TO THE VALUE OF FINANCIAL ASSETS                --             --

E-  EXTRAORDINARY GAINS AND LOSSES
    Extraordinary gains                                         --             --
    Extraordinary losses
        capital losses on the sale of equity investments        --    (4,087,378)
TOTAL EXTRAORDINARY GAINS AND LOSSES                            --    (4,087,378)

INCOME BEFORE TAXES                                        (9,231)    (4,180,212)

     Income taxes for the year                                  --             --
NET INCOME (LOSS) FOR THE YEAR                             (9,231)    (4,180,212)




                                                                                     165
      JUPITER FINANCE S.p.A.
      Headquarters: MILAN
      Share capital at 31.12.2006: € 600,000.00


      BALANCE SHEET
      (in euro)

      ASSETS                                                 31.12.2006              31.12.2005
      Cash and cash equivalents                                      40                      10
      Receivables                                            44,843,264               3,803,266
      Equity investments                                      4,300,000               4,300,000
      Tangible assets                                           202,481                  57,096
      Intangible assets                                          95,582                   1,407
      Tax assets                                                636,160                  30,192
        a) current                                 161,241                 30,192
        b) advanced                                474,919                      --
      Other assets                                                4,125                   2,759
      TOTAL ASSETS                                           50,081,652               8,194,730




      LIABILITIES AND SHAREHOLDERS' EQUITY                   31.12.2006              31.12.2005
      Payables                                               48,658,221               6,802,466
      Tax liabilities                                            43,570                   4,662
        a) current                                  30,533                  4,351
        b) advanced                                 13,037                    311
      Other liabilities                                         620,721                169,621
      Employee severance and leaving indemnity                   18,389                   1,886
      Capital                                                   600,000                600,000
      Issuance premiums                                         900,000                900,000
      Reserves                                                   16,095                       --
      Net income (loss) for the year                           (775,344)               (283,905)

      TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY             50,081,652              8,194,730




166
JUPITER FINANCE S.p.A.
Headquarters: MILAN
Share capital at 31.12.2006: € 600,000.00


INCOME STATEMENT
(in euro)

                                                                                  2006                    2005

Interest income and similar income                                             366,146                   10,973
Interest expense and similar charges                                           (277,620)                 (2,466)
INTEREST MARGIN                                                                 88,526                    8,507

Commissions received                                                           100,331                        --
Commissions paid                                                                      --                      --
NET COMMISSIONS                                                                100,331                        --

Administrative costs:                                                        (1,504,251)               (290,768)
  a) personnel costs                                             (670,503)                 (128,780)
  b) other administrative costs                                  (833,748)                 (161,988)
Net adjustments to the value of tangible assets                                 (18,929)                 (1,220)
Net adjustments to the value of intangible assets                               (29,157)                   (113)
Other operating expenses                                                       (584,796)                      --
Other operating income                                                         567,354                        --
OPERATING INCOME (LOSS)                                                      (1,569,779)               (292,101)
Gain(Loss) on sale of investments                                              143,385                        --
INCOME (LOSS) FROM CURRENT OPERATIONS GROSS OF TAXES                         (1,237,537)               (283,594)
Taxes for the year on income from current operations                           462,193                     (311)
INCOME (LOSS) FROM CURRENT OPERATIONS NET OF TAXES                            (775,344)                (283,905)
Income (loss) from groups of assets held for sale net of taxes                        --                      --
NET INCOME (LOSS) FOR THE YEAR                                                (775,344)                (283,905)




                                                                                                                   167
      CIRINVEST S.p.A. (formerly Scala Capital S.p.A.)
      Headquarters: MILAN
      Share capital at December 31 2006: € 121,750.00


      BALANCE SHEET
      (in euro)

      ASSETS                                                                 31.12.2006     31.12.2005
      A - SHAREHOLDER RECEIVABLES FOR PAYMENTS STILL DUE                                               --

      B - FIXED ASSETS                                                           7,016           9,355

            I      INTANGIBLE ASSETS                                               7,016          9,355
                      Start-up and expansion costs                                 7,016          9,355
                      Historical cost                                            11,694         11,694
                   - Accrued amortization                                         (4,678)        (2,339)
                      Concessions, licenses, trademarks and similar rights             --             --
                      Historical cost                                            13,800               --
                   - Accrued amortization                                       (13,800)              --
            II     TANGIBLE ASSETS                                                    --              --
            III FINANCIAL ASSETS                                                      --              --

      C-    CURRENT ASSETS                                                     343,515        974,622
            I      INVENTORIES                                                        --              --
            II     RECEIVABLES                                                  12,872              27
                      Tax receivables over 12 months                             8,605              27
                      Other receivables over 12 months                           4,267               --
            III FINANCIAL ASSETS NOT CLASSIFIED AS FIXED ASSETS                       --              --
            IV CASH AND CASH EQUIVALENTS                                       330,643        974,595
      D - ACCRUED INCOME AND PREPAID EXPENSES                                    2,045                --
      TOTAL ASSETS                                                             352,576        983,977



      LIABILITIES AND SHAREHOLDERS' EQUITY                                   31.12.2006     31.12.2005
      A - SHAREHOLDERS' EQUITY                                                (134,053)       959,414

            I          Capital                                                  121,750      1,000,000
            II         Additional paid-in capital                                     --              --
            III        Revaluation reserves                                           --              --
            IV         Legal reserve                                                  --              --
            V          Statutory reserves                                             --              --
            VI         Reserve for treasury stock held                                --              --
            VII        Other reserves                                           837,664               --
            VIII       Retained earnings (losses)                                     --              --
            IX         Net income (loss) for the year                        (1,093,467)        (40,586)

      B - PROVISIONS FOR RISKS AND LOSSES                                             --              --

      C-    EMPLOYEE SEVERANCE AND LEAVING INDEMNITY FUND                        4,899                --

      D - ACCOUNTS PAYABLE                                                     481,833         24,563
             Trade payables up to 12 months                                     30,387         16,829
             Taxes payable up to 12 months                                      61,332              --
             Social security payables up to 12 months                           34,013              --
             Other payables up to 12 months                                    356,101          7,734

      E-    ACCRUED EXPENSES AND DEFERRED INCOME                                      --              --
      TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                               352,679        983,977
168
CIRINVEST S.p.A. (formerly Scala Capital S.p.A.)
Headquarters: MILAN
Share capital at December 31 2006: € 121,750.00


INCOME STATEMENT
(in euro)

                                                                  30/6-31/12
                                                        2006           2005

A - VALUE OF PRODUCTION                                2,189              --
    Other revenues and income                          2,189              --

B - COSTS OF PRODUCTION                            (1,097,777)      (40,686)
      Services                                      (305,853)       (37,456)
      - consulting                                  (106,764)       (29,596)
      - Directors' and Statutory Auditors' fees     (162,963)         (7,734)
      - other                                         (36,126)          (126)
      Lease and rental                                (27,562)             --
      Personnel costs:                              (667,392)              --
      a) salaries and wages                         (211,620)              --
      b) social contributions                         (88,850)             --
      c) severance and leaving indemnity              (14,922)             --
      e) other costs                                (352,000)              --
      Amortization, depreciation and write-downs     (16,947)        (2,339)
      a) Amortization of intangible assets              (2,339)       (2,339)
      b) Depreciation of tangible assets                  (808)            --
      c) Other write-downs of fixed assets            (13,800)             --
      Miscellaneous operating costs                   (80,023)          (891)

OPERATING INCOME (LOSS)                            (1,095,588)      (40,686)

C-    FINANCIAL INCOME AND EXPENSES                      (665)          100
      Other financial income                              149           100
      Interest and financial expenses                    (814)            --

D - ADJUSTMENTS TO THE VALUE OF FINANCIAL ASSETS            --            --

E-    EXTRAORDINARY GAINS AND LOSSES                   2,786              --
      Gains                                            2,786              --


INCOME (LOSS) BEFORE TAXES                         (1,093,467)      (40,586)

      Income taxes for the year                             --             --

NET INCOME (LOSS) FOR THE YEAR                     (1,093,467)      (40,586)




                                                                                169
LIST OF EQUITY INVESTMENTS
  AS OF DECEMBER 31 2006

in accordance with Art. 38.2 of
        D.L. no. 127/91




                                  171
      SUBSIDIARIES CONSOLIDATED WITH THE FULL LINE-BY-LINE METHOD

      (in euro or foreign currency)
      Name of Company                                    Registered           Share    Currency Parent                                    % of
                                                         Offices             capital            companies                            ownership

      CIR GROUP
      CIR INTERNATIONAL S.A.                             Luxembourg   250,000,000.00         € CIR S.p.A.                               100.00
      INTERGEFI S.r.l.                                   Italy           500,000.00          € CIR S.p.A.                               100.00
      COFIDEFIN SERVICOS
      DE CONSULTORIA Lda                                 Portugal        125,000.00          € CIR S.p.A.                                74.40
      CIRINVEST S.p.A. (formerly Scala Capital S.p.A.)   Italy           121,750.00          € CIR S.p.A.                               100.00
      JUPITER FINANCE S.p.A.                             Italy           600,000.00          € CIR S.p.A.                                98.80
      JUPITER MARKETPLACE S.p.A.                         Italy          5,000,000.00         € JUPITER FINANCE S.p.A.                   100.00


      SORGENIA GROUP
      ENERGIA HOLDING S.p.A.                             Italy        120,351,238.00         € CIR S.p.A.                                73.40
      SORGENIA S.p.A.                                    Italy          8,077,392.65         € ENERGIA HOLDING S.p.A.                    79.25
      ENERGIA ITALIANA S.p.A.                            Italy         26,050,000.00         € SORGENIA S.p.A.                           62.00
      ENERGIA PLASSIER S.r.l                             Italy             50,000.00         € SORGENIA S.p.A.                          100.00
      ENERGIA LUCANA S.p.A.                              Italy          2,500,000.00         € SORGENIA S.p.A.                           80.00
                                                                                               TECNOPARCO VALBASENTO S.p.A.              20.00
                                                                                                                                        100.00
      ENERGIA PROGETTI S.r.l.                            Italy           500,000.00          € SORGENIA S.p.A.                           80.00
      ENERGIA MOLISE S.p.A.                              Italy         14,600,000.00         € SORGENIA S.p.A.                          100.00
      ENERGIA OPERATION S.p.A.                           Italy           100,000.00          € SORGENIA S.p.A.                          100.00
      ENERGIA APRILIA S.r.l.                             Italy             10,000.00         € SORGENIA S.p.A.                           90.00
      ENERGIA MINERVINO S.p.A.                           Italy           200,000.00          € SORGENIA S.p.A.                           75.00
      ENERGIA LOMBARDA S.p.A.                            Italy           120,000.00          € SORGENIA S.p.A.                          100.00
      ENERGIA MODUGNO S.p.A.                             Italy          1,620,000.00         € SORGENIA S.p.A.                           90.00
      SOLUXIA S.r.l.                                     Italy           670,000.00          € SORGENIA S.p.A.                          100.00
      ANEMON S.p.A.                                      Italy          1,343,156.00         € SORGENIA S.p.A.                          100.00
      ELIGENT S.r.l.                                     Italy           136,050.00          € SORGENIA S.p.A.                           70.00
      ITALIA ENERGIA S.r.l.                              Italy             10,000.00         € SORGENIA S.p.A.                          100.00
      ENERGY STAR S.r.l.                                 Italy             10,200.00         € SORGENIA S.p.A.                          100.00


      ESPRESSO GROUP
      GRUPPO EDITORIALE L’ESPRESSO S.p.A. (*)            Italy         65,149,550.70         € CIR S.p.A.                                50.83
      FIN.E.GI.L. EDITORIALE S.p.A.                      Italy         18,161,000.00         € GRUPPO EDITORIALE L’ESPRESSO S.p.A.      100.00
      S.E.T.A. S.p.A.                                    Italy           774,750.00          € GRUPPO EDITORIALE L’ESPRESSO S.p.A.       71.00
      A. MANZONI & C. S.p.A.                             Italy         15,000,000.00         € GRUPPO EDITORIALE L’ESPRESSO S.p.A.      100.00
      CENTRO PREPARAZIONE STAMPA –
      C.P.S. S.p.A.                                      Italy           520,000.00          € GRUPPO EDITORIALE L’ESPRESSO S.p.A.      100.00
      ROTOCOLOR S.p.A.                                   Italy         23,000,000.00         € GRUPPO EDITORIALE L’ESPRESSO S.p.A.      100.00
      SOMEDIA S.p.A.                                     Italy           500,000.00          € GRUPPO EDITORIALE L’ESPRESSO S.p.A.      100.00
      ROTOSUD S.p.A.                                     Italy          2,860,000.00         € GRUPPO EDITORIALE L’ESPRESSO S.p.A.      100.00




      (*) 52.20% of voting rights

172
Name of Company                       Registered             Share    Currency Parent                                     % of
                                      Offices               capital            companies                             ownership
ELEMEDIA S.p.A.                       Italy           25,000,000.00         € GRUPPO EDITORIALE L’ESPRESSO S.p.A.       100.00
EDITORIALE FVG S.p.A.                 Italy           87,959,976.00         € GRUPPO EDITORIALE L’ESPRESSO S.p.A.        92.12
EDITORIALE LA NUOVA SARDEGNA S.p.A.   Italy             775,500.00          € FIN.E.GI.L. EDITORIALE S.p.A.             100.00
E.A.G. S.p.A.                         Italy             815,000.00          € FIN.E.GI.L. EDITORIALE S.p.A.             100.00
EDIZIONI NUOVA EUROPA S.p.A.          Italy             104,000.00          € FIN.E.GI.L. EDITORIALE S.p.A.             100.00
EDITORIALE LA CITTÀ S.p.A.            Italy             774,000.00          € FIN.E.GI.L. EDITORIALE S.p.A.             100.00
S.E.L.P.I. S.p.A.                     Italy            3,202,300.00         € GRUPPO EDITORIALE L’ESPRESSO S.p.A.        70.00
                                                                              FIN.E.GI.L. EDITORIALE S.p.A.              30.00
                                                                                                                        100.00
EDIGRAF S.r.l.                        Italy             312,000.00          € EDITORIALE FVG S.p.A.                      66.67
KATAWEB NEWS S.r.l.                   Italy               10,330.00         € ELEMEDIA S.p.A.                           100.00
KSOLUTIONS S.p.A.                     Italy            1,000,000.00         € ELEMEDIA S.p.A.                           100.00
EDITORIALE METROPOLI S.p.A.           Italy              500,000.00         € ELEMEDIA S.p.A.                           100.00
RETE A S.p.A.                         Italy            9,198,000.00         € GRUPPO EDITORIALE L’ESPRESSO S.p.A.       100.00
ALL MUSIC S.p.A.                      Italy            6,500,000.00         € RETE A S.p.A.                             100.00


SOGEFI GROUP
SOGEFI S.p.A. (**)                    Italy           58,926,707.84         € CIR S.p.A.                                 57.53
REJNA S.p.A.                          Italy            5,200,000.00         € SOGEFI S.p.A.                              99.84
FILTRAUTO S.A.                        France           5,750,000.00         € SOGEFI S.p.A.                              99.99
SOGEFI FILTRATION Ltd                 Britain             5,126,737         £ SOGEFI S.p.A.                             100.00
SOGEFI FILTRATION B.V.                Netherlands      1,125,000.00         € SOGEFI S.p.A.                             100.00
SOGEFI FILTRATION A.B.                Sweden               100,000      Sw.Kr. SOGEFI S.p.A.                            100.00
SOGEFI FILTRATION S.A.                Spain           12,953,713.60         € SOGEFI S.p.A.                              86.08
                                                                              FILTRAUTO S.A.                             13.92
                                                                                                                        100.00
SOGEFI FILTRATION d.o.o.              Slovenia        2,466,326,560       Sit. SOGEFI S.p.A.                            100.00
ALLEVARD REJNA
AUTOSUSPENSIONS S.A.                  France          36,000,000.00         € SOGEFI S.p.A.                              99.98
SOGEFI Inc.                           United States          1,000       $USA SOGEFI S.p.A.                             100.00
SOGEFI FILTRATION S.p.A.              Italy           21,951,000.00         € SOGEFI S.p.A.                             100.00
FILTRAUTO GmbH (in liquidation)       Germany             51,130.00         € SOGEFI FILTRATION B.V.                    100.00
FILTRAUTO U.K. Ltd (in liquidation)   Britain             6,810,000         £ SOGEFI FILTRATION Ltd                     100.00
SOGEFI FILTRATION DO BRASIL Ltda      Brazil            29,857,374        Real SOGEFI FILTRATION S.A.                    99.99
SOGEFI FILTRATION ARGENTINA S.A.      Argentina         10,691,607       Pesos SOGEFI FILTRATION DO BRASIL Ltda          91.90
                                                                               FILTRAUTO S.A.                             7.28
                                                                               SOGEFI FILTRATION S.p.A.                   0.81
                                                                                                                         99.99
SHANGHAI SOGEFI FILTRATION Co., Ltd   China               3,600,000      $USA SOGEFI FILTRATION S.p.A.                   70.00
ALLEVARD SPRINGS Co. Ltd              Britain             4,000,002         £ ALLEVARD REJNA AUTOSUSPENSIONS S.A.       100.00
ALLEVARD FEDERN GmbH                  Germany             50,000.00         € ALLEVARD REJNA AUTOSUSPENSIONS S.A.       100.00
ALLEVARD REJNA ARGENTINA S.A.         Argentina            600,000       Pesos ALLEVARD REJNA AUTOSUSPENSIONS S.A.       99.97
IBERICA DE SUSPENSIONES S.L. (ISSA)   Spain           10,529,668.00         € ALLEVARD REJNA AUTOSUSPENSIONS S.A.        50.00
ALLEVARD MOLAS DO BRAZIL Ltda         Brazil            37,161,683        Real ALLEVARD REJNA AUTOSUSPENSIONS S.A.       99.99
                                                                               ALLEVARD SPRINGS Co. Ltd                   0.01
                                                                                                                        100.00
(**) 58.41% of voting rights
                                                                                                                                 173
      Name of Company                         Registered              Share    Currency Parent                                   % of
                                              Offices                capital            companies                           ownership
      UNITED SPRINGS Ltd                      Britain             6,500,000           £ ALLEVARD REJNA AUTOSUSPENSIONS S.A.   100.00
      UNITED SPRINGS B.V.                     Netherlands        254,979.00           € ALLEVARD REJNA AUTOSUSPENSIONS S.A.   100.00
      SHANGHAI ALLEVARD SPRINGS Co. Ltd       China            5,335,308.00           € ALLEVARD REJNA AUTOSUSPENSIONS S.A.     60.58
      UNITED SPRINGS S.A.S.                   France          10,218,000.00           € ALLEVARD REJNA AUTOSUSPENSIONS S.A.    99.99
      ALLEVARD SPRINGS U.S.A. Inc.            United             20,055,000       $USA SOGEFI S.p.A.                            31.41
                                              States                                    ALLEVARD REJNA AUTOSUSPENSIONS S.A.     58.12
                                                                                                                                89.53
      COOPERS FILTERS Ltd                     Britain             3,000,000          £ SOGEFI FILTRATION Ltd                   100.00
      LUHN & PULVERMACHER – DITTMANN
      & NEUHAUS GmbH                          Germany             50,000.00          € ALLEVARD FEDERN GmbH                    100.00


      HOLDING SANITÀ E SERVIZI GROUP
      HSS – HOLDING SANITÀ E SERVIZI S.p.A.   Italy            4,285,610.00          € CIR S.p.A.                               85.28
      VILLA MARGHERITA S.r.l.                 Italy              751,000.00          € HOLDING SANITÀ E SERVIZI S.p.A.         100.00
      CASAVERDE S.p.A                         Italy              910,000.00          € HOLDING SANITÀ E SERVIZI S.p.A.         100.00
      REDANCIA S.r.l.                         Italy              100,000.00          € HOLDING SANITÀ E SERVIZI S.p.A.         100.00
      REHAB S.r.l.                            Italy              120,000.00          € HOLDING SANITÀ E SERVIZI S.p.A.         100.00
      OSPEDALE DI SUZZARA S.p.A.              Italy            1,000,000.00          € HOLDING SANITÀ E SERVIZI S.p.A.          65.00
      RESIDENZE ANNI AZZURRI S.r.l.           Italy           15,567,034.00          € HOLDING SANITÀ E SERVIZI S.p.A.         100.00
      SODEMARE S.A.                           Luxembourg         671,000.00          € RESIDENZE ANNI AZZURRI S.r.l.           100.00
      LA NUOVA PALMA S.r.l.                   Italy               10,200.00          € RESIDENZE ANNI AZZURRI S.r.l.           100.00
      RESIDENZE ANNI AZZURRI MONZA S.p.A.     Italy            2,064,000.00          € RESIDENZE ANNI AZZURRI S.r.l.           100.00
      MEDIPASS S.p.A.                         Italy              700,000.00          € HOLDING SANITÀ E SERVIZI S.p.A.         100.00
      MEIA S.r.l.                             Italy               50,000.00          € CASAVERDE S.p.A.                         60.00


      DRY PRODUCTS GROUP
      DRY PRODUCTS S.p.A.                     Italy              100,000.00          € CIR S.p.A.                               55.00
      FOOD MACHINERY MEDIUM VOLUME S.p.A.
      (in liquidation)                        Italy            3,000,000.00          € DRY PRODUCTS S.p.A.                     100.00


      CIR INTERNATIONAL GROUP
      CIR VENTURES L.P.                       United States      20,020,000       $USA CIR INTERNATIONAL S.A.                   99.00
      MEDINVEST Plc                           Ireland            361,489.87       $USA CIR INTERNATIONAL S.A.                   87.02




174
SHAREHOLDINGS IN JOINT VENTURES AND AFFILITED COMPANIES
VALUED USING THE EQUITY METHOD

(in euro or foreign currency)
Name of Company                       Registered          Share    Currency Parent                                      % of
                                      Offices            capital            companies                              ownership

SORGENIA GROUP
TIRRENO POWER S.p.A.                  Italy        91,130,000.00         € ENERGIA ITALIANA S.p.A.                     50.00

ESPRESSO GROUP
LE SCIENZE S.p.A.                     Italy          103,400.00          € GRUPPO EDITORIALE L’ESPRESSO S.p.A.         50.00
SAIRE S.r.l.                          Italy            46,800.00         €   GRUPPO EDITORIALE L’ESPRESSO S.p.A.       50.00
EDITORIALE CORRIERE ROMAGNA S.r.l.    Italy         2,856,000.00         €   FIN.E.GI.L. EDITORIALE S.p.A.             49.00
EDITORIALE LIBERTÀ S.p.A.             Italy         1,000,000.00         €   FIN.E.GI.L. EDITORIALE S.p.A.             35.00
ALTRIMEDIA S.p.A.                     Italy           517,000.00         €   FIN.E.GI.L. EDITORIALE S.p.A.             35.00

SOGEFI GROUP
ALLEVARD RESSORTS COMPOSITES S.A.S.   France         300,000.00          € ALLEVARD REJNA AUTOSUSPENSIONS S.A.         50.00




                                                                                                                               175
      SHAREHOLDINGS IN SUBSIDIARIES AND AFFILIATED COMPANIES
      VALUED USING THE COST METHOD (*)

      (in euro or foreign currency)
      Name of Company                              Registered                   Share      Currency Parent                                      % of
                                                   Offices                     capital              companies                              ownership

      CIR GROUP
      CIR VENTURE S.r.l. (non- operational)        Italy                    10,000.00              € CIR S.p.A.                              100.00

      SORGENIA GROUP
      TECNOPARCO VALBASENTO S.p.A.                 Italy                  945,000.00               € SORGENIA S.p.A.                          20.00
      E-ENERGY S.r.l.                              Italy                    15,000.00              € SORGENIA S.p.A.                          20.00
      EOLICA BISACCIA S.r.l.                       Italy                    10,000.00              € SORGENIA S.p.A.                          20.00
      NOVENTI SORGENIA VENTURES LP                 United States        3,030,303.00           $USA SORGENIA S.p.A.                           99.00
      SENECA S.c.a.r.l.                            Italy                    10,000.00              € SORGENIA S.p.A.                          86.25

      ESPRESSO GROUP
      SANDALYAWEB S.r.l. (in liquidation)          Italy                    75,000.00              € EDITORIALE LA NUOVA SARDEGNA S.p.A.      51.00
                                                                                                     ELEMEDIA S.p.A.                          49.00
                                                                                                                                             100.00
      RADIO DEEJAY Kft (in liquidation)            Hungary                50,000,000            HuF. ELEMEDIA S.p.A.                         100.00
      ENOTRYA S.r.l. (in liquidation)              Italy                    78,000.00              € ELEMEDIA S.p.A.                          70.00
      ZIVAGO S.p.A. (in liquidation)               Italy                3,096,000.00               € ELEMEDIA S.p.A.                          50.00
      CELLULARMANIA.COM S.r.l.
      (in liquidation)                             Italy                    10,400.00              € ELEMEDIA S.p.A.                         100.00
      UHURU MULTIMEDIA S.r.l.
      (non-operational)                            Italy                    10,400.00              € KSOLUTIONS S.p.A.                       100.00
      BENEDETTINE S.r.l. (in liquidation)          Italy                  255,000.00               € FIN.E.GI.L. EDITORIALE S.p.A.            35.00

      SOGEFI GROUP
      MAKKAWI CARS & LORRIES Co.                   Sudan                      900,000          Ls.Pt. REJNA S.p.A.                            25.00

      HOLDING SANITÀ E SERVIZI GROUP
      CONSORZIO CORIMADE                           Italy                     6,000.00              € CASAVERDE S.p.A.                         50.00

      CIR GROUP INTERNATIONAL
      CIGA - Luxembourg S.a.r.l.                   Luxembourg           3,500,000.00               € CIR INTERNATIONAL S.A.                  100.00
      BANQUE DUMENIL LEBLE S.A.
      (in liquidation)                             France              16,007,146.81               € CIR INTERNATIONAL S.A.                  100.00
      DUMENIL LEBLE (BELGIUM) S.A.
      (in liquidation)                             Belgium              7,561,217.00               € CIR INTERNATIONAL S.A.                  100.00
      DUMENIL LEBLE (SUISSE) S.A.                  Switzerland                441,650           SFR CIR INTERNATIONAL S.A.                   100.00
      VELASQUEZ VIE S.A. (in liquidation)          France                   59,980.46              € CIR INTERNATIONAL S.A.                  100.00
      PHA – Participations Hotelières Astor        France                   12,150.00              € CIR INTERNATIONAL S.A.                   99.99
      CIR VENTURES MANAGEMENT CO. L.L.C. United States                          7,100          $USA CIR INTERNATIONAL S.A.                    20.00




      (*) Holdings that are non-significant, non-operational or of recent acquisition, unless stated otherwise




176
SHAREHOLDINGS IN OTHER COMPANIES
VALUED USING THE COST METHOD (*)

(in euro or foreign currency)
Name of Company                                  Registered             Share    Currency Parent                                    % of
                                                 Offices               capital            companies                            ownership


CIR GROUP
C IDC S.p.A.
(in liquidation and settlement with creditors)   Italy            4,000,000.00         € CIR S.p.A.                                 1.23


SORGENIA GROUP
8.2 ENERGIA S.r.l.                               Italy             100,000.00          € ANEMON S.p.A.                              2.50


ESPRESSO GROUP
A.G.F. S.r.l.                                    Italy              30,000.00          € GRUPPO EDITORIALE L’ESPRESSO S.p.A.       10.00
AGENZIA A.N.S.A. S. COOP. A.r.l.                 Italy           12,307,880.00         € GRUPPO EDITORIALE L’ESPRESSO S.p.A.        3.21
                                                                                         FIN.E.GI.L. EDITORIALE S.p.A.              3.21
                                                                                         EDITORIALE LA NUOVA SARDEGNA S.p.A.        3.21
                                                                                         EDITORIALE FVG S.p.A.                      3.21
                                                                                         S.E.T.A. S.p.A.                            2.56
                                                                                         E.A.G. S.p.A.                              1.92
                                                                                                                                   17.32
CONSULEDIT S. CONSORTILE a.r.l.                  Italy              20,000.00          € GRUPPO EDITORIALE L’ESPRESSO S.p.A.        6.62
                                                                                         FIN.E.GI.L. EDITORIALE S.p.A.              3.99
                                                                                         EDITORIALE LA NUOVA SARDEGNA S.p.A.        0.62
                                                                                         S.E.T.A. S.p.A.                            0.49
                                                                                         EDITORIALE FVG S.p.A.                      0.47
                                                                                         E.A.G. S.p.A.                              0.39
                                                                                                                                   12.58
E-INK CORPORATION                                United States     71,190,856       $USA GRUPPO EDITORIALE L’ESPRESSO S.p.A.        0.26
IMMOBILIARE EDITORI GIORNALI S.r.l.              Italy             830,462.00          € S.E.T.A. S.p.A.                            0.17
                                                                                         EDITORIALE LA NUOVA SARDEGNA S.p.A.        0.12
                                                                                                                                    0.29
TRENTO PRESS SERVICE S.r.l.                      Italy             260,000.00          € S.E.T.A. S.p.A.                           14.40
AGENZIA INFORMATIVA
ADRIATICA d.o.o.                                 Slovenia           2,120,000        Sit. EDITORIALE FVG S.p.A.                    19.00
CLUB D.A.B. ITALIA – CONSORZIO                   Italy              18,075.96          € ELEMEDIA S.p.A.                           14.29
AUDIRADIO S.r.l.                                 Italy             258,000.00          € A. MANZONI & C. S.p.A.                     3.63
PRESTO TECHNOLOGIES Inc. (non- operational)      United States     7,663,998.4      $USA ELEMEDIA S.p.A.                            7.83
CERT – CONSORZIO EMITTENTI
RADIO TELEVISIVE                                 Italy             178,563.57          € RETE A S.p.A.                              6.67
CONSORZIO COLLE MADDALENA                        Italy              62,223.84          € RETE A S.p.A.                              4.17
TELELIBERTÀ S.p.A.                               Italy             500,000.00          € FIN.E.GI.L. S.p.A.                        19.00


SOGEFI GROUP
AFICO FILTERS S.A.E.                             Egypt             10,000,000        EGP SOGEFI FILTRATION S.p.A.                  19.00




(*) Holdings lower than 20%




                                                                                                                                           177
      SHAREHOLDINGS IN SUBSIDIARIES AND AFFILITED COMPANIES AND IN OTHER COMPANIES
      NOT INCLUDED IN THE CONSOLIDATED FINANCIAL STATEMENTS

      (in euro or foreign currency)
      Name of Company                          Registered         Share    Currency Parent                                  % of
                                               Offices           capital            companies                          ownership


      SOGEFI GROUP
      FILTRAUTO DO BRASIL Ltda                 Brazil           354,600        Real SOGEFI FILTRATION DO BRASIL Ltda       99.00
                                                                                    FILTRAUTO S.A.                          1.00
                                                                                                                          100.00
      INTEGRAL S.A.                            Argentina      2,515,600       Pesos FILTRAUTO S.A.                         93.50
                                                                                    SOGEFI FILTRATION ARGENTINA S.A.        6.50
                                                                                                                          100.00
      LES NOUVEAUX ATELIERS                    Belgium      2,880,000.00         € SOGEFI S.p.A.                           74.90
      MECANIQUES S.A. (in liquidation)                                             REJNA S.p.A.                            25.10
                                                                                                                          100.00


      CIR INTERNATIONAL GROUP
      C.B.D.O. - COMPAGNIE BOURGUIGNONNE
      DES OENOPHILES EURL                      France           9,000.00         € CIGA LUXEMBOURG S.a.r.l.               100.00
      SO.GE.LOC. S.a.r.l.                      France           7,622.45         € C.B.D.O. EURL                           99.80
      VICTOR HUGO CENTRE D’AFFAIRES S.a.r.l.   France          7,622.45          € C.B.D.O. EURL                           76.00
      FINAL S.A.                               France       2,324,847.00         € C.B.D.O. EURL                           47.73




178
Report of the Board of Statutory Auditors




                                            179
                                     C.I.R. S.p.A.

 REPORT OF THE BOARD OF STATUTORY AUDITORS IN ACCORDANCE
        WITH THE TERMS OF ARTICLE 153 D. LGS. NO. 58/1998 AND
              ARTICLE 2429, PARAGRAPH 2 OF THE CIVIL CODE
                  (TRANSLATION FROM THE ORIGINAL ISSUED IN ITALIAN)



To the Meeting of the Shareholders of C.I.R. S.p.A.
During financial year ended December 31 2006 we performed the surveillance activities re-
quired of us by law, according to the Principles of Conduct for Statutory Auditors recom-
mended by the National Councils of Business Consultants and Accountants. In the prepara-
tion of this report we took into account both the aforesaid principles and the indications
given by Consob in its Communiqué no. 1025564 of April 6 2001.
Concerning the way in which the institutional duties included in our mandate were carried
out, we hereby attest that:
–   We attended all the Shareholders’ Meetings and all the Meetings of the Board of Direc-
    tors that were held during the year under examination and obtained regularly from the
    Directors, sometimes on an informal basis, timely and suitable information on the activ-
    ity that had been carried out by the Company and the Group of companies which it con-
    trols, with particular regard to the most significant transactions from the economic, fi-
    nancial and equity points of view;
–   We obtained a degree of knowledge necessary to carry out the duties contained in our
    mandate, verifying that the organizational structure of the Company was adequate and
    that the principles of sound administration were being complied with. We did this by
    means of direct investigation, gathering information from the heads of the appropriate
    departments and by exchanging relevant data and information with the firm of inde-
    pendent auditors;
–   We monitored – both as a Board and through individual action – how well the system of
    internal control and the administration and accounting systems functioned, in order to
    evaluate how well they meet operational needs; we also assessed the reliability of the
    accounting system to represent operational events, through direct investigation, gather-
    ing information from the heads of the various functions and analysing the results of the
    work carried out by the firm of independent auditors;


                                                                                                181
      –   We monitored the functional efficiency of the control system for the companies in
          which CIR holds a stake and verified the adequacy of the instructions given to them,
          even according to the terms of Article 114.2 of D.L. no. 58/98;
      –   We verified that the provisions of the law and of regulations were being complied with
          in relation to the preparation, the organization and the layout of the Statutory Financial
          Statements and the Consolidated Financial Statements and the documents accompany-
          ing them and also in relation to the adoption by the Company of IAS/IFRS international
          accounting standards;
      –   We checked that the Management Report for financial year 2006 conformed to current
          laws and regulations and was consistent with the resolutions adopted by the Board of
          Directors and also with the events represented in the Statutory Financial Statements for
          the period and in the consolidated accounts. The Semi-Annual Interim Report required
          no observations to be made by the Board of Statutory Auditors. The Semi-Annual and
          Quarterly Interim Reports were made public as required by law and by regulations on
          the subject.
      In the course of our surveillance activity, carried out as above, no significant facts emerged
      requiring notification to Surveillance Bodies. On the basis of what emerged from our own
      direct action and from the information we collected, the choices made by the Directors ap-
      peared to us to be in conformity with the law and with the Company Bylaws, with the prin-
      ciples of sound administration and consistent and compatible with the size of the Company
      and with its net worth.
                                                 * * *
      The specific indications that this report must provide are listed below, in accordance with
      the above-cited Consob Communiqué of April 6, 2001.
      -   We obtained sufficient information on the most significant transactions from the eco-
          nomic, financial and equity viewpoint which were entered into by the Company and its
          subsidiaries, ensuring that these transactions were in conformity with the law and with
          the Company Bylaws; the Directors have given full details of these transactions in their
          Management Report; we also obtained information in an informal way and we made
          certain that the operations approved and/or put in place were not imprudent, rash or in
          contrast with the resolutions adopted or in potential conflict of interest and that they
          were based on the principles of sound company management;




182
-   The regular checks and controls that we carried out on the Company did not reveal any
    non-typical or unusual transactions entered into with third parties, related parties or in-
    tercompany parties;
-   Regarding routine transactions entered into with third parties, related parties and inter-
    company parties, the Directors in their Management Report have given sufficient in-
    formation on the principal transactions entered into and on the relations between C.I.R.
    S.p.A., the companies of the Group to which it belongs and/or any related parties, stat-
    ing that the transactions involved took place at normal market conditions and in the in-
    terests of the Company and of the Group and we agree with this judgement; the trans-
    actions in question were mainly intercompany loans, both as borrower and as lender,
    the issue of guarantees and the provision of management services; financial details and
    the economic effects of these transactions are given in the documents accompanying
    the Statutory Financial Statements;
-   On April 6 2007 the firm of auditors PriceWaterhouseCoopers S.p.A. issued their Au-
    dit Reports for the Statutory Financial Statements for the year and the consolidated ac-
    counts as of December 31 2006 which do not contain any objections or requests for in-
    formation;
-   We did not receive any complaints as per Article 2408 of the Civil Code or any peti-
    tions, neither did we hear of any such complaints being made to others;
-   During the year the firm of independent auditors and other companies connected with
    this firm were not awarded any further contracts by CIR S.p.A. apart from the audit
    mandate. Within the sphere of the Group, however, mandates were given by the
    Sorgenia S.p.A. Group for a total of Euro 43,000 for due diligence activity and activity
    relating to D.Lgs 231/2001, by the Holding Sanità e Servizi S.p.A. Group for Euro
    314,000 and by Cir International S.A. for Euro 340,330, both for due diligence work.
    These fees seem reasonable in consideration of the size and complexity of the work
    carried out. Regarding subsidiaries whose shares are traded on regulated markets, for
    the year under examination the firm of independent auditors and other companies asso-
    ciated with this firm were awarded mandates by the subsidiary Sogefi S.p.A. (Group)
    for a total of Euro 332,890, and by the subsidiary Gruppo Editoriale l’Espresso S.p.A.
    for a total of 137,911, as can be seen from the information obtained from their respec-
    tive controllers;
-   During the year under examination we gave no opinions;




                                                                                                  183
      -   During 2006 the Board of Directors met 6 times and the Board of Statutory Auditors
          was present at all of these meetings; the Board of Statutory Auditors also met 5 times,
          meeting the firm of independent auditors holding the mandate twice; there were nu-
          merous meetings of individual Auditors with members of the Company management;
      -   We have no particular observations to make concerning compliance with the principles
          of correct administration because these appear to have been constantly observed, nor
          have we any observations to make on the adequacy of the organizational structure
          which we found to be appropriate for satisfying the operational needs of the Company
          and the Group;
      -   We carried out an evaluation of the adequacy of the system of internal control, of the
          administrative and accounting system and of the reliability of the latter to represent op-
          erational events correctly; in particular we monitored the functional capacity of the
          control systems of the subsidiaries and verified that the latter had received adequate in-
          structions, even in relation to the terms of Article 114.2 of D.L. no. 58/1998. These in-
          structions were deemed to be adequate for the structure and size of the Group and no
          necessary corrective action was identified;
      -   We took due note of the work carried out by the firm of independent auditors, directed
          towards ascertaining that the Company accounts were being kept correctly and that op-
          erational events were being recorded in such a way as to enable them to be used as a
          basis for the preparation of Statutory Financial Statements in accordance with the pro-
          visions of the law; in particular we requested and were given by the independent audi-
          tors full information concerning the work carried out regarding the preparation of the
          Financial Statements in question; no significant aspects emerged from this;
      -   The Company has substantially adhered to the recommendations of the March 2006
          edition of the Code of Conduct of the Committee for the Corporate Governance of
          Listed Companies, and has illustrated its corporate governance model in the report that
          will be published in accordance with the Instructions to the Rules of Borsa Italiana
          S.p.A. To the extent of our responsibility we have been monitoring the way in which
          the rules of corporate governance set forth in the above-mentioned Code of Conduct
          were actually being implemented, ensuring among other things that the Corporate Gov-
          ernance Report of CIR S.p.A. contained the results of the regular check that the Board
          of Statutory Auditors has the necessary requisites of independence, which are deter-
          mined on the same basis as those for the Members of the Board of Directors;




184
-   The Board of Statutory Auditors attended the meetings of the Internal Control Commit-
    tee and examined the minutes of the meetings of the Compensation Committee. Lastly,
    concerning the provisions of D.L. nos. 231/2001 and 61/2002, the Company has
    adopted a Code of Ethics governing conduct, and has appointed the Surveillance Body
    as required by regulations on this subject; it has also adopted and implemented an “Or-
    ganizational Model” for the conduct and regulation of business.
-   Our surveillance activity was carried out on a routine basis during 2006 and did not re-
    veal any omissions, facts that could be censured or any irregularities worthy of note.
In giving a positive overall judgement on the results of our surveillance activity, as regards
the Statutory and Consolidated Financial Statements, after having verified that all the terms
of the law governing the preparation and the format of the same had been respected, we
consider the Statutory Financial Statements for the year to be worthy of your approval, to-
gether with the proposed allocation of the net income for the period, as formulated by the
Board of Directors in their Management Report, and in the absence of any further proposals
made by the Board of Statutory Auditors pursuant to the terms of Article 153.2 of D.L. no.
58/1998.

Milan, April 10 2007
                                              THE BOARD OF STATUTORY AUDITORS


Prof. Pietro Manzonetto – Chairman of the Board of Statutory Auditors


Dott. Riccardo Zingales – Statutory Auditor


Dott. Luigi Nani – Statutory Auditor




                                                                                                 185
Reports of the Independent Auditors




                                      187
189
191

				
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