Bilancio Economico 2006 Inglese

consolidated annual accounts annual accounts

CPL Concordia Group 4. Report on operations in relation to the consolidated annual accounts 21. Consolidated balance sheet of the CPL Concordia Group 28. Details of the profit and loss statement 35. Balance sheets of the companies belonging to the Group 44. Report of the board of auditors on the consolidated annual accounts 43. Certification report

2006 CPL Concordia Soc. Coop 45. Report on operations in relation to the annual accounts 69. Balance sheet of CPL Concordia Soc. Coop.

76. Details of the profit end loss statement 82. Report of the board of auditors 84. Certification report 86. Certificazione UNI EN ISO 9001:2000

table of contents

“Fellow Members,

First of all it must be emphasized that the directors of the Parent Company, in conformity with Article 2 of Italian Law no. 59/92, performed their duties with the intention of having the Cooperative Society achieve the objectives of mutual assistance prescribed by law and by the Articles of Association and with the goal of providing continuity of employment and achieving the best economic, social, and professional conditions possible, and that they acted in this spirit at all times and in all situations regarding our Group.

For these reasons the Parent Company acted to maintain full employment of its members and the employees of all the companies of the entire Group, remunerating their work at the best possible contractual conditions, taking into account the market conditions and their specific field of reference in which they work. Furthermore, the company strives to improve the cultural and professional qualifications of its members and the employees of the companies belonging to the Group, and invests to guarantee optimal conditions in the workplace.

The consolidated Balance Sheet for the fiscal year that ended on December 31, 2006, which was drawn up in conformity with the provisions of Italian Legislative Decree no. 127 of April 9, 1991, reports a consolidated value of production of 218,976,000 euros, which represents a decrease in comparison with the previous fiscal year of 22,853,000 euros or 9.5%. The Group’s results generated by the aforesaid production show profits before taxes for the year of 8,804,211 euros which, net of current, deferred, and prepaid taxes, is equivalent to 3,238,135 euros - a result that we consider absolutely positive, also because it is mainly due to our core business.

General Considerations and Economic Valuations In fact, the last two fiscal years were characterized by a series of extraordinary operations whose purpose was the divestiture of production divisions that are not a part of the Group’s core business and assets that are no longer considered to be strategic to the development of the Group’s initiatives. These divestitures had two fundamental goals - one financial and the other economic. The financial goal was fully realized, as can be seen in the section dedicated to financial management and the asset structure of the Consolidated Balance Sheet, resulting in an extensive improvement whose effects can easily been seen by analyzing the balance sheet indices. From a purely economic point of view, the results are equally positive and are due to the management of the Group’s core business, which include the construction and maintenance of gas, water, and electric networks and sewer systems; the construction and management of heating and air conditioning systems; public lighting systems, and home automation. Fiscal year 2006 was also distinguished by an extensive reorganization of the business structure and production structure of the parent company and then of the entire group. This reorganization resulted in the elimination of the old Divisions in favor of a structure whose operations are organized by geographical areas, by production departments, and by specializations.

The geographical areas tend to cover the entire country and include both the business structure and the production structure. In the context of the business proposal and the consequent production capacity, the Group applies its own know-how to those activities mentioned above, but especially in relation to the construction, maintenance, and management of

report on operations in relation to the consolidated annual accounts as of december 31, 2006

consolidated annual accounts gas and water supply networks, sewer systems, emergency service, and the construction of heating and air conditioning systems in both private and public buildings, such as schools, hospitals, nursing homes, etc.

The values, both in absolute terms and in terms of profitability, that emerge from the analysis of fiscal year 2006 are extremely positive even though there are areas that have been under control for a long time that have offered better performance in comparison with other areas that are in a startup phase; with the implementation of this type of organization we expect them to be able to achieve excellent results. The main values achieved during the fiscal year, with regard to the new organization, are summarily analyzed below: Headquarters Area Office: The Headquarters Area Office executes heat management work orders and supply network construction work orders in the region of Emilia Romagna and in the provinces surrounding the headquarters based in Concordia, such as the province of Mantua.

The Area Office has achieved a total value of work of 37.1 million euros.

Its principal work orders include emergency service and road maintenance of the municipality of Bologna for Hera S.p.A., remote heating for AMPS of Parma, the management of systems of the province of Modena, and the complete service of systems for the municipality of Mantua.

Rome, Sardinia, and Tyrrhene Area Office: This Area Office executes heat management work orders and supply network construction work orders in Latium and Sardinia. It has achieved a total value of work of 29.5 million euros. Its principal work orders include the management of the heating systems for the Autonomous Board for Tenement Housing (IACP) of the municipality of Rome, the management of the heating systems of the auditorium of the School of Music in Rome, and the management of systems of the municipality of Rome.

Northwest Milan Area Office: This Area Office executes heat management work orders and supply network construction work orders in Lombardy, Piedmont, Valle d’Aosta, and Liguria. It has achieved a total value of work of 27.5 million euros.

Its principal work orders include maintenance work on the Milan Subway and the Linate Airport as well as the management of the heating systems of the hospital facilities of Cremona and the province of Milan.

VALUE OF PRODUCTION FOR “CPL CONCORDIA” AND THE “CPL CONCORDIA” GROUP amounts expressed in thousands of euros 250.000

257.053

249.293

150.000 100.000

241.830

229.992

200.000

131.700

155.819

176.464

217.628

180.929 184.119

50.000 0

2002

2003

CPL Concordia Group

2004

2005

2006

CPL Concordia Soc. Coop.

Sant’Omero Adriatica Area Office: This Area Office executes heat management work orders and supply network construction work orders in Abruzzo, Basilicata, Molise, and Puglia. It has achieved a total value of work of 11.3 million euros. Its principal work orders include the maintenance of the supply networks of the municipality of Serravalle di Chienti and the management of the heating systems of the province of Ascoli Piceno, the Local Public Health Center (ASL) of Teramo, and the municipality of Pescara.

Fano Umbria Area Office: This Area Office executes heat management work orders and supply network construction work orders in the regions of Marches, Umbria, and Romagna. It has achieved a total value of work of 11.5 million euros. Its principal work orders include the maintenance of the gas and water supply networks and sewer systems of Aset di Fano and the management of the heating systems of the province of Pesaro Urbino or the municipality of Riccione.

Campania, Calabria, and Sicily Area Office: This Area Office executes heat management work orders and supply network construction or maintenance work orders in the regions of Campania, Calabria, and Sicily. It has achieved a total value of work of 2.9 million euros. Its principal work orders include the management and operation of the heating systems of the municipal government of Caserta.

Padua – Northeast Area Office: This Area Office executes heat management work orders and supply network construction work orders in the regions of the Triveneto area. It has achieved a total value of work of 16.7 million euros. Its principal work orders include the maintenance of the water and gas supply networks of the municipality of Padua as well as the heat management work orders for many hotels operating in Trentino and for a large number of condominiums in the Triveneto area.

Tuscany Area Office: This Area Office has achieved a total value of work of 5.9 million euros. Its principal work orders include the maintenance of electrical systems managed by Enel S.p.A. and the management of the heating systems of the Local Public Health Center (ASL) of Arezzo.

Foreign Office: The Foreign Office is in charge of the initiatives in progress in Greece and Romania. An amount of 6.5 million euros of the total value of production of 10.9 million euros was produced in Greece through the activities of the construction and maintenance of the water supply networks and sewer systems of Thessalonica, Greece. The remaining 4.4 million euros was produced by the gas supply concessions operating in the province of Cluj Napoca in Romania.

The departments operate in addition to the geographical area offices.

The departments represent those activities that have been performed for some time or in a specific geographical area (refer to building) or in a national or international environment with an autonomous structure.

Technological Systems Department: This department constructs technological systems such as, for example, gas pressure reduction and compression stations and operates throughout Italy as well as internationally. It has realized a value of production of 10.1 million euros, which represents a decrease from the previous fiscal year of 0.5 million euros.

Odorizer Department: This department, which markets and sells

methane gas odorizer throughout Italy, achieved a total value of work of 9.3 million euros, which represents a decrease of 1.3 million euros from the previous fiscal year.

Information Technology Department: This newly formed department develops and subsequently manages IT packets and innovative software such as Tecnet, remote control, and packets for invoicing, sending, and collecting the bills for gas, water, and global service. It has achieved production, without calculating investments, in 2006 of 1.8 million euros, which represents an increase in revenue over the previous fiscal year of 0.6 million euros.

Building Department: The Building Department performs activities in connection with the Borgoverde real property initiative in the municipality of Carpi in the province of Modena and the management and operation of the hotel in San Possidonio in the province of Modena as well as other smaller initiatives. The value of production achieved in 2006 amounts to 8.4 million euros, which is a considerable increase in comparison to the past, due to the sale of the lots from the real property initiative in Carpi.

Other Departments: This department is actually an agglomeration of activities governed by various operators in reference to initiatives that are being closed or completed. These activities include especially the values that resulted from the management of the maintenance and emergency service activity in effect at the petrochemical facility in Ottana (this activity was transferred in December 2006) and the works executed at the Malpensa Airport. The value of production achieved in 2006 on these activities is 7.8 million euros.

The “Gas sales and distribution” department deserves to be discussed in a separate section. In fact, during the last three fiscal years the group has reconstructed the gas sales and distribution activity by means of the acquisition and development of several service areas located in southern Italy in Campania, in Calabria, in Sardinia, and in Sicily as well as the service area of Cluj Napoca in Romania, which is discussed above under the Foreign Office.

Trading activity, which in previous fiscal years had a large impact on the value of production, was considerably scaled back; however, this did not particularly affect the economic results.

In fact, it should be noted that the Group performed the activity of marketing methane gas with the primary goal of procuring the gas necessary for the acquired activity of distribution to the consumer. The marketing activity, scaled down as of the start of the heating year (October 1, 2005), was performed with a main supply contract stipulated with the company Intergas Più S.r.l. in 2005, which was renewed during the fiscal year for two more years.

In addition to the approximately 554,500 Gj distributed by Intergas Più S.r.l., the company has stipulated other secondary supply contracts: a three-monthly order with Spigas S.r.l. for 31,550 Gj, a bimonthly order with Gas Natural S.r.l. for 42,700 Gj, and a supply contract with Sorgenia S.p.A. that specifies a monthly delivery of approximately 19,360 Gj for the entire heating year from October 1, 2006 to September 30, 2007.

Regarding sales, the company accomplished two transfers of stored gas with Edison S.p.A. and Electra Italia S.p.A. for a total of 153,810 Gj, thereby realizing revenues of approximately € 1,500,000.

Below is shown a summary table for gas purchases and sales that were

made during the fiscal year by the trading department.

SALES

GJ

Sm³

EDISON S.p.A.

150,000

3,937,008

1,475,000

3,810

100,000

27,001

TOTAL SALES

153,810

4,037,008

1,502,001

PURCHASES

GJ

Sm³

INTERGAS PIU’ S.r.l.

554,539

14,554,840

3,598,210

GAS NATURAL VENDITA S.p.A.

42,700

1,120,735

312,013

SORGENIA S.p.A.

58,077

1,524,332

433,008

SPIGAS S.r.l.

31,550

828,084

219,746

686,866

18,027,991

4,562,977

ELECTRA ITALIA S.p.A.

TOTAL PURCHASES

Total (in€)

Total (in€)

As presented above, the sales revenues of the commercial division amount to € 1,502,001, while the costs for purchasing gas are € 4,562,977.

At the same time, three cash sales contracts with an agreement to repurchase the gas at their conclusion were stipulated at a preset price, by carrying out temporary gas transfer operations.

Of the above-mentioned operations, two will end in the next fiscal year, and the operation with Spigas S.r.l., which ended during this fiscal year, resulted in a margin of € 22,950. As summarized in the table below, the three sales operations with an agreement to repurchase at their conclusion will allow the company to achieve a total margin of € 128,905 over a period of two fiscal years.

FISCAL YEAR

SALES

GJ

Sm³

Total (in€)

BLUGAS S.p.A.

2006

130,000

3,412,073

1,040,000

CAMGAS S.p.A.

2006

32,000

839,895

224,000

SPIGAS S.r.l.

2006

16,000

419,948

134,950

FISCAL YEAR

178,000

4,671,916

1,398,950

GJ

Sm³

BLUGAS S.p.A.

2006

84,118

2,207,822

600,326

BLUGAS S.p.A.

2007

45,882

1,204,252

331,638

CAMGAS S.p.A.

2006

0

0

0

CAMGAS S.p.A.

2007

32,000

839,895

226,080

SPIGAS S.r.l.

2006

16,000

419,948

112,000

178,000

4,671,916

1,270,045

TOTAL SALES REPURCHASES

TOTAL REPURCHASES

Total (in€)

With regard to the operating costs of the trading activity, the company incurred costs of € 223,690 for the storage service provided by the company Stoccaggi Italia S.p.A. and € 401,467 for the transport service provided by the companies Snam S.p.A. and S.G.I. S.p.A. In reference to the natural gas sales activities, operations took place in Italy in the following service areas: Campania 25, Campania 30, Palma and Camastra, Calabria 20, Sicily 12, Sicily 17, and the municipalities of Morfasso and Marigliano.

The following table gives a detailed summary of the active consumers as

consolidated annual accounts of December 31, 2006, broken down by service area: SERVICE AREA

Total

CALABRIA 20

4,007

CALABRIA 30

284

PALMA and CAMASTRA

1,240

CAMPANIA 25

6,942

CAMPANIA 30

7,232

MARIGLIANO

5,205

MORFASSO

180

SICILY 12

718

SICILY 17

2,861

SAPRI

1,000

CAMEROTA

147

Overall total

sold shows that a volume of 303,139 m³ more was purchased than was sold. This difference is explained partly by the normal volatility of methane gas and partly by time lag of the final readings for sales.

To these amounts of natural gas it is necessary to add the amounts of liquid propane gas that are purchased and sold in the context of the management of the municipalities of Sapri and Camerota where 1,147 consumers were being served as of December 31, 2006. An amount of 338,493 m³ of gas was purchased, while 303,888 m³ of gas was sold.

Above we have analyzed the active consumers for whom, within the context of the Group, gas was both distributed and sold. To these consumers must be added those for whom only the activity of gas transfer was performed: the active consumers of the Calabria 30 service area, which was acquired in 2006.

The following table shows the active consumers as of December 31, 2006:

29,816 Residents

In comparison with the previous fiscal year an increase of approximately 8,000 active consumers was measured. The costs and the amount of gas purchased are broken down as follows: SERVICE AREA CALABRIA 20

CUBIC METERS PURCHASED

Bagnara Calabra

579

Calanna

1,184

27

Campo Calabro

4,072

246

Laganadi

COSTS

Consumers

11,229

San Roberto

498

12

1,987

36

1,892,241

552,122

CALABRIA 30

12,008

4,898

CAMPANIA 25

6,047,918

1,849,159

Villa San Giovanni

CAMPANIA 30

5,311,617

1,624,836

2,603

939

2,244,004

691,227

MORFASSO

237,269

71,733

PALMA and CAMASTRA

808,663

245,473

11,079

4,095

Total 33,957 1,906 Overall there were 31,722 active consumers in Italy as of December 31, 2006 in addition to the 6,312 consumers of the associated company Fontenergia S.p.A. The Cluj Napoca service area in Romania counted 8,885 active consumers as of December 31, 2006.

Therefore, there were almost 47 thousand consumers served by the CPL Concordia Group in 2006, and the value of production of the distribution department, which as we have seen includes gas distribution, marketing, and the sale to the end customer, is 26.3 million euros, which resulted in a profit of 2.8 million euros.

CITTANOVA MARIGLIANO

SAN GIUSEPPE VESUVIANO SICILY 12

152,103

48,545

SICILY 17

1,496,473

460,364

18,215,978

5,553,392

TOTAL

The revenues and amount of gas sold are broken down as follows: SERVICE AREA CALABRIA 20

CUBIC METERS SOLD

1,878,199.00

REVENUES 1,052,492.09

CALABRIA 30

24,884.00

14,161.51

CAMPANIA 25

6,039,207.00

3,044,842.93

CAMPANIA 30

5,266,912.00

3,010,074.70

4,568.00

1,025.22

2,155,177.00

1,212,011.82

MORFASSO

243,947.00

100,795.93

PALMA and CAMASTRA

775,132.00

431,095.96

CITTANOVA MARIGLIANO

SAN GIUSEPPE VESUVIANO SICILY 12 SICILY 17

TOTAL

9,931.00

5,535.31

151,167.00

92,094.35

1,363,715.00

818,443.42

17,912,839.00

9,782,573.24

A comparison of the number of cubic meters of gas purchased with that

Sant’Alessio Santo Stefano

436

41

1,467

65

13,084

900

Financial Management for Fiscal Year 2006: Considerations With regard to the Group’s financial management, first we would like to provide a brief analysis of the macroeconomic context and then we will analyze the main financial operations that the Group executed during fiscal year 2006.

The National Environment In 2006 the worldwide economy continued to expand at a rate of 5% like in the previous two years, still driven mainly by China (+10.7%), India (+9%), and the emerging markets in Asia, and to a lesser degree by Brazil and Russia. Growth was stable in Japan and the United States.

The forecasts for this year confirm this basic trend, although the rates will be slightly lower and although there is some risk in connection with the excessive fluctuations in the financial markets over the past few months, which hopefully represent a correction of the prices of the financial activi-

ties towards values that are more closely in line with past experience and not a worsening of the expectations on the size of the economies.

In the euro zone the GDP grew by 2.6%; these results exceeded expectations and were driven especially by the higher-than-expected performance of Germany and Italy. Overall the European economy benefited from good progress in production activities and sustained foreign demand which, it is hoped, can be maintained despite the constant appreciation of the euro, which has continued also during the first few months of 2007.

Inflation has remained low and is not expected to increase during the current year since the prices of raw materials and petroleum are dropping and the appreciation of the euro facilitates the containment of inflation.

The restrictive monetary policies in place in 2006 and confirmed also for 2007 seem, therefore, to be the result more of the necessity to control excessive expansion in the money supply (M3) than true inflationary signs.

In Italy the GDP began to grow again and, in fact, exceeded every expectation. The increase of +1.9% in 2006 has been the largest over the past five years, and it is encouraging that it was achieved by means of a multitude of factors: the increase in families’ consumption, in industrial production and productivity, in gross fixed capital formation, and in exports.

At the same time a restructuring of the public finances was implemented, and the debt/GDP ratio was kept below 4.4% at the end of the year even though much worse data were projected after the EU’s measures regarding VAT on automobiles and the return of high-speed train debts in the national budget.

For 2007 the 2.8% goal for the debt/GDP ratio has been confirmed and appears to be achievable.

The recovery from the difficult financial situation of the beginning of 2006 resulted in the adoption by the government of a series of measures for containing expenses and increasing revenues, which increased the tax burden to above the European average. It is hoped that the tax burden will progressively return to average levels so as not to excessively penalize Italian companies and families.

Within this context the extremely serious problem regarding delayed payments by the government has continued not to be addressed. This is a true emergency which in 2006 hit again, and even harder if possible, the balance sheets of the government’s suppliers. Even our Cooperative has partially felt the impact of this situation.

Exports have grown appreciably (+5.3%) in comparison to the modest data from previous years, with good results coming in from both the euro zone (especially for exports to Germany) and the rest of the world, with especially interesting and promising results from countries experiencing strong development such as China and Russia.

The industrial production index, driven by the activities that are traditional Italian specializations (such as the metalworking and mechanical fields and means of transport as well as the more traditional products made in Italy, including textiles, clothing, leather, wood, and furniture) reversed its trend and became positive. Also in 2007 the situation regarding the orders is encouraging.

Also for the field of construction, which was feared to be flat, the data show sustained accumulation concentrated in the sector of private construction.

Consumption increased by 1.5%, which is in line with the increase in real disposable family income, with a change in spending on durable goods,

and an increase in the impact of housing expenses (rent or loan payments), while food expenses remained unchanged.

The unemployment rate in Italy dropped to 6.8%; this is the lowest it has been since the 1980s, even though the effect of the regularization of the immigrant workers had a large impact on the overall data.

Employment increased by 1.6% both in employment and in self-employed activity. This figure is higher in the industrial sector, after many years of difficulties. Even in southern Italy an increase in employment has been noted, even though the unemployment rate, which has dropped from 14.8% to 13%, still represents a worrying statistic that is too far removed from the average in the country.

Inflation in the European Union, like in Italy, has remained at 2%. In these first few months the inflation rate has dropped to 1.8%, mainly due to the reduction in prices for raw materials and petroleum and the simultaneous appreciation of the euro.

Due to their worries in connection with the increase in the money supply and possible inflation risks, the board of directors of the European Central Bank adjusted the reference rate a total of five times and raised the rate also in March and June 2007. As a result of these adjustments, the official rate increased by 1.50% in a year.

Moreover, the system’s high level of liquidity and the increased competitive pressure in the credit industry did, indeed, increase the average final cost of money in a nonproportional manner.

In fact, the demand for credit remained very strong, with an expansion of credits that reached +11.7% in Italy, which was higher than in the euro zone, with a large impact provided also by short-term credit.

In the medium term demand was driven especially by the demand for home loans by families and, with regard to companies, by financing for investments and by debt restructuring.

The quality of the bank loan, however, was not significantly influenced by expansive credit policies, in light of the stability of the bad loans.

Even the consumer credit industry has continued to grow, with an increase of +13%, although this is at a slower rate than in previous years. The rate of bad loans is 0.8%.

The official data show that the expenses incurred by families for debt servicing has reached 7% of disposable income. Although this figure is relatively small by international standards, its constant growth invites reflection.

Main financial operations carried out

by CPL Concordia Group during fiscal year 2006 The progressive increase in rates during 2006, which we are still experiencing today, had only a moderate impact on the CPL Concordia Group’s overall financial charges: in fact, as a result of the debt restructuring of 2005, up until the first few months of fiscal year 2006 a large portion of the Group’s debt was structured as medium- and long-term debt. The majority of the financing received entails payments of interest and capital every six months. Therefore, the reference rate was adjusted twice, which helped limit the negative effects of increasing rates. Furthermore, the improvement in the main balance sheet indicators, following the important decisions made by the Board of Directors at the end of 2004, allowed the spread paid by the parent company on the following two main lines of credit disbursed by the banking system to be significantly reduced due to the covenants stipulated in the contracts: the pool financing from a group of banks headed by Unicredit Banca d’Impresa of

consolidated annual accounts August 4, 2005 and the pool financing from a group of banks headed by Banco Popolare di Verona e Novara of February 21, 2003.

Beginning in the first few months of fiscal year 2006, in fact, the parent company has progressively eliminated the use of short-term bank credit lines due to the positive effects of the current assets (which benefited not only from good progress with collections, especially taking into consideration the customer type (mainly public institutions), but also from the increase in payment terms obtained from suppliers, especially for the natural gas used for heat management services).

Only during the last two-month period did the Parent Company discharge the remaining capital of the credit lines granted by Banco di Sicilia (0.5 million euros) and the pool financing from a group of banks headed by Unicredit Banca d’Impresa (10.5 million euros). In May a loan that was granted by Interbanca S.p.A. just 12 months before (originally for 7.5 million euros) was paid off early. In fact, the available liquidity allowed the cooperative society to repay a loan that had decidedly higher costs than the other financing obtained.

From the moment fiscal year 2006 financial planning was carried out, it was clear that the remaining availability of funds in the two lines of credit mentioned above would not be sufficient for the parent company to initiate new operations.

The main structuring of medium- and long-term lines of credit regarded the following companies of the Group: on December 7, 2006 Ischia Gas S.r.l. obtained from the Banca Popolare dell’Emilia Romagna Group a line of credit of 6.0 million euros to be used to partially finance the construction of the methane gas supply network in the municipality of Ischia (province of Naples). As of the end of the fiscal year only 100,000 euros of this line of credit had been used. On the same day the subsidiary company Marigliano Gas S.r.l. obtained from the Banca Popolare

dell’Emilia Romagna Group a line of credit of 5.0 million euros to be used to partially finance the extension of the methane gas supply network in the municipality of Marigliano (province of Naples), and also restructured a line of credit that had been previously granted. At the end of the fiscal year three million euros had been drawn against the line of credit. In September the Romanian-law subsidiary company CPL Concordia Filiala Cluj S.r.l. obtained from Unicredit Romania S.A. two lines of credit for a total of 1.7 million euros, with an expiration date of 2014, to be used to partially replace a loan that had been granted by the parent company as well as to sustain the planned investments included in the 2006 budget.

Lastly, in December Erregas S.r.l. obtained from Banca Popolare di Verona e Novara a line of credit for 4.0 million euros, which expires in 10 years, to be used to finance the construction of the LPG supply networks managed by the subsidiary company. The credit line was completely utilized as of the date the contract was signed.

On Dec. 21, 2006 the parent company paid off early, in comparison to the expiration date of Oct. 21, 2008, an interest rate swap contract covering interest rate variation risk, with a notional value of 5.0 million euros, stipulated with the Banca di Roma on Oct. 21, 2003, because the contract’s mark to market was steadily worsening in line with the market trend.

As of the end of the fiscal year the parent company had outstanding a single derivatives contract for covering interest rate variation risk, with a notional value of 20.0 million euros, stipulated with Unicredit Banca d’Impresa on Oct. 29, 2003, expiring on Oct. 31, 2008, with a negative mark to market of 1.151 million euros.

The following was the Group’s financial structure with regard to mediumand long-term operations, even following the above-mentioned operations, as of December 31, 2006:

LIST OF OUTSTANDING BANK LOANS AS OF DECEMBER 31,2006 (Amounts expressed in thousands of euros)

Lender Pool BPV - BSGSP Italian Law no. 46/82

Amount lent

Date lent

Interest rate

15,000 21/02/2003

Euribor 3/6 months + 1,2%

Date of redemption

Portion due beyond 5 years

Current

Not Current

3,000

7,500

10,500 21/02/2010

0

4,110%

15

85

100 03/10/2012

0

419

217

636 10/06/2008

0

750

0

750 15/10/2007

0

527

4,473

5,000 31/12/2016

2,368

538

2,929

3,467 31/12/2012

619

494

0

494 30/11/2007

0

678

352

1,030 12/06/2008

0

33,000 15/09/2005

Euribor 3 months + 1,1% Euribor 6 months /360 + 1,5% Euribor 6 months /360 + 1,2% Euribor 6 months + 0,5% Euribor 3 months+ 1,5% Media Euribor 3-6 months + 1,5% Euribor 6 months/ 360 + 1%

3,771

29,229

33,000 30/09/2015

14,143

948 15/11/2006

Fixed rate 6,20%

460

488

948 14/09/2008

0

154 09/05/2003

Credito Emiliano S.p.A.

2,000 10/06/2003

CARIFIRENZE

1,500 15/10/2004

BANCO DI SICILIA

4,500 30/07/2004

UNICREDITI S.P.A.

4,500 27/12/2004

BANCA POPOLARE DI BERGAMO CASSA DI RISPARMIO FERARRA Pool, UNICREDIT BANCA SPA

1,200 31/05/2005

MCC (ACCOLLO ENERFIN)

BALANCE AS OF DEC. 31, 2006

2,000 13/06/2005

Total

Amount lent

Lender

Date lent

BALANCE AS OF DEC. 31, 2006

Interest rate

Euribor 3 months+ 1,1% Euroribor 6 months+ 1% Euribor 3 months + 1,5% Euribor 3 months+ 1,2% Euribor 3 months + 1,25% Euribor 3 months + 1,25% Euribor 3 months + 1,2% Euribor 3 months+ 1,2% Euribor 3 months+ 1,2% Euribor 6 months Euribor 3 months+ 1,2% Euribor 1 month + 2,6% Euribor 1 month + 2,6% Euribor 3 months+ 1,25% Euribor 6 months /360 + 1,5%

UNICREDITI BANCA

517 14/02/2002

COMIT B.C.I.

375 30/01/2002

CASSA RURALE LAVIS

550 19/10/2005

CASSA DI RISPARMIO BOLZANO CASSA DI RISPARMIO TRENTO

400 19/12/2006

CASSA RURALE LAVIS

725 10./02/2006

CASSA RURALE LAVIS

600 19/06/2006

BANCA POPOLARE DI BERGAMO BANCA POP. EMILIA ROMAGNA BANCA POP. VERONA E NOVARA BANCA POP. EMILIA ROMAGNA

150 29/03/2006

650 14/11/2006

6,000 07/12/2006 4,000 11/12/2006 5,000 07/12/2006

UNICREDIT ROMANIA S.A.

500 30/06/2006

UNICREDIT ROMANIA S.A.

1,200 30/09/2006

BPV - BSGSP

480 07/02/2005

Unsecured loan, B.P.E.

2,000 29/07/2004

Date of redemption

Portion due beyond 5 years

Current

Not Current

29

0

29 28/02/2007

0

21

0

21 30/03/2007

0

86

380

466 18/10/2011

0

72

328

400 31/12/2011

0

96

554

650 14/11/2012

96

113

522

635 09/02/2012

113

0

600

600 09/02/2012

0

49

65

114 20/03/2009

0

0

100

100 07/12/2017

0

0

4,000

4,000 31/12/2016

2,500

0

3,000

3,000 07/12/2017

0

24

476

500 30/09/2014

0

0

1,100

1,100 30/09/2014

0

20

384

404 30/09/2016

220

203

1,707

1,910 29/07/2014

428

11,365

58,489

Total

69,854

20,487

During the first few months of fiscal year 2007, the positive trend of the financial management allowed the parent company to execute several monthly and quarterly operations that employed liquidity. As of today’s date there is no need to audit any medium- or long-term operation before the end of the fiscal year.

2006 Consolidated Balance Sheet After having analyzed the items characterizing the group from an economic and financial point of view, below we will briefly analyze the data from the 2006 Consolidated Balance Sheet and compare it with the data of the previous four fiscal years.

When commenting on the variations (especially those variations regarding assets) of the 2006 consolidated balance sheet with respect to previous fiscal years, it is necessary to keep in mind that in fiscal year 2006 the company Cristoforetti S.r.l. was included in the consolidated balance sheet by means of the proportional method instead of the integral method, due to a change in the decision-making equilibriums that occurred during the year.

Therefore, this consolidation methodology includes, with respect to the past, 50% of the economic and asset values of the subsidiary company’s balance sheet.

10

consolidated annual accounts Asset Structure “CPL Concordia” Group: Consolidated Statements of Assets and Liabilities reclassified using the items liquidity method (Amounts expressed in thousands of euros) Actual data ASSETS

Quick assets Liquid assets Financial activities that do not constitute assets Accounts receivable due from customers and others Inventory Capital due from shareholders Accrued income and prepayments Total quick assets

Capital assets Intangible assets Tangible assets Long-term investments Total capital assets

Total ASSETS

LIABILITIES

Short-term liabilities Payables due to banks Payables due to shareholders and other lenders Advance payments Payables due to suppliers Payables in the form of credit instruments Payables due to subsidiary companies Payables due to associated companies Taxes payable Payables due to social security institutions Other short-term payables Accrued liabilities and deferred income Total short-term liabilities

Medium- and long-term liabilities Debentures Payables due to banks Payables due to shareholders and other lenders Advance payments Payables due to suppliers Payables in the form of credit instruments Taxes payable Other payables due beyond the fiscal year Provisions for severance indemnity Provisions for retirement pensions and similar obligations Provisions for taxes

Dec. 31, 2006

13,617,415 84 130,870,797 26,140,017 1,250,904 6,635,666 178,514,883

13,351,631 80,844,348 17,174,232 111,370,210

289,885,093

15,092,838 4,950,419 12,878,459 74,125,417 0 0 303,761 7,935,892 3,033,287 7,500,789 942,023 126,762,884

0 58,489,020 0 0 1,701,134 0 0 270,843 6,955,065 21,526 150,012

Dec. 31, 2005

7,534,571 0 127,978,596 36,745,161 1,250,006 8,517,982 182,026,316

14,084,073 62,550,349 18,339,281 94,973,703

277,000,019

19,708,552 4,264,103 15,426,293 71,148,370 0 0 885,376 4,244,144 1,707,985 7,303,347 1,286,141 125,974,310

0 55,564,136 0 0 2,255,596 0 0 278,499 7,431,485 21,526 70,873

Dec. 31, 2004

14,670,321 0 132,019,289 38,367,698 1,269,712 5,235,733 191,562,752

15,659,671 117,368,410 14,050,038 147,078,119

338,640,871

69,040,457 8,516,870 11,742,131 72,422,732 0 2,205 167,236 5,622,354 1,801,444 5,906,281 3,591,600 178,813,309

0 66,714,262 0 0 2,884,933 0 0 263,307 7,115,472 36,426 97,876

Dec. 31, 2003

8,486,072 1,350 104,106,354 47,290,401 1,155,086 1,190,397 162,229,660

15,465,470 120,442,662 19,692,039 155,600,171

317,829,831

47,095,404 2,676,232 4,903,198 69,687,827 0 2,759 437,850 4,366,111 1,806,999 8,174,627 6,639,007 145,790,014

0 70,217,850 3,312,864 0 2,164,004 0 0 0 6,995,220 45,825 0

Dec. 31, 2002

31,100,134 21,047,530 93,627,780 41,594,500 441,747 1,652,083 189,463,774

11,994,889 93,433,779 12,603,614 118,032,282

307,496,056

71,895,366 2,448,217 28,741,999 59,066,623 0 3,332,611 0 4,066,216 1,436,514 6,857,438 31,204,942 209,049,926

15,000,000 17,648,299 2,416,496 0 1,322,139 0 0 0 6,335,203 24,922 0

11

Actual data

Dec. 31, 2006 Other provisions 2,942,883 Total medium- and long-term liabilities 70,530,483

Shareholders’ equity

Share capital 12,952,749 Revaluation reserve 656,679 Legal reserve 69,866,959 Statutory Reserves 78,184 Reserve for contributions of capital, Italian Law no. 784/80 1,269,396 Consolidation reserve 2,565,595 Surplus from merger 235,597 Reserve for exchange rate fluctuations 483,057 Profits / losses carried forward 0 Profit / loss for the year 3,238,135 Total shareholders’ equity in relation to the group 91,346,351

1,245,375 Third parties’ equity

Total LIABILITIES 289,885,093

Quick assets, which include current assets and accrued income and prepayments, decreased in comparison to the previous fiscal year due to the large reduction in inventory resulting from the transfers of real properties that were executed in connection with the Borgoverde real property initiative in the municipality of Carpi and from the transfer of apartments in connection with the real property initiative of Cividale, a township under the municipal administration of Mirandola.

Instead, note should be taken of the considerable increase in liquid assets resulting from the positive results of financial management, which are thoroughly discussed in the previous section.

Furthermore, there was in increase in commercial credits, which are mainly invoices issued to public institutions whose payments are constantly late with respect to normal market terms.

Assets are increasing, especially tangible assets, which regard mainly gas supply networks. During 2006 there was an overall increase, net of depreciation, of more than 18 million euros in comparison with the previous fiscal year. Up until fiscal year 2004 the value of the intangible assets also included the gas supply networks constructed in the Ogliastra service area in Sardinia, for an amount of more than 30 million euros which, due to the deconsolidation that took place in 2005, is no longer included on the consolidated balance sheet, even though the group still holds 49% of these networks.

The necessary information regarding the long-term investments and especially the financial results and the valuations of the associated companies that are included in the consolidation is provided below.

Enerfin S.r.l. in Liquidation: This company is the Italian holding company that possesses a controlling interest of 99% in the Argentine-law company Holding Intergas S.A., with headquarters in Buenos Aires, which in turn holds 100% of the operating companies Redengas S.A. and Emprigas S.A. The latter two companies manage the gas supply concessions in the cities of San Francisco and Paranà. During the fiscal year

12

Dec. 31, 2005 3,111,398 68,733,514

12,702,218 656,679 67,692,238 78,184 1,269,396 -7,874,424 235,597 -79,316 0 5,643,749 80,324,322

1,967,873

277,000,018

Dec. 31, 2004 5,010,409 82,122,684

13,335,213 656,679 67,692,238 78,184 1,269,396 -6,624,127 3,102,096 -35,563 0 -4,351,051 75,123,065

2,581,813

338,640,871

Dec. 31, 2003 3,503,360 86,239,123

14,878,043 656,679 66,683,567 78,185 1,269,396 -36,538,702 3,102,096 -338,671 0 31,668,663 81,459,255

4,341,439

317,829,831

Dec. 31, 2002 2,967,725 45,714,784

13,728,240 656,679 64,614,612 78,184 1,269,396 -41,087,721 3,102,096 -110,712 0 7,532,272 49,783,046

2,948,300

307,496,056

the shareholders had due diligence carried out that resulted in a market value for the Argentine companies that is much higher than that recorded on the balance sheet, which was the result of the large writedowns that were effected in 2002 and 2003 following the severe devaluation of the Argentine peso due to the economic crisis that hit the country at that time. The due diligence established a market value of the Argentine companies of 3,668,595 pesos, which is the equivalent of 907 thousand euros, as opposed to the 800 thousand euros entered on Enerfin’s balance sheet as the cost of the equity investments. As a result of this valuation the Cooperative Society decided in turn to give a real valuation to the equity investment by means of the probable realizable value from the liquidation of the company, with the expectation of a future transfer of the Argentine companies at the market value resulting from the due diligence. The value of the equity investment of Enerfin that was entered on the consolidated balance sheet amounts to 250,628 euros.

Fontenergia S.p.A.: This company was established on April 12, 1999 as a result of the need to combine the Cooperative’s know-how with that of Liquigas S.p.A. (third-party partner) for LPG construction, management, and distribution in other cities in the Ogliastra service area in Sardinia.

During fiscal year 2002 the Cooperative acquired from Liquigas S.p.A. the remaining 50% of the company’s shares, thereby becoming the sole shareholder. In September 2005 the Cooperative transferred 51% of the shares of Fontenergia S.p.A. to the company Supergaz S.p.A. of Genoa (a company operating under the Esso trademark) at a price of 4,500,000 euros.

During the last several years the company has been involved in the construction of LPG supply networks. In 2005, all 24 of the municipalities included under the agreement started operations. There were 6,312 active consumers as of December 31, 2006.

The large increase in consumers allowed the company to close the 2006 balance sheet with a profit of 68,045 euros, a result that was strongly

consolidated annual accounts impacted by the mild winter temperatures and by the nonpayment of the contributions of capital that were stipulated by the tender by the Region of Sardinia. It is expected that these funds will be collected by the end of fiscal year 2007.

Lastly, it should be noted that the company has filed a Request for Ruling in conformity with Article 37 “bis,” paragraph 8 of Italian Presidential Decree no. 600 of September 29, 1973 and in observance of the applicable provisions of Italian Ministerial Decree no. 259 of June 19, 1998, because it had been found to be “inactive” as a result of the provisions of Article 30 of Italian Law no. 724 of December 23, 1994 and subsequent amendments, and that on April 4, 2007 the company received from the Internal Revenue Office of the Region of Sardinia, with Provision no.

FIS/11764/2007, a positive evaluation regarding its effective operational functionality.

Fontenergia controls 51% of the shares of the company Safin S.r.l., which is the financing company that in turn controls 73% of Sarda Reti Costruzioni S.r.l..

During the fiscal year Safin acquired the 13% of the shares possessed by its partner Pisanu and the 9% of the shares possessed by its partner Ortu, thereby increasing its control of the company Sarda Reti Costruzioni from 51% to 73%.

On the consolidated balance sheet the company Fontenergia was valued by means of the net assets method, including the effects of the valuation of the companies under it as well as the effects in connection with the 49% of the margins that were eliminated in previous fiscal years on the construction of the supply networks but that have not yet been depreciated.

Pegognaga Servizi S.r.l.: This company was established on April 15, 2005 by means of a document executed by Mr. Silvio Vezzi, Notary Public in Modena, with registration number 111410, file no. 16693, to manage cemetery services for the municipality of Pegognaga in the province of Mantua. The Cooperative holds 50% of the shares, and the company Mazzola & Bignardi Servizi S.r.l. holds the remaining 50% of the shares.

A valuation of the equity investment using the net assets method yielded a value for the company of 54,818 euros.

Crist Gas S.r.l.: This company, 50% of whose shares are held by the

Cooperative, was established in 2002 as a sales company for Cristoforetti Ser S.r.l., in accordance with Italian Legislative Decree no. 164/2000.

This company is currently still inactive.

The transfer of the remaining 50% that is still possessed by CPL CONCORDIA is currently being finalized with the partner Cristoforetti.

Teclab S.r.l.: This company, in which the Cooperative Society holds a 35% interest, was acquired on April 22, 2004 by means of a deed entered in the Company Register of La Spezia with reference no. 4365.

This company, which is involved in the development and writing of software for remote control, was acquired as the ideal partner for our former Networks Division.

The 2006 financial results show a loss of 49,245 euros due mainly to extraordinary factors which, it is felt, will not be repeated in the future.

A valuation of the equity investment using the net assets method yielded a value for the company of 37,358 euros.

For anything that is not specified in this Report on Consolidated Operations, in relation to the other companies belonging to the Group, please refer to the information contained in the Report on Operations in relation to the civil balance sheet.

With regard to liabilities, it should be noted that both the short-term and long-term liabilities have remained substantially unchanged with respect to the previous fiscal year. The item that experienced the largest variation is Taxes Payable, which indicates a large increase in the Group’s tax burden; this is undoubtedly a reflection of the considerable increase in the tax burden at the national level.

The consolidated net assets increased by the considerable amount of approximately 11 million euros. This increase is partly justified by the allocation to reserve of the previous fiscal year’s consolidated profit, but the majority of this increase is a result of the difference between the price paid to acquire the subsidiary company Si.gas S.r.l. and the value of this company’s net assets, which amounts to 7.8 million euros.

Economic Structure The following is the analysis of the reclassified profit and loss statement of the 2006 Consolidated Balance Sheet according to the value-added method, in comparison with the balance sheets of the four previous fiscal years:

CONSOLIDATED PROFIT AND LOSS STATEMENTS RECLASSIFIED USING THE VALUE ADDED METHOD (Amounts expressed in euros) Actual data Dec. 31,2006 Percent. Dec. 31,2005 Percent. Dec. 31,2004 Percent. Dec. 31,2004 Percent. Dec. 31,2002 Percent.

Revenues from sales and services 202,658,804 92,55% 226,056,566 93,48% 227,537,890 88,52% 175,073,206 76,12% 189,800,953 76,14% Differences in the inventory (2,569,631) -1,17% (10,187,122) -4,21% 5,204,351 2,02% 6,363,772 2,77% 1,923,513 0,77% of semi-finished and finished products (2,135,696) -0,98% 847,557 0,35% (14,750,459) -5,74% 791,819 0,34% 11,173,355 4,48% Differences in work in progress Work performed on a time 17,294,210 7,90% 15,934,003 6,59% 23,075,550 8,98% 35,590,190 15,47% 37,090,324 14,88% and material basis Other income 3,728,427 1,70% 9,178,587 3,80% 15,986,119 6,22% 12,173,187 5,29% 9,305,183 3,73% VALUE OF PRODUCTION 218,976,113 100,00% 241,829,591 100,00% 257,053,450 100,00% 229,992,174 100,00% 249,293,328 100,00%

Costs for purchases (69,336,134) -31,66% (91,571,513) -37,87% (110,830,619) -43,12% (91,990,382) -40,00% (89,617,331) -35,95% Differences in the inventory (5,695,328) -2,60% 1,080,564 0,45% 4,640,637 1,81% 3,196,893 1,39% 1,133,543 0,45% of raw materials

13

Actual data Dec. 31,2006 Percent. Dec. 31,2005 Percent. Dec. 31,2004 Percent. Dec. 31,2004 Percent. Dec. 31,2002 Percent.

Miscellaneous costs for services (72,614,398) -33,16% (83,655,008) -34,59% (86,407,797) -33,61% (85,810,793) -37,31% (86,863,780) -34,84% Expenses for the use of third (9,818,513) -4,48% (10,481,809) -4,33% (7,971,511) -3,10% (5,835,499) -2,54% (7,672,795) -3,08% parties’ assets Other operating charges (2,700,807) -1,23% (3,490,490) -1,44% (3,970,689) -1,54% (3,931,721) -1,71% (6,532,911) -2,62% ADDED VALUE 58,810,934 26,86% 53,711,334 22,21% 52,513,470 20,43% 45,620,671 19,84% 59,740,054 23,96%

Cost of labor and related charges (36,456,477) -16,65% (37,507,271) -15,51% (39,574,568) -15,40% (36,933,231) -16,06% (36,619,919) -14,69% GROSS OPERATING MARGIN 22,354,457 10,21% 16,204,064 6,70% 12,938,903 5,03% 8,687,440 3,78% 23,120,135 9,27% Depreciation of tangible assets (3,660,616) -1,67% (4,456,592) -1,84% (5,669,249) -2,21% (6,749,324) -2,93% (3,564,085) -1,43% Depreciation of intangible assets (4,583,865) -2,09% (4,322,471) -1,79% (3,566,695) -1,39% (2,211,199) -0,96% (8,226,555) -3,30% Provisions and writedowns (1,907,161) -0,87% (1,858,729) -0,77% (3,571,721) -1,39% (4,145,456) -1,80% (539,436) -0,22% Depreciation, provisions, (10,151,642) -4,64% (10,637,792) -4,40% (12,807,665) -4,98% (13,105,980) -5,70% (12,330,076) -4,95% and writedowns OPERATING RESULTS 12,202,815 5,57% 5,566,272 2,30% 131,238 0,05% (4,418,539) -1,92% 10,790,059 4,33%

Interest and other financial (4,198,165) -1,92% (5,543,328) -2,29% (5,983,193) -2,33% (4,866,351) -2,12% (10,055,927) -4,03% charges Other financial income TOTAL FINANCIAL MANAGEMENT CURRENT RESULTS

Financial income from equity investments Adjustments to financial activities Shareholder distributions Extraordinary operating items PROFITS (loss) BEFORE TAXES Income taxes for the year NET PROFITS (LOSS)

(PROFITS) LOSSES ATTRIBUTABLE TO THIRD PARTIES

PROFITS (LOSSES) ATTRIBUTABLE TO THE GROUP

503,898 (3,694,267) 8,508,548

550,224

0,23% 362,905 -1,69% (5,180,424) 3,89% 385,848

0,25% 7,717,593

0,15% 312,889 -2,14% (5,670,305) 0,16% (5,539,067)

3,19% 2,203,675

0,12% 450,048 0,20% 1,651,102 -2,21% (4,416,303) -1,92% (8,404,825) -2,15% (8,834,842) -3,84% 2,385,234

0,86% 55,987,891 24,34% 1,311,021

0,66% -3,37% 0,96%

0,53%

(664,559)

-0,30% (1,410,864)

-0,58%

-0,21% (6,156,504)

-0,47%

(750,000) 1,159,999 8,804,212 (5,585,887) 3,218,325

-0,34% (500,000) 0,53% 3,139,422 4,02% 9,331,999 -2,55% (3,640,956) 1,47% 5,691,042

19,810

3,238,135

-0,21% 0 1,30% 791,174 3,86% (3,072,553) -1,51% (1,969,666) 2,35% (5,042,219)

(47,293)

a) Decrease in the marketing activity of natural gas. This factor has already been commented on in this report. b) Removal of the company Fontenergia S.p.A. from the consolidation in the previous fiscal year which was completely consolidated only for the profit and loss statement. c) Consolidation of the subsidiary company Cristoforetti S.p.A. by means of the proportional method as of 2006, instead of the integral method, which had been used since the company was established.

As has already been stated above, revenues earned during the fiscal year (value of production) amount to 218,976,000 euros and are the result of the consignments made and the services performed for third parties and companies belonging to the group.

They are broken down as follows:

-2,68% (1,182,307)

0,00% 0 0,00% 0,31% (722,991) -0,31% -1,20% 40,273,555 17,51% -0,77% (9,091,255) -3,95% -1,96% 31,182,300 13,56%

691,168

5,643,749

The 2006 consolidated value of production, which amounts to 218,976,113 euros, decreased considerably with respect to previous years due to three fundamental factors:

14

(528,335)

(4,351,051)

486,363

31,668,663

(295,430) 1,754,374 3,972,892 3,409,161 7,382,053

150,219

7,532,272

Revenues from production work orders

157,445,000 euros

Sales and distribution of methane gas1

6,673,000 euros

Sales of fuel

13,000 euros

Sales of electricity

1,279,000 euros

Sales of materials

11,622,000 euros

Services Sales of real property Other revenues, services, and sales TOTAL REVENUES FROM PRODUCTION

3,716,000 euros 10,779,000 euros 1,132,000 euros 202,659,000 euros

Differences in inventory

(2,570,000) euros

Differences in contract work in progress

(2,136,000) euros

Increases in tangible assets due to internal work 17,294,000 euros Other revenues TOTAL

3,729,000 euros 218,976,000 euros

-0,12% 0,70% 1,59% 1,37% 2,96%

consolidated annual accounts The gross operating margin as of December 31, 2006 exceeded 21 million euros, was the best in the last four years, and was second only to that achieved in 2002 when Cogas S.p.A. (now Thuga Mediterranea) was included in the consolidated balance sheet for the last fiscal year along with the profit margin generated by the management of its concessions, which mainly consisted of methane gas supply networks owned by the Cooperative, which were transferred in connection with the reorganization of the group to concentrate the group’s largest concessions into that company.

The gross operating margin consisted partly of the cost of labor of 36.5 million euros, which resulted from the employment of 917 employees and members of the group.

The following is the composition of the personnel who were included in the cost of labor in 2006: Number

2006

2005

Executives

17

19

Managers

36

34

343

359

White-collar workers Blue-collar workers

521

531

Total

917

943

The operating profit amounts to 12,203,000 euros, financial management amounts to (3,695,000) euros, financial activities adjustments and financial income from equity investments amount to (114,000) euros, the cost of the shareholder distributions amounts to (750,000) euros, and extraordinary management amounts to 1,160,000 euros. The profits before taxes are 8,804,000 euros; the profit sharing of third parties produced a positive result of 20,000 euros; and deferred, prepaid, and current taxes amount to (5,586,000) euros. The final results, derived from the above, are a profit for the period of 3,238,000 euros.

Balance Sheet Indices The most significant indicators of the 2006 consolidated balance sheet are compared with the indicators of the previous four fiscal years in the following summary table:

ECONOMIC ANALYSIS Actual data

R.O.E. (Return on Equity) R.O.I. (Return on Investment) Ratio of Gross Operating Margin/Value of Production Influence of one-time income and charges Influence of Financial Charges on Value of Production Influence of Net Financial Charges on R.O.

Dec. 31,2006 3,68% 4,21% 10,21% 26,54% 1,69% 30,27%

Dec. 31,2005 7,56% 2,01% 6,70% 101,39% 2,14% 93,07%

Dec. 31,2004 -5,47% 0,04% 5,03% -3315,40% 2,21% 4320,63%

Dec. 31,2003 63,60% -1,39% 3,78% -716,72% 1,92% -99,95%

Dec. 31,2002 17,83% 3,51% 9,27% 69,81% 3,37% 77,89%

FINANCING AND ECONOMIC ANALYSIS Actual data

Liquidity index Leverage Ratio of Debt Burden Elasticity index EBITDA/DEBT DEBTI/EBITDA

Dec. 31,2006 Dec. 31,2005 Dec. 31,2004 Dec. 31,2003 Dec. 31,2002

1,41 1,44 1,07 1,11 0,91 3,29 3,71 4,26 6,38 7,28 0,74 0,96 1,63 2,31 1,85 1,60 1,92 1,30 1,04 1,61 34,44% 22,50% 9,98% 7,57% 29,52% 2,90 4,44 10,02 13,22 3,39 The large increase in net assets together with the good financial results produced a very positive ROE (Return On Equity). The GOM (Gross Operating Margin) was extremely positive, exceeding 10%; this was the best result in the past five years.

Among the capital indices a large amount of attention is paid to the ratio between DEBT and EBITDA (or GOM), which was 2.90 in 2006. Generally this index is considered to be positive when the ratio between the two factors is around 3.

The debt burden ratio was also positive. This index measures the ratio between own means (net assets before the results for the year) and third parties’ means (debt). In 2006 this index, at 0.74%, showed that the capitalization was good in comparison to the amount of bank debt.

15

Expected Evolution of Operations As has been stated often over the past few years, a period of diversification, during which the Group invested in new markets, was followed by a period of divestitures, the purpose of which was to return to the group’s core business. In fact, fiscal year 2006 was characterized by the consolidation of the Group’s core business and by a reorganization process whose goal was a greater penetration of the local markets, offering all the services the group is able to provide.

Organization by geographical area makes it possible to carry on a direct dialog with the local institutions, thereby providing us with knowledge of the local area’s needs. In this sense we pay a great deal of attention to the economic development of those regions that have planned investments in the medium term regarding the installation of methane gas supply networks and related services.

The construction and management of methane gas supply networks has always been a strong point of the Cooperative. In fact, the parent company took part in the presentation of six financing projects in connection with several large service areas in the Region of Sardinia, and another six financing projects will be presented by June 30 of this year.

Besides the initiatives that have already been undertaken or formalized or that are in the process of being awarded, the parent company intends to take part in the next awarding of tenders for gas concessions, even in reference to those concessions that, for the purposes of Italian Legislative Decree no. 164/2000, will reach their natural expiration date within the next few years.

A company that wants to compete in a market undergoing continuous evolution must also know how to evaluate new technologies and respond to its customers’ new needs.

With regard to research and experimentation, an active heating and intelligent lighting project was carried out at the Enrico Fermi Technical Institute in Modena, where 56 rooms and areas of the school network have been computerized. This represents a typical employment of home automation in settings that represent a possible future.

The installment of the Prodi government has resulted in a great deal of attention being paid to the national energy system, about which Minister Bersani has shown himself to be very concerned. There is again talk about regasifiers and alternative energies. On both fronts the parent company is very careful about future scenarios, in terms of both construction and acquisition at true market prices, of a real market that is not basically a monopoly such as is the case today.

In reference to alternative energies, the government has taken concrete actions by issuing tax provisions that provide incentives for energy produced from renewable resources such as biomass, wind, and sunlight. The parent company has been actively involved with cogeneration for many years, both when using fuels (diesel fuel or gas) for producing electricity and when using biogas produced from dumps. Over the past few months a biomass project has been evaluated that could soon become one of the Group’s current activities.

The parent company has even made solar energy investments at its headquarters in Concordia and its offices in Sant’Omero, acquiring the necessary know-how to become an active participant in this market.

These experiences permitted the parent company in 2007 to acquire the contract for the construction of a photovoltaic solar system for the city of Carano in Trentino.

On the basis of the work orders in its portfolio and in consideration of the projects that it currently has under evaluation, the parent company is preparing an update to its 2007-2009 three-year plan, which will soon be approved by the Board of Directors.

The 2007 budget has already been approved; it was drawn up on the basis of the work orders acquired up until the end of December 2006 as well as those that are in the process of being acquired. This budget was adjusted on the basis of the valuations performed when the present balance sheet was closed and when the quarterly update was given.

The reclassified consolidated profit and loss statements and statements of assets and liabilities for the 2007 fiscal year are analyzed below and compared with the four previous fiscal years:

CONSOLIDATED PROFIT AND LOSS STATEMENTS RECLASSIFIED USING THE VALUE ADDED METHOD (Amounts expressed in euros) Projected Actual data

Dec. 31,2007 Percent. Dec. 31,2006 Percent. Dec. 31,2005 Percent. Dec. 31,2004 Percent. Dec. 31,2003 Percent.

Revenues from sales and services 200,886,185 82,49% 202,658,804 92,55% 226,056,566 93,48% 227,537,890 88,52% 175,073,206 76,12% Differences in the inventory 286,717 0,12% (2,569,631) -1,17% (10,187,122) -4,21% 5,204,351 2,02% 6,363,772 2,77% of semi-finished and finished products 3,320,036 1,36% (2,135,696) -0,98% 847,557 0,35% (14,750,459) -5,74% 791,819 0,34% Differences in work in progress Work performed on a time 35,315,755 14,50% 17,294,210 7,90% 15,934,003 6,59% 23,075,550 8,98% 35,590,190 15,47% and material basis Other income 3,714,331 1,53% 3,728,427 1,70% 9,178,587 3,80% 15,986,119 6,22% 12,173,187 5,29% VALUE OF PRODUCTION 243,523,025 100,00% 218,976,113 100,00% 241,829,591 100,00% 257,053,450 100,00% 229,992,174 100,00%

Costs for purchases (85,813,784) -35,24% (69,336,134) -31,66% (91,571,513) -37,87% (110,830,619) -43,12% (91,990,382) -40,00% Differences in the inventory (3,244,170) -1,33% (5,695,328) -2,60% 1,080,564 0,45% 4,640,637 1,81% 3,196,893 1,39% of raw materials Miscellaneous costs for services (82,127,124) -33,72% (72,614,398) -33,16% (83,655,008) -34,59% (86,407,797) -33,61% (85,810,793) -37,31% Expenses for the use of third (9,849,154) -4,04% (9,818,513) -4,48% (10,481,809) -4,33% (7,971,511) -3,10% (5,835,499) -2,54% parties’ assets Other operating charges (2,523,212) -1,04% (2,700,807) -1,23% (3,490,490) -1,44% (3,970,689) -1,54% (3,931,721) -1,71% ADDED VALUE 59,965,581 24,62% 58,810,934 26,86% 53,711,334 22,21% 52,513,470 20,43% 45,620,671 19,84%

16

consolidated annual accounts Projected Actual data

Dec. 31,2007 Percent. Dec. 31,2006 Percent. Dec. 31,2005 Percent. Dec. 31,2004 Percent. Dec. 31,2003 Percent.

Cost of labor and related charges (36,168,868) -14,85% (36,456,477) -16,65% (37,507,271) -15,51% (39,574,568) -15,40% (36,933,231) -16,06% GROSS OPERATING MARGIN 23,796,713 9,77% 22,354,457 10,21% 16,204,064 6,70% 12,938,903 5,03% 8,687,440 3,78%

Depreciation of tangible assets (4,013,080) -1,65% (3,660,616) -1,67% (4,456,592) -1,84% (5,669,249) -2,21% (6,749,324) -2,93% Depreciation of intangible assets (5,442,744) -2,24% (4,583,865) -2,09% (4,322,471) -1,79% (3,566,695) -1,39% (2,211,199) -0,96% Provisions and writedowns (865,000) -0,36% (1,907,161) -0,87% (1,858,729) -0,77% (3,571,721) -1,39% (4,145,456) -1,80% Depreciation, provisions, (10,320,823) -4,24% (10,151,642) -4,64% (10,637,792) -4,40% (12,807,665) -4,98% (13,105,980) -5,70% and writedowns OPERATING RESULTS 13,475,889 5,53% 12,202,815 5,57% 5,566,272 2,30% 131,238 0,05% (4,418,539) -1,92%

Interest and other financial (4,958,215) -2,04% (4,198,165) -1,92% (5,543,328) -2,29% (5,983,193) -2,33% (4,866,351) -2,12% charges Other financial income 0 0,00% 503,898 0,23% 362,905 0,15% 312,889 0,12% 450,048 0,20% TOTAL FINANCIAL (4,958,215) -2,04% (3,694,267) -1,69% (5,180,424) -2,14% (5,670,305) -2,21% (4,416,303) -1,92% MANAGEMENT 8,517,674 3,50% 8,508,548 3,89% 385,848 0,16% (5,539,067) -2,15% (8,834,842) -3,84% CURRENT RESULTS

Financial income from equity 0 0,00% 550,224 0,25% 7,717,593 3,19% 2,203,675 0,86% 55,987,891 24,34% investments Adjustments to financial activities 719,400 0,30% (664,559) -0,30% (1,410,864) -0,58% (528,335) -0,21% (6,156,504) -2,68% 0 0,00% (750,000) -0,34% (500,000) -0,21% 0 0,00% 0 0,00% Shareholder distributions 286,064 0,12% 1,159,999 0,53% 3,139,422 1,30% 791,174 0,31% (722,991) -0,31% Extraordinary operating items PROFITS (LOSS) 9,523,138 3,91% 8,804,212 4,02% 9,331,999 3,86% (3,072,553) -1,20% 40,273,555 17,51% BEFORE TAXES Income taxes for the year (3,847,014) -1,58% (5,585,887) -2,55% (3,640,956) -1,51% (1,969,666) -0,77% (9,091,255) -3,95% NET PROFITS (LOSS) 5,676,124 2,33% 3,218,325 1,47% 5,691,042 2,35% (5,042,219) -1,96% 31,182,300 13,56%

(PROFITS) LOSSES ATTRIBUTABLE TO THIRD 15,210 19,810 (47,293) 691,168 486,363 PARTIES

PROFITS (LOSSES) 5,691,334

3,238,135

5,643,749

(4,351,051)

31,668,663

ATTRIBUTABLE TO THE GROUP

The profit and loss statement of the consolidated balance sheet projection shows a large increase in the value of production (11%), the majority of which is due to the increase in the item “Work performed on a time and material basis” and, therefore, the planned investments for expanding the existing supply networks and for extending the network of Ischia and Procida. The gross operating margin is also increasing in absolute value, but is decreasing slightly in percentage terms, because, as was stated previously, it is calculated using a value of production that is higher and, to a large degree, due to work performed on a time and material basis, which has a margin of zero.

This consideration shows that the margin on the core business has expe-

rienced further improvement.

The consolidated operating profit is approximately 13.5 million euros, the financial management is a negative 5 million euros, the extraordinary management was positive and amounts to about 1 million euros, and the consolidated profits before taxes is estimated to be 9.5 million euros.

The tax burden was estimated to be 3.8 million euros; therefore, the consolidated profits for 2007 are expected to be 5.7 million euros. We feel that this goal is extremely positive and can absolutely be achieved.

The statements of assets and liabilities of the 2007 consolidated balance sheet projection are analyzed below and compared with the four previous fiscal years, including 2006:

17

“CPL Concordia” Group: Consolidated Statements of Assets and Liabilities reclassified using the items liquidity method (Amounts expressed in euros)

ASSETS Quick assets Liquid assets Financial activities that do not constitute assets Accounts receivable due from customers and others Inventory Capital due from shareholders Accrued income and prepayments Total quick assets

Capital assets Intangible assets Tangible assets Long-term investments Total capital assets Total ASSETS

LIABILITIES Short-term liabilities Payables due to banks Payables due to shareholders and other lenders Advance payments Payables due to suppliers Payables in the form of credit instruments Payables due to subsidiary companies Payables due to associated companies Taxes payable Payables due to social security institutions Other short-term payables Accrued liabilities and deferred income Total short-term liabilities

Medium- and long-term liabilities Debentures Payables due to banks Payables due to shareholders and other lenders Advance payments Payables due to suppliers Payables in the form of credit instruments Taxes payable Other payables due beyond the fiscal year Provisions for severance indemnity Provisions for retirement pensions and similar obligations Provisions for taxes Other provisions Total medium- and long-term liabilities

18

Projected Dec, 31,2007

Dec, 31,2006

9,425,235 0 118,660,867 33,635,774 1,100,000 5,764,222 168,586,097

18,630,575 93,109,379 5,468,209 117,208,163 285,794,260

24,429,899 3,719,132 11,511,757 67,377,593 0 0 50,000 4,599,595 1,601,221 4,050,899 611,187 117,951,285

13,617,415 84 130,870,796 26,140,017 1,250,904 6,635,666 178,514,882

13,351,631 80,844,348 17,174,232 111,370,210 289,885,092

15,092,838 4,950,419 12,878,459 74,125,417 0 0 303,761 7,935,892 3,033,287 7,500,789 942,023 126,762,884

Actual data Dec, 31,2005 Dec, 31,2004

7,534,571 14,670,321 0 0 127,978,596 132,019,289 36,745,161 38,367,698 1,250,006 1,269,712 8,517,982 5,235,733 182,026,316 191,562,752

14,084,073 15,659,671 62,550,349 117,368,410 18,339,281 14,050,038 94,973,703 147,078,119 277,000,019 338,640,871

19,708,552 69,040,457 4,264,103 8,516,870 15,426,293 11,742,131 71,148,370 72,422,732 0 0 0 2,205 885,377 167,236 4,244,144 5,622,354 1,707,985 1,801,444 7,303,347 5,906,281 1,286,141 3,591,600 125,974,311 178,813,309

0 0 55,564,136 66,714,262 0 0 0 0 2,255,596 2,884,933 0 0 0 0 278,499 263,307 7,431,485 7,115,472

Dec, 31,2003

8,486,072 1,350 104,106,354 47,290,401 1,155,086 1,190,397 162,229,660

15,465,470 120,442,662 19,692,039 155,600,171 317,829,831

47,095,404 2,676,232 4,903,198 69,687,827 0 2,759 437,850 4,366,111 1,806,999 8,174,627 6,639,007 145,790,014

0 59,036,104 0 0 2,025,798 0 0 255,309 6,673,606

0 58,489,020 0 0 1,701,134 0 0 270,843 6,955,065

0 70,217,850 3,312,864 0 2,164,004 0 0 0 6,995,220

22,168

21,526

21,526

36,426

45,825

20,873 2,114,189 70,148,047

150,012 2,942,883 70,530,483

70,873 3,111,398 68,733,514

97,876 5,010,409 82,122,684

0 3,503,360 86,239,123

consolidated annual accounts

Shareholders’ equity Share capital Revaluation reserve Legal reserve Statutory Reserves for contributions of capital, Reserve Italian Law no. 784/80 Consolidation reserve Surplus from merger Reserve for exchange rate fluctuations Profits / losses carried forward Profit / loss for the year Total shareholders’ equity in relation to the group

Third parties’ equity

Total LIABILITIES

Projected Dec, 31,2007

Dec, 31,2006

Actual data Dec, 31,2005 Dec, 31,2004 Dec, 31,2003

12,702,218 13,335,213 14,878,043 656,679 656,679 656,679 67,692,238 67,692,238 66,683,567 78,184 78,184 78,185

13,000,000 656,679 72,387,954 78,184

12,952,749 656,679 69,866,959 78,184

1,269,396

1,269,396

1,269,396

1,269,396

1,269,396

2,746,762 235,597 483,057 0 5,691,334 96,548,964

2,565,595 235,597 483,057 0 3,238,135 91,346,351

(7,874,424) 235,597 (79,316) 0 5,643,749 80,324,322

(6,624,127) 3,102,096 (35,563) 0 (4,351,051) 75,123,065

(36,538,702) 3,102,096 (338,671) 0 31,668,663 81,459,255

1,145,965 285,794,260

The following are the four fundamental factors that characterize the structure of the 2007 Consolidated Statement of Assets and Liabilities: a) An improvement in collection times, with a consequent decrease in commercial credits. b) An increase in fixed assets due to investments of more than 20 million euros, of which the majority was for gas supply networks, as discussed in the section on the profit and loss statement. c) A decrease in business payables accompanied by a slight increase in

1,245,375 289,885,093

1,967,873 277,000,019

2,581,813 338,640,871

4,341,439 317,829,831

financing payables; the majority of this increase is due to the financing of the planned investments which is discussed in more detail above. d) Further capitalization of the Group resulting from the constant increase in consolidated net assets.

The main indicators of the 2007 consolidated balance sheet projection are listed below and compared with the indicators of the previous four fiscal years:

CPL Concordia Group: Principal balance sheet indices ECONOMIC ANALYSIS

R.O.E. (Return on Equity) R.O.I. (Return on Investment) Ratio of Gross Operating Margin/Value of Production Influence of one-time income and charges Influence of Financial Charges on Value of Production Influence of Net Financial Charges on R.O.

FINANCING AND ECONOMIC ANALYSIS

Liquidity index Leverage Ratio of Debt Burden Elasticity index EBITDA/DEBT DEBTI/EBITDA

Projected Dec. 31,2007 6,26% 4,72% 9,77% 42,23% 2,04% 36,79%

Dec. 31,2006 3,68% 4,21% 10,21% 26,54% 1,69% 30,27%

Projected Dec. 31,2007 Dec. 31,2006

1,43 1,41 3,15 3,29 0,86 0,74 1,44 1,60 30,60% 34,44% 3,27 2,90

Actual data Dec. 31,2005 Dec. 31,2004

7,56% -5,47% 2,01% 0,04% 6,70% 5,03% 101,39% -3315,40% 2,14% 2,21% 93,07% 4320,63%

Actual data Dec. 31,2005 Dec. 31,2004

1,44 1,07 3,71 4,26 0,96 1,63 1,92 1,30 22,50% 9,98% 4,44 10,02

Dec. 31,2003 63,60% -1,39% 3,78% -716,72% 1,92% -99,95%

Dec. 31,2003

1,11 6,38 2,31 1,04 7,57% 13,22

19

With the exception of ROE, which has improved with respect to the previous fiscal year, the other indices have been especially affected by the planned investments which, from an economic point of view, have impacted the increase in the value of production which consequently had a negative impact on the gross operating margin, and which, from a financial and capital point of view, have impacted the debt burden ratio as well as the DEBT/EBITDA ratio. The values of both of the latter indices, however, remained at an excellent level.

The following are the significant operations that took place after the Balance Sheet was closed on December 31, 2006: On January 30, 2007 an Extraordinary Shareholders’ Meeting of the company Nuoro Servizi S.r.l. was held in the presence of Mr. Zambellini Artini, Notary Public in the district of Bologna, who recorded, with registration no. 22221 and file no. 7555, the document by means of which it was decided to place the company in liquidation, with the relative appointment of the Official Receiver.

On April 23, 2007 in the presence of Mr. Silvio Vezzi, Notary Public in Modena, who recorded the relative document with registration no. 114585 and file no. 17714, was established the company Progas Metano S.r.l., a special purpose vehicle in conformity with Article 156 of Italian Legislative Decree no. 163 of April 12, 2006, which will manage the construction and subsequent management under concession of the supply network in the municipality of Procida.

On May 14, 2007 was completed the transaction with Thuga Mediterranea S.r.l. regarding the transfer back of the Cittanova concession, with the recognition of the higher value of 97 thousand euros and the simultaneous payment of all the amounts withheld by Thuga as a guarantee.

Also on May 14, 2007, by means of the relevant deed stipulated in the presence of Mr. Silvio Vezzi, Notary Public in Modena, who recorded it with registration no. 114656 and file no. 17736, was acquired from Thuga Mediterranea S.r.l. the gas distribution concessions of the municipalities in Calabria of Polistena, Rosarno, Cinquefrondi, Melicucco, and San Giorgio a Morgeto for the total price of 2,004,076.28 euros.

20

Other information It should also be noted that the entire Group updated, within the terms established by the relevant decree, the security program document in observance of Annex B of Italian Legislative Decree no. 196/03 (also known as the “Unified Body of Privacy Laws”) which contains the provisions on the technical procedures to be adopted if sensitive data is handled with electronic instruments.

It should also be noted that the Parent Company, together with the interested companies, is drafting the lists required by Italian Legislative Decree no. 164/2000 and by Resolution no. 311/01 of the Electrical Energy and Methane Gas Authority, regarding the accounting separation in reference to the production processes inherent to the methane gas industry.

Thank you for the confidence and trust you have placed in us. We recommend that you approve the Annual Accounts as of December 31, 2006 as they have been presented to you.

Concordia, May 14, 2007 Roberto Casari The Chairman (for the Board of Directors)

consolidated balance sheet of the CPL Concordia Group as of december 31, 2006

21

PROFIT AND LOSS STATEMENT December 31, 2006 amounts expressed in euros

PROFIT AND LOSS STATEMENT A)

VALUE OF PRODUCTION: 1) 2) 3) 4) 5)

B) 6) 7) 8) 9)

Revenues from sales and services Differences in the inventory of products undergoing processing, semi-finished products, and finished products Differences in contract work in progress Increases in capital assets due to internal work Other revenues and income 3,728,427 - Miscellaneous 0 - Contributions for operating expenses Total COSTS OF PRODUCTION: Costs of raw materials, subsidiary materials, consumables, and goods Costs of services Costs for the use of third parties’ assets Personnel costs: a) Salaries and wages b) Social security charges c) Employee severance indemnity d) Retirement pensions and similar costs

10)

11) 12) 13) 14)

Depreciation and writedowns: a) Depreciation of intangible assets b) Depreciation of tangible assets c) Other writedowns of capital assets d) Writedown of receivables included in the current assets and of liquid assets Differences in the inventory of raw materials, subsidiary materials, consumables, and goods Provisions for risks Other provisions Other operating charges Total

15)

16)

FINANCIAL INCOME AND CHARGES: Financial income from equity investments: - From subsidiary companies - From associated companies - From other companies Other financial income: a) From accounts receivable recorded under capital assets: - From subsidiary companies - From associated companies - From parent companies - From other companies

226,056,566

(2,569,631)

(10,187,122)

(2,135,696) 17,294,210

847,557 15,934,003

3,728,427 218,976,114

9,128,587 50,000

91,571,513

72,614,398 9,818,513

83,655,008 10,481,809 27,276,674 8,924,389 1,790,562 15,645

4,583,865 3,660,616 54,131

38,007,270 4,322,471 4,456,592 521,398

560,430

8,859,042

730,856

0 0 0 0

10,031,317

5,695,328

(1,080,564)

0 1,292,600 2,700,807 207,523,299

0 606,475 3,490,490 236,763,318

11,452,815

511,454 0 38,770

9,178,587 241,829,590

69,336,134

37,206,477

DIFFERENCE BETWEEN THE VALUE AND THE COSTS OF PRODUCTION (A - B) C)

202,658,804

27,107,357 8,371,880 1,727,240 0

22

December 31, 2005 amounts expressed in euros

5,066,272

550,224

6,036,235 1,368,791 312,567

7,717,593

0

0 0 0 0

0

consolidated annual accounts PROFIT AND LOSS STATEMENT b) From stocks recorded under capital assets that do not constitute equity investments c) From stocks recorded under current assets that do not constitute equity investments d) Other financial income not included above: - From subsidiary companies - From associated companies - From parent companies - From other companies 17) Interest and other financial charges - From subsidiary companies - From associated companies - From parent companies - From other companies 17 bis) CURRENCY EXCHANGE PROFITS AND LOSSES - Currency exchange profits and losses Total ( 15 + 16 - 17 - 17 bis) D)

December 31, 2006 amounts expressed in euros

0 323 0 503,576

4,350,069

20)

21)

EXTRAORDINARY INCOME AND CHARGES: Income: a) Capital gains on transfers, the revenues of 4,458,308 which cannot be entered under item 5 b) Contributions of capital 0 54,316 c) Other income Charges: a) Capital losses on transfers, the accounting 49,947 effects of which cannot be entered under item 14 b) Taxes regarding preceding fiscal years 0 3,302,678 c) Other charges Total extraordinary income and charges ( 20 - 21 )

PROFITS (LOSS) BEFORE TAXES ( A - B ± C ± D ± E ) 22) 26)

Income taxes for the year, current taxes, deferred taxes, and taxes paid in advance PROFITS (LOSS) FOR THE YEAR

(PROFITS) LOSS PERTAINING TO THIRD PARTIES PROFITS (LOSS) PERTAINING TO THE GROUP

503,899

0 0 0 362,904

362,904

4,350,069

5,451,800

5,451,800

(151,902)

91,530 (3,144,044)

ADJUSTMENTS OF THE VALUE OF FINANCIAL ACTIVITIES: 18) Revaluations: 60,905 a) Of equity investments b) Of long-term investments that do not consti0 tute equity investments c) Of stocks recorded under current assets that 0 do not constitute equity investments 19) Writedowns: 725,464 a) Of equity investments b) Of long-term investments that do not consti0 tute equity investments c) Of stocks recorded under current assets that

do not constitute equity investments Total adjustments ( 18 - 19 )

E)

December 31, 2005 amounts expressed in euros

2,537,167

3,513 0 60,905

0

3,513

1,414,377 0 725,464

1,414,377

(664,559)

(1,410,864)

2,258,247 4,512,624

0 1,517,830

3,776,077

319,503

3,352,625 1,159,999 8,804,211

0 317,152

636,655 3,139,422 9,331,998

(5,585,887)

(3,640,956)

3,218,324

5,691,042

19,811

(47,293)

3,238,135

5,643,749

23

STATEMENT OF ASSETS AND LIABILITIES

ASSETS

ASSETS A)

CAPITAL DUE FROM SHAREHOLDERS Portion called for

B)

CAPITAL ASSETS I 1) 2) 3) 4) 5) 5b) 6) 7)

II 1) 2) 3) 4) 5)

III

288,131 155,196

100,015 142,755

0

0

50,907

513,588

9,342 0 897,449 11,950,606 13,351,631

12,276 0 643,366 12,672,073 14,084,073

2,633,438 70,108,797 342,992 2,554,907 5,204,213 80,844,347

2,984,661 52,811,488 322,571 2,132,062 4,299,566 62,550,348

0 347,804 0 1,696,172

0 142,468 0 1,328,084

TANGIBLE ASSETS: Land and buildings Plant and machinery Industrial and commercial equipment Other tangible assets Assets under construction and advance payments Total

(within 12 months)

(within 12 months)

10,754,000

10,754,000

0

10,734,000

533,908 0 0

2,601,975 1,033 0 15,400,984 109,596,962

698,539 0 0

4,024,682 1,033 0 16,230,267 92,864,688

CURRENT ASSETS I 1) 2) 3) 4) 5)

24

December 31, 2005 amounts expressed in euros 1,250,006 1,250,006

INTANGIBLE ASSETS: Capital and expansion costs Research, development, and advertising costs Industrial patent rights and usufructuary rights of original works Concessions, licenses, trademarks, and similar rights Goodwill Difference arising from consolidation Assets in progress and advance payments Other intangible assets Total

LONG-TERM INVESTMENTS: 1) Equity investments in: a) Subsidiary companies b) Associated companies c) Parent companies d) Other companies 2) Loans a) To subsidiary companies: b) To associated companies: c) To parent companies: d) To others: 3) Other stocks 4) Own shares Total TOTAL CAPITAL ASSETS

C)

December 31, 2006 amounts expressed in euros 1,250,904 1,250,904

INVENTORY: Raw materials, subsidiary materials, and consumables Products undergoing processing and semi-finished products Contract work in progress Finished products and goods Advance payments Total

3,253,514 4,108,238 11,904,013 5,157,002 1,717,249 26,140,016

3,346,549 3,214,257 16,599,804 12,225,926 1,358,624 36,745,160

consolidated annual accounts ASSETS II 1) 2) 3) 4) 4 bis) 4 ter) 5)

ACCOUNTS RECEIVABLE: Due from customers: Due from subsidiary companies: Due from associated companies: Due from parent companies: Tax credits Taxes paid in advance Due from others: Total FINANCIAL ACTIVITIES THAT DO NOT CONSTITUTE ASSETS:

III 1) 2) 3) 4) 5)

IV 1) 2) 3)

Equity investments in subsidiary companies Equity investments in associated companies Other equity investments Own shares Own shares Total LIQUID ASSETS: Bank and post office deposits Checks on hand Cash and equivalents on hand Total

TOTAL CURRENT ASSETS D)

ACCRUED INCOME AND PREPAYMENTS: TOTAL ASSETS

December 31, 2006 December 31, 2005 amounts expressed in euros amounts expressed in euros (beyond 12 months) (beyond 12 months) 1,765,146 121,493,423 2,086,148 121,226,277 0 0 0 0 8,103 224,209 22,867 131,094 0 0 0 0 2,852,787 3,861,549 2,262,000 3,376,259 0 5,811,626 1,492,433 132,644,045 130,087,612

0 0 0 0 84 84

0 0 0 0 0 0

13,562,294 38,500 16,622 13,617,416

172,401,561

7,500,936 3,752 29,883 7,534,571

174,367,343

6,635,666

8,517,982

289,885,093

277,000,019

25

STATEMENT OF ASSETS AND LIABILITIES

LIABILITIES

LIABILITIES A) I II III IV V VI VII

VIII IX

December 31, 2006 amounts expressed in euros

December 31, 2005 amounts expressed in euros

12,952,749 0 656,679 69,866,959 78,184 0

12,702,218 0 656,679 67,692,238 78,184 0

1,269,396 2,565,595 235,597 483,057 0 3,238,135 91,346,351

1,269,396 (7,874,424) 235,597 (79,315) 0 5,643,749 80,324,322

SHAREHOLDERS’ EQUITY SHARE CAPITAL SHARE PREMIUM RESERVE REVALUATION RESERVES LEGAL RESERVE STATUTORY RESERVES RESERVE FOR THE REPURCHASE OF OWN STOCK OTHER RESERVES: a) CONTRIBUTIONS OF CAPITAL, LAW NO. 784/80 b) CONSOLIDATION RESERVE c) SURPLUS FROM MERGER d) CONVERSION DIFFERENCE RESERVE PROFITS (LOSSES) CARRIED FORWARD NET PROFIT (LOSS) FOR THE YEAR TOTAL SHAREHOLDERS’ EQUITY OF THE GROUP

THIRD PARTIES’ CAPITAL AND RESERVES THIRD PARTIES’ PROFITS (LOSSES) SHAREHOLDERS’ EQUITY OF THIRD PARTIES TOTAL B)

PROVISIONS FOR RISKS AND CONTINGENCIES: 1) For retirement pensions and similar obligations 2) For taxes 3) Others TOTAL

C)

PROVISIONS FOR SEVERANCE INDEMNITY

D)

PAYABLES: 1) Debentures: 2) Convertible debentures: 3) Payables due to shareholders for financing 4) Payables due to banks: 5) Payables due to other lenders: 6) Advances: 7) Payables due to suppliers: 8) Payables in the form of credit instruments: 9) Payables due to subsidiary companies: 10) Payables due to associated companies: 11) Payables due to parent companies: 12) Taxes payable: 13) Payables due to social security institutions: 14) Other payables: TOTAL

26

1,265,186 (19,811) 1,245,375 92,591,726

21,526 150,012 2,942,883 3,114,421

6,955,065

(beyond 12 months)

1,920,579 47,293 1,967,872 82,292,194

21,526 70,873 3,111,398 3,203,797 7,431,485

(beyond 12 months)

0 0 0 58,489,020 0 0 1,701,134 0 0 0 0 0 0 270,843

0 0 2,723,657 73,581,858 2,226,762 12,878,459 75,826,551 0 0 303,761 0 7,935,892 3,033,287 7,771,631 186,281,858

0 0 0 55,564,136 0 0 2,255,596 0 0 0 0 0 0 278,499

0 0 2,331,665 75,272,688 1,932,438 15,426,293 73,403,966 0 0 885,377 0 4,244,144 1,707,985 7,581,846 182,786,402

consolidated annual accounts LIABILITIES E)

ACCRUED LIABILITIES AND DEFERRED INCOME: TOTAL LIABILITIES SUSPENSE ACCOUNTS I) Guarantees furnished - Sureties - Collateral Total II) Other suspense accounts - Notes subject to collection - Others Total TOTAL SUSPENSE ACCOUNTS

December 31, 2006 December 31, 2005 amounts expressed in euros amounts expressed in euros 942,023 1,286,141 289,885,093 277,000,019

131,029,741 59,500,000

112,350,462 74,500,000 190,529,741

199,420 3,914,746

186,850,462 659,058 5,682,297

4,114,166 194,643,907

6,341,355 193,191,817

27

details of the profit and loss statement

28

consolidated annual accounts table of the reconciliation of CPL Concordia’s financial results with the consolidated financial results A)

RESULTS OF THE CIVIL BALANCE SHEET OF CPL CONCORDIA

3,552,720

B)

RESULTS OF THE COMPANIES BELONGING TO THE GROUP

(1,215,724)

C)

EFFECT OF THE RESULTS ATTRIBUTABLE TO THIRD PARTIES

19,811

D= B+C

EFFECT OF THE RESULTS OF THE COMPANIES BELONGING TO THE GROUP

(1,195,913)

EFFECT OF LEASING

(148,796)

RECOVERY OF THE EQUITY INVESTMENTS DEPRECIATION APPLIED TO CPL CONCORDIA

1,901,458

ELIMINATION / RECOVERY OF INTRA-GROUP MARGINS

(692,326)

RECOVERY OF DEPRECIATION ON TRANSFER OF FILIALA 2005

17,486

EFFECT OF DEFERRED TAXES ON THE INTRA-GROUP MARGINS

75,167

ELIMINATION OF DIVIDENDS RECEIVED

0

EFFECT ON THE STOCKS OF BORGOVERDE

(643,591)

ADJUSTMENT TO THE SHAREHOLDERS’ EQUITY OF THE ASSOCIATED COMPANIES

(195,839)

UNCONFIRMED FINANCIAL BALANCES

-39,235

E)

OTHER CONSOLIDATION ADJUSTMENTS

274,323

F=A+D+E

ORDINARY OPERATING RESULTS

G)

CAPITAL GAINS ON THE TRANSFER OF FONTENERGIA

H=F+G

FINAL CONSOLIDATED FINANCIAL RESULTS

2,631,131 607,004 3,238,135

29

CONSOLIDATED PROFIT AND LOSS STATEMENTS RECLASSIFIED USING THE VALUE ADDED METHOD Amounts expressed in euros

Revenues from sales and services

Actual data Dec. 31,2006 Percent. Dec. 31,2005 Percent. Dec. 31,2004 Percent. Dec. 31,2003 Percent.

202,658,804 92,55% 226,056,566 93,48% 227,537,890 88,52% 175,073,206 76,12%

Differences in the inventory of semi-finished (2,569,631) and finished products Differences in work in progress Work performed on a time and material basis Other income VALUE OF PRODUCTION

Costs for purchases Differences in the inventory of raw materials Miscellaneous costs for services

-1,17% (10,187,122)

-4,21%

5,204,351

2,02%

6,363,772

2,77%

(2,135,696)

-0,98%

847,557

0,35% (14,750,459)

-5,74%

791,819

0,34%

17,294,210

7,90% 15,934,003

6,59% 23,075,550

8,98% 35,590,190 15,47%

3,728,427 1,70% 9,178,587 3,80% 15,986,119 6,22% 12,173,187 5,29% 218,976,113 100,00% 241,829,591 100,00% 257,053,450 100,00% 229,992,174 100,00%

(69,336,134) -31,66% (91,571,513) -37,87% (110,830,619) -43,12% (91,990,382) -40,00% (5,695,328)

-2,60%

1,080,564

0,45%

4,640,637

1,81%

3,196,893

1,39%

(72,614,398) -33,16% (83,655,008) -34,59% (86,407,797) -33,61% (85,810,793) -37,31%

Expenses for the use of third parties’ assets

(9,818,513)

-4,48% (10,481,809)

-4,33% (7,971,511)

-3,10% (5,835,499)

-2,54%

Other operating charges (2,700,807) -1,23% (3,490,490) -1,44% (3,970,689) -1,54% (3,931,721) -1,71% ADDED VALUE 58,810,934 26,86% 53,711,334 22,21% 52,513,470 20,43% 45,620,671 19,84%

Cost of labor and related charges (36,456,477) -16,65% (37,507,271) -15,51% (39,574,568) -15,40% (36,933,231) -16,06% GROSS OPERATING MARGIN 22,354,457 10,21% 16,204,064 6,70% 12,938,903 5,03% 8,687,440 3,78%

Depreciation of tangible assets (3,660,616) -1,67% (4,456,592) -1,84% (5,669,249) -2,21% (6,749,324) -2,93% Depreciation of intangible assets (4,583,865) -2,09% (4,322,471) -1,79% (3,566,695) -1,39% (2,211,199) -0,96% Provisions and writedowns (1,907,161) -0,87% (1,858,729) -0,77% (3,571,721) -1,39% (4,145,456) -1,80% Depreciation, provisions, (10,151,642) -4,64% (10,637,792) -4,40% (12,807,665) -4,98% (13,105,980) -5,70% and writedowns OPERATING RESULTS 12,202,815 5,57% 5,566,272 2,30% 131,238 0,05% (4,418,539) -1,92%

(4,198,165)

Interest and other financial charges Other financial income TOTAL FINANCIAL MANAGEMENT CURRENT RESULTS

503,898 (3,694,267)

Financial income from equity investments Adjustments to financial activities Shareholder distributions Extraordinary operating items PROFITS (LOSS) BEFORE TAXES Income taxes for the year NET PROFITS (LOSS)

(PROFITS) LOSSES ATTRIBUTABLE TO THIRD PARTIES

PROFITS (LOSSES) ATTRIBUTABLE TO THE GROUP

30

-1,92% (5,543,328)

-2,29% (5,983,193)

-2,33% (4,866,351)

-2,12%

0,23%

0,15%

0,12%

450,048

0,20%

362,905

-1,69% (5,180,424)

-2,14% (5,670,305)

-2,21% (4,416,303)

-1,92%

8,508,548

3,89%

385,848

0,16% (5,539,067)

-2,15% (8,834,842)

-3,84%

550,224

0,25%

7,717,593

3,19%

2,203,675

0,86% 55,987,891 24,34%

(664,559) (750,000) 1,159,999

-0,30% (1,410,864) -0,34% (500,000) 0,53% 3,139,422

-0,58% -0,21% 1,30%

(528,335) 0 791,174

-0,21% (6,156,504) 0,00% 0 0,31% (722,991)

8,804,212

4,02%

3,86% (3,072,553)

(5,585,887) 3,218,325

9,331,999

-2,68% 0,00% -0,31%

-1,20% 40,273,555 17,51%

-2,55% (3,640,956) -1,51% (1,969,666) -0,77% (9,091,255) -3,95% 1,47% 5,691,042 2,35% (5,042,219) -1,96% 31,182,300 13,56%

19,810

312,889

3,238,135

(47,293)

5,643,749

691,168

(4,351,051)

486,363

31,668,663

consolidated annual accounts COMPARISON OF THE BUDGET AND THE FINAL RECLASSIFIED CONSOLIDATED PROFIT AND LOSS STATEMENTS Amounts expressed in euros Actual data Dec. 31, 2006

Revenues from sales and services

Budget

Percent.

Dec. 31, 2006

Variation

Percent.

201,310,854

92,50%

204.499.049

92,65%

(3.188.195)

Differences in the inventory of semi-finished and finished products

(2,569,631)

-1,18%

(3.256.364)

-1,48%

686.733

Differences in work in progress

(2,135,696)

-0,98%

6,458,660

2,93%

(8,594,357)

Work performed on a time and material basis

17,294,210

7,95%

11,903,100

5,39%

5,391,110

3,728,427

1,71%

1,119,014

0,51%

2,609,413

VALUE OF PRODUCTION

217,628,163

Costs for purchases

(69,336,134)

100,00%

-31,86%

220,723,459

(78,015,934)

100,00%

-35,35%

(3,095,296)

8,679,800

(5,695,328)

-2,62%

(6,689,720)

-3,03%

994,392

(72,614,398)

-33,37%

(68,957,392)

-31,24%

(3,657,006)

Expenses for the use of third parties’ assets

(9,818,513)

-4,51%

(9,127,827)

-4,14%

(690,687)

Other operating charges

(2,700,807)

-1,24%

(2,095,545)

-0,95%

(605,262)

ADDED VALUE

57,462,984

26,40%

-16,75%

55,837,042

(38,134,655)

25,30%

-17,28%

1,625,942

1,678,178

17,702,387

(3,521,258)

8,02%

-1,60%

3,304,120

(139,358)

Other income

Differences in the inventory of raw materials Miscellaneous costs for services

(36,456,477)

Cost of labor and related charges GROSS OPERATING MARGIN

Depreciation of tangible assets

21,006,507 (3,660,616)

9,65%

-1,68%

Depreciation of intangible assets

(4,583,865)

-2,11%

(4,092,544)

-1,85%

(491,321)

Provisions and writedowns

(1,907,161)

-0,88%

(800,000)

-0,36%

(1,107,161)

(10,151,642)

-4,66%

(8,413,802)

-3,81%

(1,737,840)

Depreciation, provisions, and writedowns OPERATING RESULTS

10,854,865

4,99%

9,288,585

4,21%

1,566,280

(4,198,165)

-1,93%

(5,290,677)

-2,40%

1,092,512

503,898

0,23%

52,492

0,02%

451,406

(3,694,267)

1,70%

(5,238,185)

-2,37%

1,543,918

7,160,598 550,224

3,29%

0,25%

4,050,400

503,519

1,84%

0,23%

3,110,198

46,705

Shareholder distributions

(664,559)

-0,31%

(2,028,458)

-0,92%

1,363,899

Shareholder distributions

(750,000)

-0,34%

0

0,00%

(750,000)

Extraordinary operating items

2,507,949

1,15%

3,189,591

1,45%

(681,643)

PROFITS (LOSS) BEFORE TAXES

8,804,212

4,05%

5,715,053

2,59%

3,089,159

(5,585,887)

-2,57%

(4,312,116)

-1,95%

(1,273,770)

Interest and other financial charges Other financial income TOTAL FINANCIAL MANAGEMENT CURRENT RESULTS Adjustments to financial activities

Income taxes for the year NET PROFITS (LOSS) (PROFITS) LOSSES ATTRIBUTABLE TO THIRD PARTIES PROFITS (LOSSES) ATTRIBUTABLE TO THE GROUP

3,218,325

1,48%

1,402,936

0,64%

1,815,389

19,810

173,460

(153,650)

3,238,135

1,576,396

1,661,739

31

Consolidated Statements of Assets and Liabilities reclassified using the items liquidity method CONSOLIDATED BALANCE SHEETS

( Amounts expressed in euros)

ASSETS Quick assets Liquid assets Financial activities that do not constitute assets Accounts receivable due from customers and others Inventory Capital due from shareholders Accrued income and prepayments Total quick assets

Capital assets Intangible assets Tangible assets Long-term investments Total capital assets Total ASSETS

LIABILITIES Short-term liabilities Payables due to banks Payables due to shareholders and other lenders Advance payments Payables due to suppliers Payables in the form of credit instruments Payables due to subsidiary companies Payables due to associated companies Taxes payable Payables due to social security institutions Other short-term payables Accrued liabilities and deferred income Total short-term liabilities

Medium- and long-term liabilities Debentures Payables due to banks Payables due to shareholders and other lenders Advance payments Payables due to suppliers Payables in the form of credit instruments Taxes payable Other payables due beyond the fiscal year Provisions for severance indemnity Provisions for retirement pensions and similar obligations Provisions for taxes Other provisions Total medium- and long-term liabilities

32

Dec. 31,2006

13,617,415 84 130,870,796 26,140,017 1,250,904 6,635,666 178,514,882

13,351,631 80,844,348 17,174,232 111,370,210 289,885,092

15,092,838 4,950,419 12,878,459 74,125,417 0 0 303,761 7,935,892 3,033,287 7,500,789 942,023 126,762,884

0 58,489,020 0 0 1,701,134 0 0 270,843 6,955,065

Actual data Dec. 31,2005 Dec. 31,2004

7,534,571 14,670,321 0 0 127,978,596 132,019,289 36,745,161 38,367,698 1,250,006 1,269,712 8,517,982 5,235,733 182,026,316 191,562,752

14,084,073 15,659,671 62,550,349 117,368,410 18,339,281 14,050,038 94,973,703 147,078,119 277,000,019 338,640,871

19,708,552 69,040,457 4,264,103 8,516,870 15,426,293 11,742,131 71,148,370 72,422,732 0 0 0 2,205 885,377 167,236 4,244,144 5,622,354 1,707,985 1,801,444 7,303,347 5,906,281 1,286,141 3,591,600 125,974,311 178,813,309

0 0 55,564,136 66,714,262 0 0 0 0 2,255,596 2,884,933 0 0 0 0 278,499 263,307 7,431,485 7,115,472

Dec. 31,2003

8,486,072 1,350 104,106,354 47,290,401 1,155,086 1,190,397 162,229,660

15,465,470 120,442,662 19,692,039 155,600,171 317,829,831

47,095,404 2,676,232 4,903,198 69,687,827 0 2,759 437,850 4,366,111 1,806,999 8,174,627 6,639,007 145,790,014

0 70,217,850 3,312,864 0 2,164,004 0 0 0 6,995,220

21,526

21,526

36,426

45,825

150,012 2,942,883 70,530,483

70,873 3,111,398 68,733,514

97,876 5,010,409 82,122,684

0 3,503,360 86,239,123

consolidated annual accounts

Shareholders’ equity Share capital Revaluation reserve Legal reserve Statutory Reserves for contributions of capital, Reserve Italian Law no. 784/80 Consolidation reserve Surplus from merger Reserve for exchange rate fluctuations Profits / losses carried forward Profit / loss for the year Total shareholders’ equity in relation to the group

Third parties’ equity

Total LIABILITIES

Dec. 31,2006

12,952,749 656,679 69,866,959 78,184

Actual data Dec. 31,2005 Dec. 31,2004 Dec. 31,2003

12,702,218 13,335,213 14,878,043 656,679 656,679 656,679 67,692,238 67,692,238 66,683,567 78,184 78,184 78,185

1,269,396

1,269,396

1,269,396

1,269,396

2,565,595 235,597 483,057 0 3,238,135 91,346,351

(7,874,424) 235,597 (79,316) 0 5,643,749 80,324,322

(6,624,127) 3,102,096 (35,563) 0 (4,351,051) 75,123,065

(36,538,702) 3,102,096 (338,671) 0 31,668,663 81,459,255

1,245,375 289,885,093

1,967,873 277,000,019

2,581,813 338,640,871

4,341,439 317,829,831

33

NET DEBT BURDEN ITEMS SHORT-TERM PAYABLES DUE TO BANKS LONG-TERM PAYABLES DUE TO BANKS LOAN FROM SHAREHOLDERS AND OTHER LENDERS - DEDUCTING LIQUIDITY NET DEBT BURDEN

AS OF DEC. 31, 2005 19,708,552 55,564,136 4,272,934 (7,534,571) 72,011,051

AS OF DEC. 31, 2004 69,040,457 66,714,262 8,516,870 (14,670,321) 129,601,267

ECONOMIC ANALYSIS Actual data

R.O.E. (Return on Equity) R.O.I. (Return on Investment) Ratio of Gross Operating Margin/Value of Production Influence of one-time income and charges Influence of Financial Charges on Value of Production Influence of Net Financial Charges on R.O.

Dec. 31,2006 3,68% 4,21% 10,21% 26,54% 1,69% 30,27%

Dec. 31,2005 7,56% 2,01% 6,70% 101,39% 2,14% 93,07%

Dec. 31,2004 -5,47% 0,04% 5,03% -3315,40% 2,21% 4320,63%

Dec. 31,2003 63,60% -1,39% 3,78% -716,72% 1,92% -99,95%

Dec. 31,2003 17,83% 3,51% 9,27% 69,81% 3,37% 77,89%

FINANCING AND ECONOMIC ANALYSIS

Liquidity index Leverage Ratio of Debt Burden Elasticity index EBITDA/DEBT DEBTI/EBITDA

34

Actual data

Dec. 31,2006 Dec. 31,2005 Dec. 31,2004 Dec. 31,2003 Dec. 31,2003

1,41 1,44 1,07 1,11 0,91 3,29 3,71 4,26 6,38 7,28 0,74 0,96 1,63 2,31 1,85 1,60 1,92 1,30 1,04 1,61 34,44% 22,50% 9,98% 7,57% 29,52% 2,90 4,44 10,02 13,22 3,39

balance sheets of the companies belonging to the Group

35

BALANCE SHEETS OF THE COMPANIES INVOLVED IN METHANE GAS AND LPG OPERATIONS Balance Sheets as of December 31, 2006 STATEMENT OF ASSETS AND LIABILITIES PERCENTAGE POSSESSED ASSETS

COOPGAS SRL

ISCHIA GAS SRL

SI,GAS SRL

ERREGAS SRL

MARIGLIANO SRL

100%

100%

100%

100%

99,5%

-

-

-

-

3,600

56,321

79,230

236,765

77,963

2,300

5,373

2,242,501

9,864,577

5,702,786

7,183,070

Total long-term investments

11,128,444

7,236

1,525

8,423

1,318

Total capital assets

11,190,139

2,328,968

10,102,867

5,789,172

7,186,688

Total inventory

2,194,387

-

5,404

71,517

-

Total accounts receivable

4,342,313

504,536

446,165

718,556

411,437

-

-

-

-

-

439,404

83,234

26,047

77,842

49,536

6,976,104

(587,771)

477,616

867,914

460,974

241,294

71,838

620

28,444

43,399

18,407,537

2,988,576

10,581,103

6,685,529

7,694,660

13,991,281

1,306,024

9,061,017

745,032

2,376,116

183,800

-

531,343

-

-

46,840

-

-

1,645

-

Financing payables

450,000

468,000

215,000

4,775,000

4,850,000

Business payables

3,448,920

1,214,226

773,742

1,162,158

458,754

286,696

326

-

1,694

9,790

18,407,537

2,988,576

10,581,103

6,685,529

7,694,660

Total value of production

12,177,503

9,181

784,926

1,883,425

561,498

Total costs of production

(11,632,857)

(93,528)

(891,858)

(2,018,238)

(380,438)

9,727

870

-3,194

(200,325)

(169,598)

-

-

-

-

-

(335,400)

-

-

-

-

218,973

(83,477)

(110,127)

(335,138)

11,462

Income taxes for the year

(104,620)

-

181

108,815

(7,045)

Profits (loss) for the year

114,353

(83,477)

(109,946)

(226,323)

4,417

Total capital due from shareholders Total intangible assets Total tangible assets

Total financial activities that do not constitute assets Total liquid assets Total current assets Total accrued income and prepayments TOTAL ASSETS LIABILITIES Total shareholders’ equity Total provisions for risks and contingencies Provisions for employment severance indemnity

Total accrued liabilities and deferred income TOTAL LIABILITIES PROFIT AND LOSS STATEMENT

Total financial income and charges Total adjustments of the value of financial activities Extraordinary income and charges Profits (loss) before taxes

36

consolidated annual accounts BALANCE SHEETS OF THE COMPANIES INVOLVED IN ENERGY OPERATIONS Balance Sheets as of December 31, 2006 STATEMENT OF ASSETS AND LIABILITIES PERCENTAGE POSSESSED

CRISTOFORETTI S.E.R. S.r.l.

ENERGIA DELLA CONCORDIA SpA

SERIO ENERGIA S.r.l.

50%

100%

40%

ASSETS -

-

-

Total intangible assets

2,733,311

-

20,658

Total tangible assets

1,259,925

89,584

2,614,634

95,720

310,596

3,400

Total capital assets

4,088,955

400,180

2,638,692

Total inventory

4,845,616

332,801

-

Total accounts receivable

9,920,429

573,980

656,128

168

-

-

509,218

6,313

663,609

15,275,430

913,094

1,319,737

3,407

6,536

-

19,367,793

1,319,809

3,958,428

1,565,533

548,433

1,159,903

-

30,000

-

297,756

-

-

Financing payables

9,439,029

-

1,910,135

Business payables

8,065,475

741,376

887,836

-

-

554

TOTAL LIABILITIES

19,367,793

1,319,809

3,958,428

PROFIT AND LOSS STATEMENT

Total value of production

18,274,967

265,625

1,269,905

(17,463,929)

(326,991)

(988,631)

(218,055 )

19,737

(84,215)

Total adjustments of the value of financial activities

-

-

-

Extraordinary income and charges

-

-

-

592,983

(41,629)

197,059

Income taxes for the year

(336,009)

12,791

(77,422)

Profits (loss) for the year

256,974

(28,838)

119,637

Total capital due from shareholders

Total long-term investments

Total financial activities that do not constitute assets Total liquid assets Total current assets Total accrued income and prepayments TOTAL ASSETS LIABILITIES Total shareholders’ equity Total provisions for risks and contingencies Provisions for employment severance indemnity

Total accrued liabilities and deferred income

Total costs of production Total financial income and charges

Profits (loss) before taxes

37

BALANCE SHEETS OF FOREIGN COMPANIES Balance Sheets as of December 31, 2006 STATEMENT OF ASSETS AND LIABILITIES PERCENTAGE POSSESSED

CPL HELLAS A.B.E. & T.E.

CPL CONCORDIA FILIALA CLUJ S.R.L.

97%

100%

ASSETS -

-

Total intangible assets

14,548

13,239

Total tangible assets

78,593

9,313,299

Total long-term investments

22,902

19,683

116,043

9,346,221

97,396

184,690

3,601,208

1,306,560

-

-

1,230

536,566

3,699,835

2,027,816

16,683

63,057

3,832,561

11,437,094

(324,329)

7,585,254

Total provisions for risks and contingencies

-

-

Provisions for employment severance indemnity

-

-

Financing payables

1,315,903

2,776,322

Business payables

2,840,987

1,075,518

-

-

3,832,561

11,437,094

Total value of production

6,388,582

4,382,435

Total costs of production

(7,215,629)

(4,049,802)

(87,389)

96,997

-

-

(2,238)

-

(916,674)

429,630

-

(41,613)

(916,674)

388,017

Total capital due from shareholders

Total capital assets Total inventory Total accounts receivable Total financial activities that do not constitute assets Total liquid assets Total current assets Total accrued income and prepayments TOTAL ASSETS LIABILITIES Total shareholders’ equity

Total accrued liabilities and deferred income TOTAL LIABILITIES PROFIT AND LOSS STATEMENT

Total financial income and charges Total adjustments of the value of financial activities Extraordinary income and charges Profits (loss) before taxes Income taxes for the year Profits (loss) for the year

38

consolidated annual accounts BALANCE SHEETS OF OTHER SUBSIDIARY COMPANIES Balance Sheets as of December 31, 2006 STATEMENT OF ASSETS AND LIABILITIES PERCENTAGE POSSESSED ASSETS

IMMOBILIARE DELLA CONCORDIA S.r.l.

NUPI PIPE BORGOVERDE CPLCINA IN S.r.l.

LIQUIDAZIONE

ISCHIA COM S.r.l.

NUORO SERVIZI S.r.l.

100%

100%

54%

51%

44%

-

-

-

75,000

-

68,625

3,733

-

2,798

-

1,535,428

-

-

-

-

109,780

2,934

-

-

55,035

Total capital assets

1,713,834

6,667

-

2,798

55,035

Total inventory

1,331,329

2,568,065

-

-

-

345,639

124,852

206,729

19

6,595,048

-

-

-

-

-

38,300

280,061

1,194

24,709

265

Total current assets

1,715,269

2,972,978

207,923

24,728

6,595,313

Total accrued income and prepayments

1,189,490

4,397

-

-

-

TOTAL ASSETS

4,618,593

2,984,042

207,923

102,526

6,650,348

253,721

209,116

206,405

99,571

733,119

20,873

-

-

-

105,076

-

-

-

-

250,640

Financing payables

3,614,518

732,000

18

-

444,119

Business payables

721,761

2,042,926

1,500

2,954

5,117,394

7,719

-

-

-

-

4,618,593

2,984,042

207,923

102,526

6,650,348

945,538

7,587,669

-

-

3,755,355

(1,395,227)

(7,194,767)

(48,716 )

(500)

(4,492,175)

Total financial income and charges Total adjustments of the value of financial activities Extraordinary income and charges

(202,746)

-84,339

-111

71

(26,594)

-

-

-

-

-

-

-

32

-

884,026

Profits (loss) before taxes

(652,435)

308,563

(48,795 )

(429)

120,612

0

(138,248)

0

0

(194,646)

(652,435)

170,315

(48,795)

(429)

(74,034)

Total capital due from shareholders Total intangible assets Total tangible assets Total long-term investments

Total accounts receivable Total financial activities that do not constitute assets Total liquid assets

LIABILITIES Total shareholders’ equity Total provisions for risks and contingencies Provisions for employment severance indemnity

Total accrued liabilities and deferred income TOTAL LIABILITIES PROFIT AND LOSS STATEMENT

Total value of production Total costs of production

Income taxes for the year Profits (loss) for the year

39

BALANCE SHEETS OF THE ASSOCIATED COMPANIES IN THE SARDINIA AREA Balance Sheets as of December 31, 2006 STATEMENT OF ASSETS AND LIABILITIES

FONTENERGIA S.p.A.

SAFIN S.r.l.

SARDA RETI COSTRUZIONI S.r.l.

PEGOGNAGA SERVIZI S.r.l.

TECLAB S.r.l.

PERCENTAGE POSSESSED

49%

24,99%

18,50%

50%

35%

ASSETS

-

-

-

-

-

186,992

1,550

10,260

20,199

345,025

28,657,321

-

2,368,877

119,637

66,983

946,010

1,263,000

7,783

63

-

29,790,323

1,264,550

2,386,920

139,899

412,008

532,295

-

2,418

-

369,230

2,586,764

3,982

809,528

20,463

617,551

-

-

-

-

2,247

231,442

26,462

159,670

28,876

94

3,350,501

30,444

971,616

49,340

989,122

31,435

-

-

998

14,988

33,172,259

1,294,994

3,358,536

190,236

1,416,118

3,435,164

459,636

237,204

109,635

106,738

-

-

-

-

-

54,524

-

40,320

1,967

216,730

Financing payables

27,848,492

480,750

2,663,112

40,000

781,238

Business payables

1,792,008

354,608

350,287

38,635

311,412

42,071

-

67,613

-

-

33,172,259

1,294,994

3,358,536

190,236

1,416,118

Total value of production

6,802,904

-

1,113,667

178,074

1,967,473

Total costs of production

(5,974,113)

(11,651)

(1,018,093)

(147,505)

(1,900,296)

(676,725)

4

-91,230

(730)

(69,386)

Total adjustments of the value of financial activities

-

-

-

-

88

Extraordinary income and charges

-

-

-

-

1,636

Profits (loss) before taxes

152,066

(11,647)

4,344

29,840

(485)

Income taxes for the year

(84,021)

0

(13,923)

(9,886)

(48,760)

Profits (loss) for the year

68,045

(11,647)

(9,579)

19,954

(49,245)

Total capital due from shareholders Total intangible assets Total tangible assets Total long-term investments Total capital assets Total inventory Total accounts receivable Total financial activities that do not constitute assets Total liquid assets Total current assets Total accrued income and prepayments TOTAL ASSETS LIABILITIES Total shareholders’ equity Total provisions for risks and contingencies Provisions for employment severance indemnity

Total accrued liabilities and deferred income TOTAL LIABILITIES PROFIT AND LOSS STATEMENT

Total financial income and charges

40

report of the board of auditors on the consolidated annual accounts as of december 31, 2006

41

Members, In fulfillment of the duties assigned to us in compliance with article 41 of Italian Legislative Decree no. 127 of April 9, 1991, we have examined the consolidated Annual Accounts and the Report on Operations of the CPL Group.The following is a summary of the CPL Group’s Consolidated Balance Sheet as of December 31, 2006.

All values are expressed in euros: ASSETS Capital due from shareholders Capital assets Current assets Accrued income and prepayments Total assets

1,250,904 109,596,962 172,401,561 6,635,666 289,885,093

LIABILITIES Shareholders’ equity of the group Third parties’ share capital and reserves Total Provisions for risks and contingencies Provisions for severance indemnity Payables Accrued liabilities and deferred income Total liabilities

91,346,351 1,245,375 92,591,726 3,114,421 6,955,065 186,281,858 942,023 289,885,093

The suspense accounts are even at 194,643,907 euros .

PROFIT AND LOSS STATEMENT Value of production Costs of production Difference between the value and costs of production Financial income and charges Adjustments of the value of financial activities Extraordinary financial income and charges Profit (loss) before taxes Income taxes for the year (current taxes, deferred taxes, and taxes paid in advance) Profits (loss) for the year Third parties’ losses The group’s losses

218,976,114 (207,523,299) 11,452,815 (3,144,044) (664,559) 1,159,999 8,804,211 (5,585,887) 3,218,324 19,811 3,238,135

The Balance Sheet was drawn up in compliance with the provisions of Italian Legislative Decree no. 127 of April 9, 1991 as well as the accounting principles issued by the National Council of Business Consultants and Accountants and, wherever necessary, by the accounting principles issued by the International Accounting Standards Board (previously IASB, now known as I.F.R.S.).

The balance sheets of the companies included on the consolidated balance sheet were examined by their respective Boards of Auditors and/or, if this was not done because it was not required by law, by the auditing company PriceWaterhouseCoopers S.p.A.

42

On the basis of its examinations the Board of Auditors confirms the following: ­ The companies included in the consolidation are correctly identified and meet the requirements to be classified as subsidiary companies as required by the above-mentioned regulation. ­ The information provided by the companies included in the consolidation, to the consolidating company comply with the valuation criteria, the structure, and the content established by the consolidating company itself, as certified by the administrative bodies of each consolidated company. ­ The information received was properly used by the consolidating company to draw up the consolidated balance sheet, together with the information from its own accounting records. ­ The valuation criteria and principles of consolidation that were adopted, as well as the consolidation method and criteria, conform to the reference regulation: The asset and liability items as well as the costs and revenues were taken in their entirety from the balance sheets of the companies included in the consolidation, after said balance sheets had been adequately reclassified, according to the criteria of the integral consolidation method.

All the operations of significant importance, from the point of view of their value as well as their consequences within the group, that took place between the companies included in the consolidation, specifically payables, receivables, costs, revenues, and capital gains, were eliminated.

Therefore, the Board of Directors adopted the integral consolidation method in cases in which actual and real control is exercised over the operations of companies in which an interest is held.

The Board of Directors employed the net assets method for the other companies.

We gave our approval to the entry on the balance sheet of the Capital and expansion costs as well as the Research, development, and advertising costs, respectively 288,131 euros and 155,196 euros.

The Notes to the Annual Accounts contain the information required by the reference regulation.

The data and information contained in the Report on Operations observe the provisions of article 40 of Italian Legislative Decree no. 127/91 and are not in conflict with the civil-law balance sheet.

In our judgment this consolidated balance sheet correctly expresses the financial position and economic results of the group headed by the cooperative society CPL Concordia for the fiscal year that ended on December 31, 2006, in conformity with the regulations that govern the drawing up of the consolidated balance sheet.

Concordia sulla Secchia, June 11, 2007 The Board of Auditors Mr. Carlo Alberto Pelliciardi (Chairman) Mr. Fausto Ascari Mr. Mauro Casari

certification report

43

44

Fellow Members,

The Balance Sheet for the fiscal year that ended on December 31, 2006, which we are submitting for your approval, shows a profit, after taxes for the year and after ordinary and extraordinary provisions, of 3,552,720 euros. These results considerably exceeded expectations despite the effects of an extremely high level of taxation that strongly eroded the excellent results before taxes, which we will comment on in detail in this report.

The production executed during the fiscal year amounts to 185,466,616 euros, which represents an increase of 2.51% in comparison with the previous fiscal year.

Total assets are 261,199,946 euros, net assets amount to 88,612,284 euros, the funds total 1,860,616 euros, the provisions for severance indemnity total 6,507,062 euros, and the total of debts and accrued liabilities and deferred income amounts to 164,219,984 euros.

As always, the directors of the Cooperative, in conformity with Article 2 of Italian Law no. 59/92, performed their duties with the intention of having the Cooperative Society achieve the objectives of mutual assistance prescribed by law and by the Articles of Association and with the goal of providing continuity of employment and achieving the best economic, social, and professional conditions possible. For these reasons the Cooperative Society acted with the intention to maintain full employment of its members, remunerating their work at the best possible contractual conditions and taking into account the market conditions and their specific field of reference. Furthermore, the company strives to improve the cultural and professional qualifications of the members and makes investments to guarantee optimal conditions in the workplace.

For the purpose of continuing the process of capitalizing the Cooperative, as well as increasing the loyalty of the Cooperating Shareholders, the Board of Directors proposes, in consideration of the good results achieved during the year, to allocate to each Cooperating Shareholder, in accordance with article 3, paragraph 2, subparagraph b of Italian law no 142 of April 3, 2001 and subsequent amendments, as a shareholder distribution, an amount to be determined according to the amount and quality of work performed in fiscal year 2006. The amount that the Board of Directors proposes to the Members’ Meeting to be allocated to each member on the basis of the criteria indicated above is 750,000 euros, which has already been entered under item B9 of the Profit and Loss Statement under the personnel costs for each member as an additional amount to be included in the pay for the working members in 2006, 50% of which is to be allocated as a free increase in subscribed and paid-in share capital and the remaining 50% of which is to be used as an additional amount to be included in Cooperating Shareholders’ pay. Both of these methods are prescribed by Article 62 of the articles of association and in conformity with, and for all legal purposes in conjunction with, Article 6, paragraph 2 of Italian Law Decree no. 63/02, which was converted into Italian Law no. 112/02.

After the difficult time that the Cooperative went through in the period from 2003 to 2004, the results from the 2005 and 2006 balance sheets have increased the confidence of its membership base and its employees who decided to become members in 2006.

In fact, also in 2006 the membership base grew; this growth is summarized in the table below:

report on operations in relation to the annual accounts as of december 31, 2006

45

CHANGES IN THE NUMBER OF WORKING MEMBERS DURING 2006 Working Members

al 01/01/2006

ammissioni

recessi

al 31/12/2006

Blue-collar workers

175

16

7

184

White-collar workers

207

27

20

214

Managers

18

0

3

15

totals

400

43

30

413

We would like to recognize the confidence and trust placed in us by rewarding the company supporters through a shareholder distribution.

It should be noted that the shareholder distribution is a typical tool used by cooperatives to reward contributions and sacrifices for the purpose of achieving results, according to well-defined criteria. With regard to this, sometimes people will ask, “Are cooperatives right-wing or left-wing?”.

We feel that the cooperative form of business of necessity is neither; cooperatives are simply business organizations that differ from other economic entities by the ownership of the company, by some of their rules and principles, and by their ethical characteristics.

Some people may ask what the cooperative can do for them instead of what they can do for the cooperative; I believe that this mentality is not in harmony with the cooperative way of thinking and acting. We were taught this by people such as our former president Giuseppe Tanferri who had high principles and whose only interest was the good of the cooperative, its members, and average people, who gave more than they received and who are to be considered lucky because they will always find someone who will take to heart their teachings: when you create something that outlives you, it means that you have not truly died.

Therefore, asking whether the cooperative form of business is right-wing or left-wing would be like asking whether democracy is right-wing or left-wing; democracy reflects the constitution and the principles that govern it and give it importance. It is the political parties that identify themselves with cooperation to a greater or lesser degree. If someone publicly attacks the cooperative form of business, this does not mean that all cooperatives are left-wing; it simply means that this person does not relate to this way of doing business. Instead, for example, Alleanza Nazionale, with its strong sense of social fairness, is a strong supporter of cooperatives that are involved in the credit industry. Therefore, CGIL (Confederazione Generale Italiana del Lavoro [Italian General Confederation of Labor]) is present in the trade union context. Also UGL [Unione Generale del Lavoro (General Union of Labor)] is represented and is involved in protecting workers.

In a company that is now 108 years old, it is necessary for the rules and operating mechanisms to be up-to-date, but without taking anything away from its principles. The cooperative principles are one thing; the tools are an entirely different matter. We feel that it is legitimate to use all the tools that bring us closer to achieving the cooperative’s business purpose. Joint stock limited corporations are welcome if they reinforce cooperative ideals, because they can be the meeting ground for different entities (banks, private companies, cooperatives) that contribute to achieving an economic goal that is in the interests of the members of the cooperative. To take on certain markets takes a large amount of capital.

We feel that it is not wrong to have capital, because an economy requires not only people, but also capital; the best results are obtained only when both of these elements are present. If CPL Concordia did not have 90 million euros of capital (of which 70 million euros is indivisible), it could not

46

have invested in development at a local level in the province of Modena or in regions in need with good prospects such as Sardinia, Campania, Sicily, and Calabria.

More than ever before, cooperation needs to be always anchored to its fundamental principles. To accomplish this we need to examine how it is possible to maintain our principles in a society that is in constant transformation. Our principles, like those of democracy and the exchange of mutual assistance, cannot be compromised. We feel that few people correctly understand the concept of “exchange of mutual assistance.” To us the exchange of mutual assistance means that free people dedicate their time to the cooperative; the cooperative in turn gives them counter-value in the form of wages and a return on their capital, but retains a portion of the profits, which is accumulated and saved for future generations.

Therefore, at a cooperative there is not a salary, but an exchange of time and resources, even at an intergenerational level.

VALUE OF PRODUCTION (amounts expressed in thousands of euros) 200.000 180.000 160.000 140.000 120.000 100.000 80.000 60.000 40.000 20.000 0

176.464 180.929

184.118

155.819 131.700

2002

2003

2004

2005

2006

CONTRIBUTION OF THE AREA OFFICES AND DEPARTMENTS TOWARDS TOTAL WORKS Fiscal Year 2006 19,70% 16,03% 14,93% 6,16% 6,26% 3,64% 4,22% 3,24% 3,39% 5,48% 5,14% 5,16% 1,11% 0,84% 0,39% 1,06% 0,06% 2,22% 0,99%

AREA OFFICE 1: Headquarters (Concordia and Emilia) AREA OFFICE 2: Rome, Sardinia, and Tyrrhene AREA OFFICE 3: Milan and Northwest AREA OFFICE 4: Sant’Omero and Adriatic AREA OFFICE 5: Fano and Umbria AREA OFFICE 6: Campania, Calabria, and Sicily AREA OFFICE 7: Padua and Northeast AREA OFFICE 8: Tuscany Greece DEPARTMENT NO. 1: Odorizers & Services DEPARTMENT NO. 2: Technological Systems DEPARTMENT NO. 3: Supply Networks DEPARTMENT NO. 4: Information & Comm.Technology DEPARTMENT NO. 5: Intergroup Services DEPARTMENT NO. 6: Investments in offices DEPARTMENT NO. 7: Building Technical Service Divisions being closed TOTAL 184.118.665,00 Services

annual accounts When these subjects are discussed outside of our region, especially with young men and women, you quickly understand that concepts that are taken for granted in Emilia are not well-known even just a couple hundred kilometers away. Young people think that these are astonishing concepts, about which they have always thought, without being able to place them in a real context of business and production. To future economists it is indispensable to explain that there exists in Italy (and in the rest of the world) a form of business that is not public or private (joint stock limited corporations, limited liability companies), but is an association of free people who unite to follow an economic path to create their own enterprise. It is not the members of cooperatives who need society, but society that needs strong cooperation whose attraction is a different model of development through which to integrate new generations.

Discussion is not an obstacle to action, but a value in its own right.

However, often when we discuss events that take place with regard to cooperation, we do not set a good example for those who would like to learn more about it. Those who do not share these ideals use some unclear situations as the basis to make sweeping statements such as, “Ah ha, you are just like all the rest.� But, if out of 7 millions members of cooperatives there are 10 people who err, should an entire economic force be condemned that represents 7% of the national GDP? No one is definitively declared a sacred and pure cooperative member for life.

Situations may come up in which each cooperative member in his own thoughts tends to give things his own interpretation and, therefore, he must justify his actions at the members’ meeting, which is not always sleepy and quiet.

Our cooperative today is not the same as the one of 100 years ago, but this does not mean that it cannot be faithful to its own principles, with governing bodies that are answerable to its members. If its members are free, also the cooperative is free from internal and external conditioning.

If people are free and interested in what they do, together they are less likely to err, and on a positive note, have more opportunities to succeed.

This is what the founding fathers of our cooperative intended. This is what was intended by our former President Giuseppe Tanferri, who recently passed away; his example will always live in us.

It is for these reasons that we invest in our employees and in their professional expertise; in fact, also in fiscal year 2006 the Cooperative Society incurred external costs of approximately 130,000 euros for the training of its personnel, without taking into account its internal expenses for training.

Research & Development In fiscal year 2006 the cooperative continued its research and development activities. Specifically, it directed its forces towards projects that we feel are particularly innovative, which are described below: Activity 1: Reengineering the odorizer rate monitoring system known as EDOR by introducing disposable parts.

Activity 2: Building new AMR systems with highly reliable wireless technology for the remote reading of water, electric, and gas domestic meters.

Activity 3: Study, development, and integration of systems for managing methane gas consumption for industrial users.

Activity 4: Study and development of software for the computerized

management of services and integrated solutions in the utilities field (Telephony, Gas Sales to Industrial Customers, Computerized Management of Unbundling and of the Distributor/Reseller and Distributor/Consumer Relationships).

Activity 5: Establishment of a new company department that will be known as ICT (Information and Communication Technology) whose purpose will be to achieve project, technical, commercial, and management synergies and to develop new businesses (Metrology and Testing Laboratories).

Activity 6: Study and development of a new structural, procedural, and operational corporate organization for the purpose of optimizing the production processes and business activities.

Activity 7: Designing and development of new application and operational functions of the Call/Contact Center for Global Service and CRM. Overall, the cooperative has incurred total costs of 2,000,486 euros for the development of these projects.

With regard to this amount, the cooperative intends to make use of the tax-loss benefit available in relation to the regional tax on production (IRAP) specified in Article 11 of Italian Legislative Decree no. 446 of December 15, 1997, subsequently modified by Article 17, paragraph 3 of Italian Legislative Decree no. 247 of November 18, 2005.

The research and development activities in question will certainly continue also in fiscal year 2007. It is expected that these innovative processes will give positive results both in terms of increasing revenues and in terms of improving the organizational processes. ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ As can be noted from the concepts expressed herein, the Cooperative Society has paid a great deal of attention to the principles of mutual assistance, to the value of its membership base, and to the training and qualification of its personnel, and has made investments in research and development.

All of this has been undertaken without ever losing sight of the market, its evolution, and its rules.

For this reason, as can be noted from the projects under development listed above, the main and most demanding project of those executed in 2006 was the project regarding the business, production, and governance reorganization of the Cooperative Society.

It was a long and arduous process that lasted for several months in 2006, involved all of management, and was coordinated by Studio OPT of Milan. The result of that effort was to organize the Cooperative Society, from both a commercial and production point of view, by Geographical Areas, by Departments, and by Specializations, abandoning the organization by Divisions that had been the productive core of the Cooperative for many years.

Since the fourth quarter of 2006 eight geographical area offices have been established that cover all of Italy. These geographical area offices are supported by departments, which include the Gas Supply Networks Department, the Technological Systems Department, the Odorizer Department, the Information Technology Department, the Building Department, and the Foreign Area Office.

The specializations that represent the know-how of the former Networks Division and Energy Division and the Cogeneration Service operate horizontally. In fact, the big innovation is that in each area, from both a com-

47

mercial and production point of view, the activities that in previous fiscal years were carried out separately in different divisions will now coexist.

In the definition phase it will be the delegation of power by General Management that will be fundamentally important for governing the Cooperative Society. Once this phase has been completed, the construction will begin that is specified in the provisions of Italian Legislative Decree no. 231/01. To this end, it should be noted that the Cooperative Society has taken the necessary steps for adopting the required organizational structure for monitoring and directing the activities of those parties that are considered important as specified therein.

The two fiscal years preceding 2006 were characterized by a series of extraordinary operations whose purpose was the divestiture of assets in accordance with the decisions made by the Board of Directors, the purpose of which was a return to the Cooperative Society’s core business. This large number of divestitures were successfully completed in fiscal years

2004 and 2005. As we will see later in this report, the Profit and Loss Statement for fiscal year 2006 is almost completely devoid of extraordinary effects, with the exception of the transfer of 50% of the shares of the subsidiary company S.E.S. S.r.l., which did not take place in accordance with any plan, but on the basis of the evaluation of the economic and financial opportunity of the transaction and the transfer of the real property located on Via Quaranta in Milan, which instead was the last action to be taken in connection with the transfer plan approved in 2004.

The Profit and Loss Statement and the Statement of Assets and Liabilities for fiscal year 2006 faithfully present the Cooperative Society’s economic and financial structure in relation to its normal ordinary operations.

To better understand the economic and financial position of the Cooperative as of December 31, 2006, in the following tables the data for the fiscal year are compared with the data for the preceding four years, providing us with several reference indices.

Statements of Assets and Liabilities reclassified using the items liquidity method (Amounts expressed in euros) Actual Data ASSETS Quick assets

Liquid assets

Financial activities that do not constitute assets

Accounts receivable due from customers and others

Inventory

Capital due from shareholders

Accrued income and prepayments Total quick assets

Capital assets

Intangible assets

Tangible assets

Long-term investments Total capital assets

Total ASSETS

SUSPENSE ACCOUNTS LIABILITIES Short-term liabilities

Payables due to banks

Payables due to other lenders Payables due to subsidiaries

and associated companies, for financing

Advance payments

Payables due to suppliers

Payables in the form of credit instruments

Payables due to subsidiary companies

Payables due to associated companies

Taxes payable

Payables due to social security institutions

Other short-term payables

Accrued liabilities and deferred income Total short-term liabilities

48

as of Dec. 31, 2006 as of Dec. 31, 2005 as of Dec. 31, 2004 as of Dec. 31, 2003 as of Dec. 31, 2002

11,127,629 0 114,793,337 19,608,968 1,210,554 4,968,267 151,708,755

11,408,796 42,099,293 55,983,102 109,491,190 261,199,946 177,431,671

5,046,492 0 109,284,631 21,519,647 1,246,406 4,909,661 142,006,836

12,243,148 36,715,963 62,679,434 111,638,544 253,645,380 184,742,912

12,719,079 0 100,511,093 24,311,527 1,265,512 4,930,132 143,737,343

11,929,375 44,255,988 58,742,296 114,927,659 258,665,001 167,041,130

3,972,279 1,350 92,118,130 21,353,911 992,886 565,767 119,004,324

9,221,627 48,267,180 59,647,266 117,136,073 236,140,397 157,174,363

27,939,322 30,989,887 74,532,663 38,846,010 333,895 1,113,484 173,755,261

5,697,393 34,163,022 55,516,090 95,376,505 269,131,766 96,654,598

10,701,805 2,545,157

9,645,384 2,331,665

40,298,359 2,427,745

23,604,381 3,545,959

63,189,052 583,658

10,914,000

10,650,000

1,700,000

0

4,000,000

12,389,313 63,749,194 0 4,306,318 90,904 6,817,606 1,425,301 3,965,238 340,704 117,245,540

12,218,806 55,066,894 0 4,927,300 503,126 3,474,793 1,321,314 6,213,651 507,784 106,860,718

9,540,411 52,715,486 0 5,784,269 167,236 4,058,863 1,376,026 4,528,828 576,489 123,173,712

4,898,788 46,032,160 0 1,065,922 437,850 2,690,631 1,259,661 5,991,864 482,595 90,009,810

28,581,910 34,839,856 0 4,275,837 0 2,521,722 1,041,861 5,536,381 558,545 145,128,821

annual accounts Actual Data Medium- and long-term liabilities Debentures

Payables due to banks

Payables due to other lenders

Payables due to suppliers

Payables in the form of credit instruments

Provisions for severance indemnity Provisions for retirement pensions and similar obligations Other provisions Total medium- and long-term liabilities Shareholders’ equity

Share capital

Revaluation reserve

Legal reserve

Statutory Reserves

Reserve for exchange rate fluctuations

Surplus from merger Reserve for contributions of capital,

Italian Law no. 784/80

Profit / loss for the year Total shareholders’ equity

Total LIABILITIES

SUSPENSE ACCOUNTS

as of Dec. 31, 2006 as of Dec. 31, 2005 as of Dec. 31, 2004 as of Dec. 31, 2003 as of Dec. 31, 2002

0 45,273,309 0 1,701,134 0 6,507,062

0 50,097,220 0 2,255,596 0 5,832,038

0 39,361,654 0 2,884,933 0 5,461,142

0 46,586,869 0 2,164,004 0 5,205,849

15,000,000 10,846,626 2,416,496 1,322,139 0 4,753,647

21,526

21,526

21,633

45,825

24,922

1,839,090 55,342,121

2,836,404 61,042,784

4,494,620 52,223,982

3,705,046 57,707,593

2,967,725 37,331,554

12,952,749 656,679 69,866,959 78,184 0 235,597

12,702,218 656,679 67,692,238 78,184 0 235,597

13,335,213 656,679 67,692,238 78,184 0 3,102,096

14,878,043 656,679 66,683,567 78,184 0 3,102,096

13,728,240 656,679 64,614,611 78,184 0 3,102,096

1,269,396

1,269,396

1,269,396

1,269,396

1,269,396

3,552,720 88,612,285

3,107,566 85,741,878

-2,866,499 83,267,307

1,755,028 88,422,994

3,222,183 86,671,391

261,199,946 177,431,671

An analysis of the Statement of Assets and Liabilities shows a considerable increase in liquidity of 6.1 million euros under Assets, which confirms a further general improvement in the Cooperative’s financial situation, as is analyzed in more detail in the relevant section. Also, an increase in accounts receivable of approximately 5 million euros was recorded, due in large part to the chronic lateness of payments from public administrations, but also to an increase in invoiced revenues. Overall the value of the assets decreased, mainly due to the decrease in long-term investments, while the value of the tangible assets increased due to the investments made in the methane gas supply networks under concession, with a considerable increase in the number of municipalities receiving service, which is now 60 directly, and 32,000 active consumers out of 100,000 potential consumers, as well as the consumers of the subsidiary companies and the companies in which an interest is held.

In reference to the liabilities of the Statement of Assets and Liabilities, it should be noted that the short-term liabilities include an increase of approximately 10 million euros due partly to the increase in payables due

253,645,380 184,742,912

258,665,001 167,041,130

236,140,397 157,174,363

269,131,766 96,654,598

to suppliers and partly to the increase in taxes payable. The increase in taxes payable is closely linked to the increase in the tax burden, which has resulted in the Cooperative Society allocating as a provision more than 5 million euros of current and deferred taxes, thereby decreasing the results for the year by 57% before calculating the taxes.

The medium- and long-term liabilities decreased by approximately 5 million euros in relation to loans paid and transferred to short-term amounts and subsequent to the use of provisions for risks and contingencies, for the majority that is to be used to cover the charges in connection with taking over the MCC loan from the associated company Enerfin S.r.l., which operates in Argentina through the subsidiary company Holding Intergas S.A. The Cooperative Society’s net assets amount to 88.6 million euros, with an increase of a further 3 million euros over the previous fiscal year.

Now let’s analyze the economic situation in reference to fiscal year 2006 and the preceding four years.

Profit and Loss Statements reclassified using the Value Added Method (Amounts expressed in euros) As of Dec. As of Dec. As of Dec. As of Dec. As of Dec. Actual Data % % % % % 31, 2006 31, 2005 31, 2004 31, 2003 31, 2002 Revenues from sales 172,845,785 93,88% 165,438,299 91,44% 163,812,968 92,83% 126,624,794 81,26% 99,212,098 63,67% and services Differences in the inventory of semi(1,552,050) -0,84% 0 0,00% 0 0,00% 0 0,00% 0 0,00% finished and finished products

49

As of Dec, 31, 2006

Actual Data

As of Dec, 31, 2005

%

As of Dec, 31, 2004

%

As of Dec, 31, 2003

%

As of Dec, 31, 2002

%

%

Differences in work in progress Work performed on a time and material basis

(892,233)

-0,48% (3,494,561)

-1,93% (15,099,987)

-8,56%

1,11% 11,318,338

7,26%

9,945,241

5,40% 10,475,074

5,79% 14,111,186

8,00% 17,285,600 11,09% 13,439,105

8,62%

Other income

3,771,923

2,05%

4,70% 13,639,837

7,73% 10,186,712

5,87%

8,510,074

1,722,321

6,54%

7,730,388

VALUE OF PRODUCTION

184,118,665 100,00% 180,928,886 100,00% 176,464,004 100,00% 155,819,427 100,00% 131,699,931 100,00%

Costs for purchases

(54,226,507) -29,45% (52,715,594) -29,14% (49,754,348) -28,20% (46,642,774) -29,93% (32,757,916) -24,87%

Differences in the inven274,277 0,15% (346,772) -0,19% (482,830) -0,27% (378,994) -0,24% 89,980 0,07% tory of raw materials Miscellaneous costs (67,308,739) -36,56% (71,767,063) -39,67% (73,695,523) -41,76% (68,682,473) -44,08% (56,341,290) -42,78% for services Expenses for the use of (9,881,067) -5,37% (10,826,715) -5,98% (8,310,388) -4,71% (6,013,257) -3,86% (7,023,265) -5,33% third parties’ assets Other operating charges

(1,958,381)

ADDED VALUE

51,018,249 27,71% 43,108,568 23,83% 41,978,484 23,79% 31,420,185 20,16% 33,205,983 25,21%

Cost of labor and related charges GROSS OPERATING MARGIN

Depreciation of tangible assets Depreciation of intangible assets Provisions and writedowns Depreciation and provisions

Other financial income TOTAL FINANCIAL MANAGEMENT CURRENT RESULTS

19,991,638 10,86% 12,414,895

-1,27% (2,681,744)

-1,72% (2,461,457)

-1,87%

6,86% 11,292,136

6,40%

3,291,580

2,11%

9,213,967

7,00%

(1,673,715)

-0,91% (1,863,046)

-1,03% (2,581,728)

-1,46% (2,075,324)

-1,33% (1,274,303)

-0,97%

(4,178,341)

-2,27% (4,021,661)

-2,22% (2,884,484)

-1,63% (1,515,615)

-0,97%

(992,827)

-0,75%

(1,544,703)

-0,84% (1,023,965)

-0,57%

(643,054)

-0,36% (1,179,448)

-0,76%

(317,663)

-0,24%

(7,396,758)

-4,02% (6,908,672)

-3,82% (6,109,266)

-3,46% (4,770,388)

-3,06% (2,584,794)

-1,96%

12,594,880

6,84%

3,04%

2,94% (1,478,808)

-0,95%

5,03%

(3,668,045) 904,825 (2,763,220)

5,506,223

5,182,870

6,629,173

-1,99% (4,066,967)

-2,25% (3,913,559)

-2,22% (3,214,228)

-2,06% (3,936,084)

-2,99%

0,49%

0,32%

0,18%

0,60%

1,403,950

1,07%

579,726

317,057

935,438

-1,50% (3,487,241)

-1,93% (3,596,502)

-2,04% (2,278,790)

-1,46% (2,532,134)

-1,92%

9,831,661

5,34%

2,018,981

1,12%

1,586,367

0,90% (3,757,598)

-2,41%

4,097,039

3,11%

550,195

0,30%

4,527,721

2,50%

2,336,675

1,32% 20,404,475 13,09%

979,640

0,74%

Financial income from equity investments Adjustments to financial activities

(2,347,069)

Shareholder distributions Extraordinary operating items PROFITS (LOSS) BEFORE TAXES Income taxes for the year

(5,134,301)

NET PROFITS (LOSS)

3,552,720

50

-1,20% (2,242,431)

(31,026,611) -16,85% (30,693,673) -16,96% (30,686,348) -17,39% (28,128,605) -18,05% (23,992,016) -18,22%

OPERATING RESULTS

Interest and other financial charges

-1,06% (2,164,174)

-1,27% (2,162,320)

-1,20% (5,131,523)

-2,91% (10,946,643)

-7,03% (1,808,541)

-1,37%

(750,000)

-0,41%

(500,000)

-0,28%

0

0,00%

0

0,00%

(295,430)

-0,22%

1,402,234

0,76%

1,889,160

1,04%

1,449,751

0,82% (1,058,513)

-0,68%

2,534,621

1,92%

8,687,021

4,72%

5,773,543

3,19%

241,271

0,14%

2,98%

5,507,328

4,18%

4,641,721

-2,79% (2,665,977)

-1,47% (3,107,770)

-1,76% (2,886,693)

-1,85% (2,285,145)

-1,74%

1,93%

1,72% (2,866,499)

-1,62%

1,13%

2,45%

3,107,566

1,755,028

3,222,183

annual accounts As can be seen from the table of the Profit and Loss Statements reclassified according to the value-added method, it can be noted that fiscal year 2006 represents, in terms of performance, the best fiscal year in the five years examined. So as to make the data for the fiscal year comparable with the data of previous years, in this table the higher value resulting from the transfer of the real property on Via Quaranta in Milan has been classified under extraordinary items. After this reclassification the gross operating margin for the period is 10.86%, which is very near the values for the same index in the years prior to 2002 when the old concessions were operative before they were transferred in 2001 to Cogas S.p.A. whi-

ch has now become THUGA Mediterranea S.r.l.

Also the operating profit of 12.5 million euros, which is equivalent to 6.84%, is considered to be a success.

The financial charges have also decreased, while current operating results have increased to 9.8 million euros.

The extraordinary operating items include the equity investment writedowns, the shareholder distribution, and the economic effects of the reclassification in relation to the effects of the transfer of the above-mentioned real property located on Via Quaranta in Milan.

Several interesting Balance Sheet indices are provided below:

ECONOMIC ANALYSIS As of Dec. 31, 2006

As of Dec. 31, 2005

As of Dec. 31, 2004

As of Dec. 31, 2003

As of Dec. 31, 2002

R.O.E. (Return on Equity)

4,18%

3,76%

-3,33%

2,03%

3,86%

R.O.I. (Return on Investment)

4,82%

2,17%

2,00%

-0,63%

2,46%

Ratio of Gross Operating Margin/Value of Production

10,86%

6,86%

6,40%

2,11%

7,00%

Influence of one-time income and charges

28,21%

56,44%

-55,31%

-118,68%

48,61%

Influence of Financial Charges on Value of Production

1,50%

1,93%

2,04%

1,46%

1,92%

Influence of Net Financial Charges on R.O.

21,94%

63,33%

69,39%

-154,10%

38,20%

Actual Data

As of Dec. 31, 2006

As of Dec. 31, 2005

As of Dec. 31, 2004

As of Dec. 31, 2003

As of Dec. 31, 2002

Liquidity index

1,29

1,33

1,17

1,32

1,20

Leverage

3,07

3,07

3,00

2,72

3,23

Ratio of Debt Burden

0,69

0,82

0,83

0,80

0,82

Elasticity index

1,39

1,27

1,25

1,02

1,82

EBITDA/DEBT

34,29%

18,34%

15,89%

4,72%

13,53%

DEBT/EBITDA

2,92

5,45

6,29

21,19

7,39

Actual Data

FINANCING AND ECONOMIC ANALYSIS

An analysis of the principal balance sheet indices shows that those for fiscal year 2006 are certainly the best in the entire five-year period. Special attention is paid to the ratio between DEBT (financing payables) and EBITDA (gross operating margin), the ideal value of which is considered to be 3.00, and which was actually 2.92 for this fiscal year. This ratio expresses the ability of the Cooperative Society to repay its bank debts by means of the profitability of the core business.

In another part of this report information is provided regarding the reorganization of the production division, which generated the results of the core business.

The discussion in relation to the production results will be presented by geographical areas and no longer by divisions.

Operational analysis of Area Offices and Departments Headquarters Area Office: This Area Office executes heat management work orders and supply network construction work orders in the region of Emilia Romagna and in the provinces surrounding the headquarters based in Concordia, such as the province of Mantua. It has achieved a total value of work of 36.3 million euros, which represents a decrease

of 8.3 million euros from the previous fiscal year. Its principal work orders include emergency service and road maintenance of the municipality of Bologna for Hera S.p.A., remote heating for AMPS of Parma, the management of systems of the province of Modena, and the complete service of systems for the municipality of Mantua.

Rome, Sardinia, and Tyrrhene Area Office: This Area Office executes heat management work orders and supply network construction work orders in Latium and Sardinia. It has achieved a total value of work of 29.5 million euros, which represents an increase of 1.8 million euros over the previous fiscal year. Its principal work orders include the management of the heating systems for the Autonomous Board for Tenement Housing (IACP) of the municipality of Rome, the management of the heating systems of the auditorium of the School of Music in Rome, and the management of systems of the municipality of Rome.

Milan and Northwest Area Office: This Area Office executes heat management work orders and supply network construction work orders in Lombardy, Piedmont, Valle d’Aosta, and Liguria. It has achieved a total value of work of 27.5 million euros, which represents an increase of 9.2 million euros over the previous fiscal year. Its principal work orders include maintenance work on the Milan Subway and the Linate Airport as

51

well as the management of the heating systems of the hospital facilities of Cremona and the Province of Milan.

Sant’Omero and Adriatic Area Office: This Area Office executes heat management work orders and supply network construction work orders in Abruzzo, Basilicata, Molise, and Puglia. It has achieved a total value of work of 11.3 million euros, which is in line with the production of the previous fiscal year. Its principal work orders include the maintenance of the supply networks of the municipality of Serravalle di Chienti and the management of the heating systems of the province of Ascoli Piceno, the Local Public Health Center (ASL) of Teramo, and the municipality of Pescara.

Fano and Umbria Area Office: This Area Office executes heat management work orders and supply network construction work orders in the regions of Marches, Umbria, and Romagna. It has achieved a total value of work of 11.5 million euros, which is in line with the production of the previous fiscal year. Its principal work orders include the maintenance of the gas and water supply networks and sewer systems of Aset di Fano and the management of the heating systems of the province of Pesaro Urbino or the municipality of Riccione.

Campania, Calabria, and Sicily Area Office: This Area Office executes heat management work orders and supply network construction or maintenance work orders in the regions of Campania, Calabria, and Sicily. It has achieved a total value of work of 6.7 million euros, which represents a decrease of 3.8 million euros from the previous fiscal year. Its principal work orders include the construction of the gas supply networks of the island of Ischia and the Calabria and Campania service areas, as well as the management and operation of the heating systems of the municipal government of Caserta.

Padua and Northeast Area Office: This Area Office executes heat management work orders and supply network construction work orders in the regions of the Triveneto area. It has achieved a total value of work of 7.8 million euros, which is virtually unchanged with respect to the previous fiscal year. Its principal work orders include especially the maintenance of the water and gas supply networks of the municipality of Padua.

Tuscany Area Office: It has achieved a total value of work of 5.9 million euros, which represents an increase of 1.3 million euros over the previous fiscal year. Its principal work orders include the maintenance of electrical systems managed by Enel S.p.A. and the management of the heating systems of the Local Public Health Center (ASL) of Arezzo.

Foreign Area Office: This Area Office is in charge of the initiatives in progress in Greece and Romania. The value of production of 6.2 million euros refers exclusively to the activities of the construction and maintenance of the water supply networks and sewer systems of Thessalonica, Greece. The activities in Romania, following the assignment made in 2005, are managed directly by the Romanian-law company Filiala Cluj Romania S.r.l.

The data of the stable organization in Greece were included in the foreign area; the following is a summary of these data:

52

Total assets

5,273,710 euros

Value of production

6,242,901 euros

Profits for the period

41,730 euros

Technological Systems Department: This department constructs technological systems such as, for example, gas pressure reduction and compression stations and operates throughout Italy as well as internationally. It has realized a value of production of 10.1 million euros, which represents a decrease from the previous fiscal year of 0.5 million euros.

The data of the stable organization in Croatia were included in the foreign area; the following is a summary of these data: Total assets

195,537 euros

Value of production

308,257 euros

Profits for the period

365 euros

Odorizer Department: This department, which markets and sells methane gas odorizer throughout Italy, achieved a total value of work of 9.3 million euros, which represents a decrease of 1.3 million euros from the previous fiscal year.

Supply Networks Department: This department constructs and manages the supply networks of which the Cooperative Society is the concession holder. These concessions operate in the service areas located in Campania, Calabria, and Sicily, as well as in the municipalities of Camastra, Palma di Montechiaro, Cittanova, and San Giuseppe Vesuviano. The total value of work performed during the fiscal year, without taking into consideration the works performed on a time and material basis (which increase capitalization), amounts to 4.2 million euros, which represents an increase with respect to the previous fiscal year of 1 million euros, following the increase in the number of consumers who were hooked up to the supply network and were receiving service.

Information Technology Department: This newly formed department develops and subsequently manages IT packets and innovative software such as Tecnet, remote control, and packets for invoicing, sending, and collecting the bills for gas, water, and global service. It has achieved production, without calculating investments, in 2006 of 1.8 million euros, which represents an increase in revenue over the previous fiscal year of 0.6 million euros.

Other Departments: Among the other departments particular note should be taken of the Building Department, which achieved production of 2 million euros, which represents a decrease from the previous fiscal year of 0.9 million euros. Lastly, there are the activities that are being shut down. Specifically, these activities refer to works that ended in 2006 and were not allocated.

These activities include the works executed at the Malpensa Airport and the costs for closing the Romanian stable organization called CPL Branch Romania. The following are its pertinent data:

annual accounts Total assets

410,579 euros

Value of production

(24,397) euros

Loss for the period

63,887 euros

The following were the principal costs regarding operational management:

Personnel costs

Costs for shareholder distributions

Costs for raw materials, subsidiary materials, etc.

54,226,000 euros

Costs for services and the use of third parties’ assets

77,190,000 euros

31,027,000 euros 750,000 euros

Other operating charges

1,958,000 euros

Interest and financial charges

3,676,000 euros

Writedowns on equity investments

2,347,000 euros

Revenues earned during the fiscal year (value of production) amount to 185,467,000 euros and are the result of the consignments made and the services performed for third parties and associated companies and/or subsidiary companies (refer to subsequent pages for a more detailed explanation of the revenues). They are broken down as follows: Headquarters Area Office

36,268,000 euros

Rome, Sardinia, and Tyrrhene Area Office

29,505,000 euros

Milan and Northwest Area Office

27,484,000 euros

Sant’Omero and Adriatic Area Office

11,341,000 euros

Fano and Umbria Area Office

11,533,000 euros

Campania, Calabria, and Sicily Area Office

6,702,000 euros

Padua and Northeast Area Office

7,763,000 euros

Tuscany Area Office

5,956,000 euros

Foreign Area Office

6,243,000 euros

Technological Systems and Odorizer Departments19,576,000 euros Supply Networks Department

9,493,000 euros

Information Technology Department

2,048,000 euros

Services to the companies belonging to the Group 1,541,000 euros Building Department

1,953,000 euros

Other revenues

8,061,000 euros

TOTAL

185,467,000 euros

Financial Management for Fiscal Year 2006: Considerations With regard to the Cooperative Society’s financial management, first we would like to provide a brief analysis of the macroeconomic context and then we will analyze the main financial operations that the Cooperative executed during fiscal year 2006.

The National Cooperative Environment In 2006 the worldwide economy continued to expand at a rate of 5% like in the previous two years, still driven mainly by China (+10.7%), India (+9%), and the emerging markets in Asia, and to a lesser degree by Brazil and Russia. Growth was stable in Japan and the United States.

The forecasts for this year confirm this basic trend, although the rates will be slightly lower and although there is some risk in connection with the excessive fluctuations in the financial markets over the past few months, which hopefully represent a correction of the prices of the financial activities towards values that are more closely in line with past experience and not a worsening of the expectations on the size of the economies.

In the euro zone the GDP grew by 2.6%; these results exceeded expectations and were driven especially by the better-than-expected performance of Germany and Italy. Overall the European economy benefited from good progress in production activities and sustained foreign demand which, it is hoped, can be maintained despite the constant appreciation of the euro, which has continued also during the first few months of 2007.

Inflation has remained low and is not expected to increase during the current year since the prices of raw materials and petroleum are dropping and the appreciation of the euro facilitates the containment of inflation.

The restrictive monetary policies in place in 2006 and confirmed also for 2007 seem, therefore, to be the result more of the necessity to control excessive expansion in the money supply (M3) than true inflationary signs.

In Italy the GDP began to grow again and, in fact, exceeded every expectation. The increase of +1.9% in 2006 has been the largest over the past five years, and it is encouraging that it was achieved by means of a multitude of factors: the increase in families’ consumption, in industrial production and productivity, in gross fixed capital formation, and in exports.

At the same time a restructuring of the public finances was implemented, and the debt/GDP ratio was kept below 4.4% at the end of the year even though much worse data were projected after the EU’s measures regarding VAT on automobiles and the return of high-speed train debts in the national budget.

For 2007 the 2.8% goal for the debt/GDP ratio has been confirmed and appears to be achievable.

The recovery from the difficult financial situation of the beginning of 2006 resulted in the adoption by the government of a series of measures for containing expenses and increasing revenues, which increased the tax burden to above the European average. It is hoped that the tax burden will progressively return to average levels so as not to excessively penalize Italian companies and families.

Within this context the extremely serious problem regarding delayed payments by the government has continued not to be addressed. This is a true emergency which in 2006 hit again, and even harder if possible, the balance sheets of the government’s suppliers. Even our Cooperative has partially felt the impact of this situation.

53

Exports have grown appreciably (+5.3%) in comparison to the modest data from previous years, with good results coming in from both the euro zone (especially for exports to Germany) and the rest of the world, with especially interesting and promising results from countries experiencing strong development such as China and Russia.

The industrial production index, driven by the activities that are traditional Italian specializations (such as the metalworking and mechanical fields and means of transport as well as the more traditional products made in Italy, including textiles, clothing, leather, wood, and furniture) reversed its trend and became positive. Also in 2007 the situation regarding the orders is encouraging.

Also for the field of construction, which was feared to be flat, the data show sustained accumulation concentrated in the sector of private construction.

Consumption increased by 1.5%, which is in line with the increase in real disposable family income, with a change in spending on durable goods, and an increase in the impact of housing expenses (rent or loan payments), while food expenses remained unchanged.

The unemployment rate in Italy dropped to 6.8%; this is the lowest it has been since the 1980s, even though the effect of the regularization of the immigrant workers had a large impact on the overall data.

Employment increased by 1.6% both in employment and in self-employed activity. This figure is higher in the industrial sector, after many years of difficulties. Even in southern Italy an increase in employment has been noted, even though the unemployment rate, which has dropped from 14.8% to 13%, still represents a worrying statistic that is too far removed from the average in the country.

Inflation in the European Union, like in Italy, has remained at 2%. In these first few months the inflation rate has dropped to 1.8%, mainly due to the reduction in prices for raw materials and petroleum and the simultaneous appreciation of the euro.

Due to their worries in connection with the increase in the money supply and possible inflation risks, the board of directors of the European Central Bank adjusted the reference rate a total of five times and raised the rate also in March and June 2007. As a result of these adjustments, the official rate increased by 1.50% in a year.

Moreover, the system’s high level of liquidity and the increased competitive pressure in the credit industry did, indeed, increase the average final cost of money in a nonproportional manner.

In fact, the demand for credit remained very strong, with an expansion of credits that reached +11.7% in Italy, which was higher than in the euro zone, with a large impact provided also by short-term credit.

In the medium term demand was driven especially by the demand for home loans by families and, with regard to companies, by financing for investments and by debt restructuring.

The quality of the bank loan, however, was not significantly influenced by expansive credit policies, in light of the stability of the bad loans.

Even the consumer credit industry has continued to grow, with an increase of +13%, although this is at a slower rate than in previous years. The rate of bad loans is 0.8%.

The official data show that the expenses incurred by families for debt servicing has reached 7% of disposable income. Although this figure is relatively small by international standards, its constant growth invites reflection.

With regard to the cooperative environment, the recent conference sea-

54

son was an occasion to show once again, at a national level and at the level of the various geographical areas, the strength of the cooperative economy and its ability to produce growth rates that are higher than the average in Italy.

In fact, the projected data for 2006 in relation to the cooperatives that are members of Legacoop show a +4.41% increase in revenues, confirming how important cooperation is for national development.

Employment increased by 2.51%, with approximately 10,000 more employees than the previous year. Another very strongly positive piece of data regards the number of members, which has grown overall by 2.64% to more than 7.7 million people, confirming cooperation’s ability to become socially rooted.

The positive dynamics of the revenue refers to all the cooperative fields, with positive peaks in the field of services and social cooperation.

Labor cooperation (PL, social and tourism services) for the second consecutive year has achieved results that are higher than the cooperative average.

Adequate tools for development are necessary for such a dynamic cooperative movement.

Main financial operations carried out by CPL Concordia during fiscal year 2006 The progressive increase in rates during 2006, which we are still experiencing today, had only a moderate impact on CPL Concordia’s overall financial charges: in fact, as a result of the debt restructuring of 2005, up until the first few months of fiscal year 2006 the Cooperative Society’s entire debt was structured as medium- and long-term debt. The majority of the financing received entails payments of interest and capital every six months. Therefore, the reference rate was adjusted twice, which helped limit the negative effects of increasing rates. Furthermore, the improvement in the main balance sheet indicators, following the important decisions made by the Board of Directors at the end of 2004, allowed the spread paid by the Cooperative Society on the following two main lines of credit disbursed by the banking system to be significantly reduced due to the covenants stipulated in the contracts: the pool financing from a group of banks headed by Unicredit Banca d’Impresa of August 4, 2005 and the pool financing from a group of banks headed by Banco Popolare di Verona e Novara of February 21, 2003.

Beginning in the first few months of fiscal year 2006, CPL Concordia has progressively eliminated the use of short-term bank credit lines due to the positive effects of the current assets (which benefited not only from good progress with collections, especially taking into consideration the type of CPL Concordia’s customers (mainly public institutions), but also from the increase in payment terms obtained from suppliers, especially for the natural gas used for heat management services).

Only during the last two-month period did the Cooperative Society discharge the remaining capital of the credit lines granted by Banco di Sicilia (0.5 million euros) and the pool financing from a group of banks headed by Unicredit Banca d’Impresa (10.5 million euros). In May a loan that was granted by Interbanca S.p.A. just 12 months before (originally for 7.5 million euros) was paid off early. In fact, the available liquidity allowed the Cooperative Society to repay a loan that had decidedly higher

annual accounts costs than the other financing obtained.

From the moment fiscal year 2006 financial planning was carried out, it was clear that the remaining availability of funds in the two lines of credit mentioned above would not be sufficient for the Cooperative to initiate new operations.

On Dec. 21, 2006 the Cooperative Society paid off early, in comparison to the expiration date of Oct. 21, 2008, an interest rate swap contract covering interest rate variation risk, with a notional value of 5.0 million euros, stipulated with the Banca di Roma on Oct. 21, 2003, because the contract’s mark to market was steadily worsening in line with the market trend. As of the end of the fiscal year the Cooperative Society had outstanding a single derivatives contract for covering interest rate variation risk, with a notional value of 20.0 million euros, stipulated with Unicredit Banca d’Impresa on Oct. 29, 2003, expiring on Oct. 31, 2008, with a negative mark to market of 1.151 million euros.

During the first few months of fiscal year 2007, the positive trend of the financial management allowed the Cooperative Society to execute several monthly and quarterly operations that employed liquidity. As of today’s date there is no need to audit any medium- or long-term operation before the end of the fiscal year.

After analyzing the financial management and the core business, below we are providing the necessary information on the results of the group’s subsidiary companies and associated companies, because their results influenced the economic valuations and the valuations of the assets that were included on the parent company’s balance sheet.

SUBSIDIARY COMPANIES: Holdico Gas Nederland B.V.: The company that acted as an international holding company, following the closing of the liquidation phase of the subsidiary company Odogas S.p.A., was in turn placed in liquidation during the previous fiscal year; its liquidation phase ended quickly and an amount of 86,446 euros was returned to its shareholder. Its liquidation resulted in a writedown of 21,787 euros.

Coopgas S.r.l.: During the fiscal year this company was the subject of two extraordinary actions in connection with the request for a ruling filed by the Cooperative Society, which was forwarded on May 25 to the Ministry of the Economy and Finance, regarding the feasibility, from a fiscal point of view, of the merger by incorporation of the company Gas della Concordia S.p.A. The extraordinary operation for which was requested the ruling, in conformity with article 21, paragraph 9 of Italian Law no. 413/91, required that the company Gas della Concordia S.p.A. assign to Coop Gas S.r.l. (a company that is 98% controlled by the Cooperative Society) its company division for the wholesale trading of natural gas, thereby acquiring a shareholding in the capital of Coop Gas S.r.l. and retaining only the role of industrial sub-holding company. Subsequently, Gas della Concordia S.p.A. would have been merged by incorporation into the Cooperative Society itself, thus achieving a reduction in the fixed operating costs and overhead costs as well as the reorganization that was more functional in terms of group efficiency.

In accordance with the strategy outlined above, on September 30 by means of a document drawn up by Mr. Silvio Vezzi, Notary Public, with registration number 113571/17412, the company Gas della Concordia S.p.A. transferred to the company Coop Gas S.r.l. its natural gas produc-

tion and marketing operation and at the same time acquired a shareholding in the company itself.

However, on October 30 official notice was received from the Internal Revenue Office confirming that the operation of the merger by incorporation of the company Gas della Concordia into its parent company CPL Concordia would not be possible due to tax avoidance issues.

Therefore, the parent company’s Board of Directors decided to suspend the merger by incorporation of Gas della Concordia into the Cooperative Society, and instead proceed by the end of the fiscal year with the alternative merger of Coop Gas S.r.l. into Gas della Concordia S.p.A., making use of the less stringent terms granted by the application of Art. 2503 of the Italian Civil Code.

In compliance with what was decided on November 17, the company Gas della Concordia S.p.A., by means of three distinct documents, the entirety of the shares of the company Coop Gas S.r.l.; on November 30 the respective Extraordinary Shareholders’ Meetings approved the merger by incorporation of the company Coop Gas S.r.l. into Gas della Concordia S.p.A.; and on December 12, by means of a document drawn up by Mr. Silvio Vezzi, Notary Public, with registration number 113889/17506, the merger by incorporation took place.

With this merger, the acquiring company Gas della Concordia S.p.A. became the new sales company to the end customer, replacing the company Coop Gas S.r.l. So as to avoid uncertainty and disorientation in their customers, at the Extraordinary Shareholders’ Meeting of December 22, by means of a document drawn up by Mr. Silvio Vezzi, Notary Public, with registration number 113979/17546, the company Gas della Concordia S.p.A. changed its form and its name to become Coopgas S.r.l.

Contemporaneously the Extraordinary Shareholders’ Meeting approved the reduction in the share capital, in conformity with the first paragraph of Article 2445 of the Italian Civil Code, the change in the company’s registered office, and the adoption of a new company purpose.

The reduction of the share capital from 13,000,000.00 euros to 2,500,000.00 euros, that is, a reduction of 10,500,000.00 euros, and the return of the corresponding amount of capital to the shareholders, took place on April 11, 2007 after 90 days had passed since the resolution was recorded in the company register on January 11, 2007. The effects of the reduction in the company’s share capital were, therefore, attributable to fiscal year 2007, for the purposes of accounting.

The financial results of the company resulting from the merger between Gas della Concordia S.p.A (now Coopgas S.r.l.) and Coop Gas S.r.l. amount to 114,353 euros.

These results were strongly influenced by the mild temperatures of the last two months of 2006.

During the fiscal year the company provided service to 28,669 consumers located throughout the Campania, Calabria, and Sicily service areas and in the municipality of Marigliano.

The amount of natural gas purchased in 2006 was 18,215,978 cubic meters and the amount sold was 17,912,839 cubic meters.

S.E.S. S.r.l.: An amount of 50% of the company’s shares were transferred on January 27, 2006 to Marcopolo Engineering S.p.A. at a total price of 550,000.00 euros, which resulted in capital gains of 503,519 euros being realized.

Immobiliare della Concordia S.r.l.: The company’s activities in 2005

55

were concentrated mainly on managing CH Hotel, which is located in the municipality of San Possidonio. The company also managed the progress of the real property initiative of Cividale, a township under the municipal administration of Mirandola (province of Modena).

Unfortunately, in 2006 both of these activities produced very bad results.

Specifically, the management of the hotel was negatively affected by its startup phase during which there was a much lower occupancy rate than had been projected.

Several initiatives are in progress whose purpose is to improve the income data in connection with the hotel’s activities; it is felt that these initiatives will be able to minimize losses in 2007. Furthermore, the merger by incorporation of the company Borgoverde S.r.l. into Immobiliare della Concordia was recently approved. This merger will be completed in fiscal year 2007. Therefore, the company Borgoverde S.r.l., which is successfully managing the real property initiative in Carpi (province of Modena), will contribute the profits from its own activities to help establish a single real estate company for the Group.

Immobiliare della Concordia’s financial results for fiscal year 2006 show a loss of 652,435 euros. This loss sustained by the company is no longer considered recoverable. Therefore, this equity investment was written down to adapt it to the corresponding amount of net assets. The economic effects of this writedown amount to 652,434 euros. No provisions for possible future losses will be made, because the merger operation with the company Borgoverde will permit the company to achieve basically even financial results in 2007, and for the future the foundations have been laid for a radical change in the management of the hotel business.

In fact, as of May 1, 2007 the hotel’s management will be entrusted directly to Immobiliare della Concordia and, at the same time, the contract with the current manager will be canceled and a new Hotel Director will be hired. It is felt that these actions will be able to considerably reduce the operating deficit caused by the manager in 2006. The first positive effects are expected as early as the second half of 2007 and will extend into 2008. Several initiatives are currently underway to revitalize the hotel business, especially with regard to its image.

These actions are expected to bear fruit in 2008.

Cristoforetti S.r.l.: This company, which was established in April 1996 and operates in the field of heat management in the Trentino-Alto Adige region, represents a considerable strongpoint in the group’s strategic arsenal. Over the years the company has extended its range of action, acquiring contracts in the regions of Veneto and Friuli Venezia Giulia.

The company is also involved in the distribution of LPG in the municipality of Ferrara di Monte Baldo (province of Verona) and is completing a supply network in the municipality of Vigo di Ton (province of Trento).

The company, whose profits for the year amount to 256,974 euros, has always reported good income results, and it is felt that the amount paid for the company fully represents its future potential.

In consideration of the company’s profitability and its future prospects, it is felt that the existing difference between the cost of the equity investment and the reference net assets can be recovered in a relatively short amount of time.

Erre.Gas S.r.l.: This company’s business purpose is the distribution of liquid propane gas in the municipalities of Sapri and Camerota (province of Salerno). It ended the fiscal year with a loss of 226,323 euros. The

56

loss for the year, as for previous years, was generated by the company’s startup of operations, that is, an effective imbalance between the investments that were made and the number of consumers who were hooked up to the supply network, which was an average of approximately 1,200 consumers for fiscal year 2006.

To achieve even results on the balance sheet, during the fiscal year the supply network and gas pressure reduction stations were constructed that are necessary for the conversion of the supply network from LPG to methane gas and to comply with the provisions of Italian Law no. 784, so as to obtain the corresponding contributions of capital for the supply networks that were constructed. It is felt that these actions and the consequent distribution of the contributions, together with the increase in the number of consumers who were hooked up to the supply network, will be extremely important for achieving even results on the balance sheet. For the above-mentioned reasons the parent company has written down the value of the equity investment, adjusting it to the corresponding value of the subsidiary company’s net assets. The economic effect of this writedown amounts to 226,323 euros.

Marigliano Gas S.r.l.: This company was established in 2002 for the specific purpose of building and managing the gas concession of the municipality of Marigliano. It is 99.5% controlled by the Cooperative and 0.5% controlled by Thuga Mediterranea S.r.l. During the fiscal year this company extended the methane gas supply network of the municipality of Marigliano by distributing methane gas to the sales company Coopgas S.r.l.

Due to the large number of consumers who were hooked up to the supply network in 2005, the financial results for the fiscal year show a profit of 4,417 euros, which is to be considered satisfactory, especially considering that the winter was not particularly cold.

Furthermore, it should be noted that during the fiscal year the company stipulated a financing contract with Banca Popolare dell’Emilia Romagna for 5,000,000.00 euros whose covenants include the payment by the shareholders of an amount of 1,400,000.00 euros as a “Reserve for future share capital increase.” The Cooperative Society satisfied this requirement at the time the document was stipulated on December 7, 2006 in the presence of Mr. Aldo Fiori, Notary Public, who recorded the aforesaid document with registration number 203624 and file no. 36961.

The company recorded the amount of 1,400,000 euros among its assets.

With regard to the financing disbursed by Banca Popolare dell’Emilia Romagna, a lien was placed on the company’s shares in favor of said banking institute as a guarantee of the contract, for a maximum amount of 5 million euros.

Taking into consideration the 2006 financial results and the future projections, it was felt that the current difference between the recorded value of the equity investment and the value of the corresponding net assets will be made up from the profits which it is reasonably certain will be achieved in future fiscal years.

Si.Gas S.r.l.: This company was established on October 16, 2000 under the name “Nuceria Società Consortile a responsabilità limitata” with a company purpose of the management of, building renovation of, and repair work to, real property damaged by the earthquakes that took place in the zone of Umbra in 1997. In fact, the company never performed these activities.

annual accounts On December 13, 2004, in the presence of Mr. Adalberto Mercatali, Notary Public, who recorded the relevant document with registration no.

99,824 and file no. 24,752, took place the Extraordinary Shareholders’ Meeting of the company NUCERIA Società Consortile a responsabilità limitata, with which the company was transformed into a limited liability company (società a responsabilità limitata), its name was changed to “SI. GAS S.r.l.,” and its company purpose, which is still valid today, was changed to “the distribution of methane gas for civil, industrial, and domestic use, in any form, and any other related activity.”

The above-mentioned changes were necessary for carrying out an operation involving the assignment of a company division belonging to the parent company Sigla Soc. Coop, which was experiencing grave economic and financial problems. In fact, this company’s problems were so serious that on March 21, 2005, by means of Italian Ministerial Decree no. 82 published in Official Gazette no. 76 of April 2, 2005, the Ministry of Productive Activities placed it in forced liquidation and appointed the official receivers.

In the context of the liquidation procedure, on May 30, 2006 in the presence of Mr. Nicola Atlante, Notary Public enrolled in the Professional Order of Notaries Public of Rome, who recorded the relevant document with registration no. 23537, file no. 9227, the share capital of the company SI.GAS S.r.l. was increased, and the increase in share capital was released by means of an assignment in kind. This document stipulates the assignment to Si.Gas of the concessions for the methane gas distribution services of the municipalities of Santo Stefano d’Aspromonte, Campo Calabro, Bagnara Calabra, San Roberto, Laganadi, Calanna, Villa San Giovanni, and Sant’Alessio in Aspromonte, which Sigla manages under concession together with “Consorzio Fra Cooperative di Produzione e Lavoro Conscoop,” whose headquarters are located in Forlì, and “Consorzio Ravennate delle Cooperative di Produzione e Lavoro,” whose headquarters are located in Ravenna, which are respectively the representative head company and the mandators of the temporary association of companies that was awarded the service.

The company division was valued by means of the appraisal of Mr. Alessandro Bonura, which was sworn to on April 24, 2006 at the Court of Rome (Addendum 3). The appraisal gave a total value of 9,162,662.82 euros to the company division, assigning to the supply networks, as of January 31, 2006, a value of 9,481,454.90 euros, net of the depreciation funds which total 413,992.10 euros. It follows that the value of the methane gas supply network entered on the balance sheet is 9,895,447 euros. The aforesaid assignment resulted in the company performing the activity specified in the business purpose, beginning on May 31, 2006.

On July 3, 2006 the Cooperative Society acquired from the shareholders of SI.GAS S.r.l. 100% of the shares of the company.

On the same date at the Extraordinary Shareholders’ Meeting, the location of the company headquarters of SI.GAS S.r.l. was changed to Concordia sulla Secchia (province of Modena). The document was drawn up by Mr. Silvio Vezzi, Notary Public enrolled in the Professional Order of Notaries Public of Modena, who recorded it with registration number 113285, file no. 17323. The financial results for the period of management from June 1, 2006 to December 31, 2006 show a loss of 109,946 euros.

Nuoro Servizi S.r.l.: Fiscal year 2006 was characterized by a series of initiatives regarding the management of the various services performed within the context of the petrochemical manufacturing center in Ottana

(province of Nuoro) whose purpose was the transfer of the business. A long and complex path was followed to make it possible to achieve these transfers. Specifically:

On May 31, 2006 at the Ministry of Labor and Social Security was stipulated the Agreement pursuant to Italian Law Decree no. 68/2006, which was converted into Italian Law no. 127 of March 24, 2006 and then modified by Italian Law Decree no. 126 of April 3, 2006 regarding the employees of the company Nuoro Servizi. This agreement prescribed the laying off of 30 employees out of a total 71 making up the workforce on that date, who met the requirements of the above-cited Italian Law Decree no. 68/2006.

On July 26, 2006 was stipulated the “Agreement on a plan for the reorganization, the stabilization of the industrial services, and the reduction of charges of the industrial centers of Ottana, Bolotana, and Noragugume” between the Ministry of Economic Development, the autonomous region of Sardinia, the province of Nuoro, the “Consorzio per l’area di Sviluppo Industriale della Sardegna Centrale,” and Nuoro Servizi.

To achieve the goals set forth in the agreement, article 3 specifies that Nuoro Servizi S.r.l. transfer to the “Consorzio per l’area di Sviluppo Industriale della Sardegna Centrale” the company assets to be used to perform the production activities in the zone of Ottana as well as the personnel in 42 units who are necessary for carrying out the service activities, and that the company Nuoro Servizi S.r.l. be placed in liquidation.

By means of a document stipulated on November 16, 2006 the company transferred to the “Consorzio per l’area di Sviluppo Industriale della Sardegna Centrale - ASI” the company division comprised of a series of assets (movable and immovable property, rights, contracts, relationships, licenses, and authorizations) that are functionally organized for performing the activities at the Ottana facility. The transfer had effect for the assignor as of December 31, 2006 and for the assignee as of January 1, 2007.

On January 30, 2007 the Shareholders’ Meeting approved the placement in liquidation of the company and appointed as the official receiver Mr. Maurizio Rinaldi, to whom was granted the power to represent the company for any operation regarding the liquidation.

Currently only the transfer price must be collected from ASI, which will pay this amount when it receives the contribution specified in the plan agreement.

Once this amount is collected, which is expected shortly, it will be possible to proceed to close the liquidation. The financial results on the balance sheet reflect the events described above, taking into account the capital gains from the transfer of assets, the closing charges incurred for the long layoff of the employees who were not transferred, and the costs and revenues from ordinary operations. The company ended the fiscal year with a loss of 74,034 euros. Obviously the parent company considers this loss not to be recoverable and has adjusted the value of the equity investment to the corresponding value of the net assets. The economic effect of this writedown amounts to 8,289 euros.

CPL HELLAS A.B.E. & T.E.: This company was established in December 2002 following the acquisition of works in Greece directly from the cooperative society in relation to the installation of methane gas supply networks in several zones of the capital, Athens. Specifically, the Cooperative worked together with CPL HELLAS to complete the installation of

57

methane gas supply networks in the Olympic Village for the 2004 Olympics and to install other methane gas supply networks in Athens.

During fiscal year 2005 the company acquired a large contract for water pipelines and the sewer system in the city of Thessalonica and in 2006 it acquired other smaller contracts. Fiscal year 2006 was characterized by poor management of the subcontractors and various organizational problems which resulted in large losses in productivity.

This caused the company to end fiscal year 2006 with a loss of 916,674 euros. In light of the difficulties encountered in Greece and due to the fact that no further concrete areas of development are foreseen, the Cooperative Society’s Board of Directors has decided to end its activities in Greece as soon as possible. Therefore, the value of the equity investment was set to zero by allocating to the provisions for risks and contingencies the portion of loss exceeding the value of the equity investment itself as well as the estimated loss for fiscal year 2007. The overall economic effect of this writedown and the provisions amounts to 1,340,702 euros.

CPL CONCORDIA FILIALA CLUJ ROMANIA S.r.l.: Due to the assignment of assets of the branch office in Romania on May 4, 2005, this Romanian-law company currently manages the distribution and sale of methane gas in approximately 30 towns located in the province of Cluj Napoca. In 2006 service was provided to 8,885 consumers out of a potential total of 24 thousand consumers. The company produced profits for the year of 388,017 euros. These results can be considered to be better than expected and were positively affected by the continuous increase in the value of the local currency which, therefore, responded well to Romania’s entry into the European Union.

SERIO ENERGIA S.r.l.: This company was established on February 27, 2003 by means of a deed executed by Mr. Silvio Vezzi, Notary Public, of Modena, with registration number 108594, file no. 15745, registered at the Court of Modena on March 6, 2003, for the purpose of managing the heating systems of the Bolognini Hospital in Seriate (BG). The Cooperative holds 40% of Serio Energia’s shares, but nevertheless effectively controls it due to the activities it must perform regarding the project for which it was established.

The financial results for the period show a profit of 119,637 euros.

Operations began running at full speed in 2006, therefore, the company’s startup phase can be considered to have ended. Good levels of performance are expected for the three-year period from 2007 to 2009.

BORGOVERDE S.r.l.: This company was established on October 5, 2004 from the conversion of Solly S.r.l. after the latter company was acquired on the same date from private shareholders in the presence of the Notary Public Mr. Aldo Fiori of Carpi (MO) who recorded this transaction with registration no. 189641, file no. 32221.

This company was acquired to manage a property initiative regarding the urbanization and subsequent construction of a residential housing complex located in the municipality of Carpi (MO). The balance sheet as of December 31, 2006 shows a profit for the year of 170,315 euros. The property initiative, which possesses a high level of profitability, will produce high profit margins when the urbanized or built lots are transferred. For a majority of these lots a sales agreement has already been stipulated within Immobiliare della Concordia following its expected merger, which is discussed in the relevant section.

58

ISCHIA GAS S.r.l.: This company was established on April 1, 2005 by means of a document drawn up by Mr. Silvio Vezzi, Notary Public in Modena, and recorded with registration number 111359, file no. 16678, for the construction and subsequent management of the methane gas distribution service in the municipality of Ischia (province of Naples).

During the fiscal year it exclusively constructed the supply network and hooked up the first consumers. Obviously its financial results were affected by this situation, and it experienced a loss of 83,477 euros. Taking into consideration the difficulties that are inherent in the work, which will require a segment of sea pipeline, and the short-term projections, the recorded value of the equity investment has been prudently written down to the value of the company’s net assets. The economic effect of this writedown amounts to 93,976 euros.

Furthermore, it should be noted that during the fiscal year the company stipulated a financing contract with Banca Popolare dell’Emilia Romagna for 6,000,000.00 euros whose covenants include the payment by the shareholders of an amount of 1,300,000.00 euros as a “Reserve for future share capital increase.” The Cooperative Society satisfied this requirement at the time the document was stipulated on December 7, 2006 in the presence of Mr. Aldo Fiori, Notary Public, who recorded the aforesaid document with registration number 203624 and file no. 36961.

The company recorded the amount of 1,300,000 euros among its assets.

With regard to the financing disbursed by Banca Popolare dell’Emilia Romagna, a lien was placed on the company’s shares in favor of said banking institute as a guarantee of the contract, for a maximum amount of 6 million euros.

ISCHIA COM S.r.l.: This company, of which the Cooperative Society holds 51% of the share capital, was established on September 22, 2006 in the presence of Mr. Silvio Vezzi, Notary Public in Modena, who recorded the relative document with registration no. 113515 and file no. 17394.

The company’s purpose is the activities of construction, building, laying, supplying, and selling and renting energy and telecommunications infrastructure, especially optical fiber. In 2006 the company did not perform any activities. In conformity with the company’s articles of incorporation, its first balance sheet will be closed as of December 31, 2007.

CPL CONCORDIA PLIN D.O.O.: This Croatian-law company was established to manage a work order in the vicinity of Fiume acquired by the former Networks Division. This company is basically a special purpose vehicle which was placed in liquidation in 2005 after its activity had been completed. The liquidation was completed at the beginning of 2007. The effects of the liquidation were included in the balance sheet, resulting in a writedown of 3,043 euros.

The following are the companies that are indirectly controlled: ENERGIA DELLA CONCORDIA S.P.A.: After having transferred in 2005 the activity of selling electricity produced by the Ferrandina plant’s cogenerators, this company, whose entire interest is held by Coopgas S.r.l., pursued its activity by means of the stipulation of two systems sales contracts and subsequent management and maintenance. Not very much activity was performed by the company during the fiscal year. This

annual accounts small amount of activity resulted in a loss for the year of 29,000 euros, which is felt to be recoverable over the next few fiscal years.

ASSOCIATED COMPANIES: Enerfin S.r.l. in Liquidation: This company is the Italian holding company that possesses a controlling interest of 99% in the Argentine-law company Holding Intergas S.A., with headquarters in Buenos Aires, which in turn holds 100% of the operating companies Redengas S.A. and Emprigas S.A. The latter two companies manage the gas supply concessions in the cities of San Francisco and Paranà. The strategies with regard to this company include the shareholders taking over the loan granted to the company by Mediocredito Centrale, the transfer of the equity investment in Holding Intergas S.A. to the shareholder Ghezzi S.p.A., and closing the liquidation procedure of Enerfin. For this reason, up until the previous fiscal year the equity investment was valued at the symbolic amount of 1 euro. In 2006 according to the projections, the shareholders took over the loan with Mediocredito Centrale, thereby causing the loan takeover value to increase by the cost of the equity investment. The company recorded extraordinary income equal to the settlement value of the debt with Mediocredito. In the meantime the shareholders had due diligence carried out that resulted in a market value for the Argentine companies that is much higher than that recorded on the balance sheet, which was the result of the large writedowns that were effected in 2002 and 2003 following the severe devaluation of the Argentine peso due to the economic crisis that hit the country at that time.

The due diligence established a market value of the Argentine companies of 3,668,595 pesos, which is the equivalent of approximately 950 thousand euros, as opposed to the 800 thousand euros entered on Enerfin’s balance sheet as the cost of the equity investments. As a result of this valuation the Cooperative Society decided in turn to give a real valuation to the equity investment by means of the probable realizable value from the liquidation of the company, with the expectation of a future transfer of the Argentine companies at the market value resulting from the due diligence. The value of the equity investment of Enerfin that was entered on the Cooperative Society’s balance sheet amounts to 199,700 euros.

It should also be noted that in the meantime the Cooperative Society acquired in April a further 30% shareholding from the shareholder ASM of Brescia, at a price of 125,000 euros, stipulating at the same time a preliminary transfer of these shares with Mr. Bisaschi, who has worked in that zone for years. The purpose of this operation is to give a value to the Argentine-law companies with a view towards the future transfer of all the shares.

Fontenergia S.p.A.: This company was established on April 12, 1999 as a result of the need to combine the Cooperative’s know-how with that of Liquigas S.p.A. (third-party partner) for LPG construction, management, and distribution in other cities in the Ogliastra service area in Sardinia.

During fiscal year 2002 the Cooperative acquired from Liquigas S.p.A. the remaining 50% of the company’s shares, thereby becoming the sole shareholder. In September 2005 the Cooperative transferred 51% of the shares of Fontenergia S.p.A. to the company Supergaz S.p.A. of Genoa (a company operating under the Esso trademark) at a price of 4,500,000.00 euros. During the last several years the company has been involved in the construction of LPG supply networks. In 2005, all 24 of the municipalities included under the agreement started operations. There were 6,312 acti-

ve consumers as of December 31, 2006.

The large increase in consumers allowed the company to close the 2006 balance sheet with a profit of 68,045 euros, a result that was strongly impacted by the mild winter temperatures and by the nonpayment of the contributions of capital that were stipulated by the tender by the Region of Sardinia. It is expected that these funds will be collected by the end of fiscal year 2007. Lastly, it should be noted that the company has filed a Request for Ruling in conformity with Article 37 “bis,” paragraph 8 of Italian Presidential Decree no. 600 of September 29, 1973 and in observance of the applicable provisions of Italian Ministerial Decree no. 259 of June 19, 1998, because it had been found to be “inactive” as a result of the provisions of Article 30 of Italian Law no. 724 of December 23, 1994 and subsequent amendments, and that on April 4, 2007 the company received from the Internal Revenue Office of the Region of Sardinia, with Provision no. FIS/11764/2007, a positive evaluation regarding its effective operational functionality.

PEGOGNAGA SERVIZI S.r.l.: This company was established on April 15, 2005 by means of a document executed by Mr. Silvio Vezzi, Notary Public in Modena, with registration number 111410, file no. 16693, to manage cemetery services for the municipality of Pegognaga in the province of Mantua. The Cooperative holds 50% of the shares, and the company Mazzola & Bignardi Servizi S.r.l. holds the remaining 50% of the shares.

The financial results for the fiscal year show a profit of 19,954 euros, which is to be considered absolutely satisfactory.

Crist Gas S.r.l.: This company, 50% of whose shares are held by the Cooperative, was established in 2002 as a sales company for Cristoforetti Ser S.r.l., in accordance with Italian Legislative Decree no. 164/2000.

This company is currently still inactive.

The transfer of the remaining 50% that is still possessed by CPL CONCORDIA is currently being finalized with the partner Cristoforetti.

TECLAB S.r.l.: This company, in which the Cooperative Society holds a 35% interest, was acquired on April 22, 2004 by means of a deed entered in the Company Register of La Spezia with reference no. 4365.

This company, which is involved in the development and writing of software for remote control, was acquired as the ideal partner for our former Networks Division.

The 2006 financial results show a loss of 49,245 euros due mainly to extraordinary factors which, it is felt, will not be repeated in the future.

The difference between the recorded value of the equity investment and the corresponding portion of the Net Assets is attributable to the company’s intrinsic know-how and is believed to be recoverable from the profits produced over the next few fiscal years.

OTHER COMPANIES: In reference to operations carried out in other companies, it is worth noting only the increase in the share capital of the financing company Movimento Cooperativo Sofinco S.p.A. by an amount of 286,613 euros.

Relations with affiliated companies Within the sphere of its own activities the Cooperative Society engaged in relations during fiscal year 2006 with the following subsidiaries and associated companies:

59

CPL Concordia’s revenues - Costs of the companies of the group COMPANY

SERVICES

BORGOVERDE COOP GAS CPL FILIALA CLUJ CPL HELLAS CPL NUPI PIPE CINA CRISTOFORETTI ENERGIA D. CONC. ERRE.GAS SI.GAS S.r.l.

ISCHIA COM.Sr.l.

IMM.D.CONCORDIA ISCHIA GAS MARIGLIANO GAS NUORO SERVIZI SERIO ENERGIA S.R.L. Total FONTENERGIA S.P.A. SARDA RETI ENERFIN S.R.L. TECLAB S.R.L. PEGOGNAGA SERVIZI TOTAL

1,888,598 3,815,472 111,280 0 0 270,804 25,179 922,553 226,015 0 179,390 3,191,845 375,003 81,325 272,584 11,360,047 372,717 0 0 0 15,617 11,748,381

ORDERS

0 0 29,175 0 0 (3,316) 338,134 (4,325) 3,520 0 10,520 1,000 5,568 0 0 380,277 12,230 0 0 0 1,099 393,607

INTEREST

TOTAL

32,754 1,921,352 0 3,815,472 46,506 186,961 0 0 0 0 0 267,488 0 363,313 193,579 1,111,807 3,433 232,967 0 0 184,726 374,637 11,675 3,204,520 58,231 438,802 823 82,147 0 272,584 531,726 12,272,049 0 384,948 0 0 0 0 0 0 0 531,726 12,656,997

CPL Concordia’s costs - Revenues of the companies of the group COMPANY

BORGOVERDE COOP GAS CPL FILIALA CLUJ CPL HELLAS CPL NUPI PIPE CINA CRISTOFORETTI ENERGIA D. CONC. ERRE.GAS GAS D.CONCORDIA HOLDICO GAS IMM.D.CONCORDIA ISCHIA GAS MARIGLIANO GAS NUORO SERVIZI PEGOGNAGA SERVIZI Total FONTENERGIA S.P.A. SARDA RETI ENERFIN S.R.L. TECLAB S.R.L. PEGOGNAGA SERVIZI TOTALS

60

SERVICES

0 577 0 6,144,774 0 409,453 17,842 99,045 0 0 0 8,050 0 0 0 6,679,741 0 0 0 71,169 0 6,750,911

ORDERS

0 64,273 0 0 0 0 0 0 0 0 0 0 0 0 0 64,273 1,030 0 0 30,958 0 96,262

INTEREST

TOTAL

0 0 1 64,851 0 0 0 6,144,774 0 0 0 409,453 2,403 20,245 0 99,045 0 0 0 0 0 0 0 8,050 0 0 0 0 0 0 2,403 6,746,418 0 1,030 0 0 0 0 0 102,127 0 2,403 6,849,576

CASH FLOW (amounts expressed in thousands of euros) 70,000 60,000 50,000 40,000 30,000 18.682

20,000 10,000 0

12.974 10.891

8.033 2002

9.395 2003

2004

2005

2006

These relations, all of which were engaged in according to normal market conditions, result from the nature of the business purposes of the affiliated companies that perform activities that are similar to and/or complementary to the Cooperative Society’s activities.

Evaluation of the data of the new multiyear investment program running from january 1, 2004 to december 31, 2008 Beginning in fiscal year 2004 the analysis of the implementation of the multiyear investment program is based on the data of the new multiyear program approved by the Members’ Meeting of December 4, 2004. Addenda no. 1 and no. 2 respectively list the version of the new five-year investment program for CPL Concordia that has been approved by the Members’ Meeting of December 4, 2004 and the analysis of the variations between the projected data and the actual data for fiscal year 2006.

annual accounts 2004-2008 Multiyear Investment Plan (Approved by the Members’ Meeting of December 4, 2004) Amounts expressed in thousands of euros Description: A) INTANGIBLE ASSETS - Software - Work performed on third parties’ assets - Other intangible assets TOTAL INTANGIBLE ASSETS

2004

2005

2006

2007

2008

Total

200 6,500 0 6,700

279 4,800 0 5,079

300 5,000 0 5,300

300 5,250 0 5,550

300 5,500 0 5,800

1,379 27,050 0 28,429

B) TANGIBLE ASSETS - Plant and equipment - Networks in concession - Industrial and commercial equipment - Other tangible assets TOTAL TANGIBLE ASSETS

(8,500) 20,000 1,800 0 13,300

(400) 371 500 0 471

0 3,500 750 0 4,250

0 3,500 1,000 0 4,500

0 3,500 1,000 0 4,500

(8,900) 30,871 5,050 0 27,021

C) LONG-TERM INVESTMENTS - Miscellaneous long-term investments TOTAL LONG-TERM INVESTMENTS

1,000 1,000

(30,000) (30,000)

500 500

500 500

500 500

(27,500) (27,500)

21,000

(24,450)

10,050

10,550

10,800

27,950

(21,000)

24,450

(10,050)

(10,550)

(10,800)

(27,950)

500

7,500

10,500

11,500

12,500

42,500

6,800

(800)

(5,000)

(1,000)

0

0

(13,700)

31,150

(4,550)

(50)

1,700

14,550

TOTAL INVESTMENTS EXPENDITURES FOR INVESTMENTS FORMS OF FINANCING Cash flow from operations Share Capital paid in (Cooperative Shares) Change in payables due to investments

2004-2008 Multiyear Investment Plan (Analysis of variations for fiscal year 2006) Amounts expressed in thousands of euros Description:

Projected Actual 2004 2004

Diff.

Projected Actual 2005 2005

Diff.

Projected Actual 2006 2006

Diff.

2007

Total of Total of actual plan data

2008

A) INTANGIBLE ASSETS - Software - Work performed on third parties’ assets - Other intangible assets TOTAL INTANGIBLE ASSETS

200

105

(95)

279

381

102

300

366

66

300

300

1,452

1,379

6,500

4,792

(1,708)

4,800

3,560

(1,240)

5,000

1,987

(3,013)

5,250

5,500

21,089

27,050

0

695

695

0

395

395

0

991

991

0

0

2,081

0

5,592 (1,108)

5,079

4,336

(743)

5,300

3,344 (1,956)

5,550

5,800

24,622

28,429

6,700

B) TANGIBLE ASSETS - Plant and (8,500) equipment - Networks in 20,000 concession - Industrial and commercial 1,800 equipment - Other tangi0 ble assets

(8,303)

197

(400)

(257)

143

0

264

264

0

0

(8,296)

(8,900)

7,242 (12,758)

371

(4,962)

(5,333)

3,500

5,715

2,215

3,500

3,500

14,995

30,871

681

(1,119)

500

(521)

(1,021)

750

911

161

1,000

1,000

3,071

5,050

(1,049)

(1,049)

0

63

63

0

167

167

0

0

(819)

0

61

Description:

Projected Actual 2004 2004

TOTAL TANGIBLE ASSETS

Diff.

Projected Actual 2005 2005

13,300 (1,429) (14,729)

C) LONG-TERM INVESTMENTS

Projected Actual 2006 2006

Diff.

471 (5,677) (6,148)

4,250

Diff.

7,057

2007

Total of Total of actual plan data

2008

2,807

4,500

4,500

8,951

27,021

- Miscellaneous long-term investments

1,000

(681)

(1,681) (30,000)

4,407

34,407

500

(6,875)

500

500

TOTAL LONG-TERM INVESTMENTS

1,000

(681) (1,681) (30,000)

4,407

34,407

500 (6,375) (6,875)

500

500 (1,649) (27,500)

TOTAL NET INVESTMENTS EXPENDITURES FOR INVESTMENTS

21,000

(21,000) (3,482)

500

Share Capital paid in (Coope6,800 rative Shares) Incr. (-) / Decr. (+) financing pa- (13,700) yables due to investments

3,482 (17,518) (24,450)

FORMS OF FINANCING

Cash flow from operations

3,066

17,518

27,516

10,050

4,026 (6,024)

10,550

10,800

31,924

27,950

24,450 (3,066) (27,516) (10,050) (4,026)

(1,649) (27,500)

6,024 (10,550) (10,800) (31,924) (27,950)

4,691

4,191

7,500

8,100

600

10,500

9,502

(998)

11,500

12,500

46,293

42,500

(1,200)

(8,000)

(800)

341

1,141

(5,000)

(164)

4,836

(1,000)

0

(2,023)

0

9

13,709

31,150

5,375 (25,775) (4,550)

5,312

9,862

(50)

1,700

12,346

14,550

Fiscal Year 2006 In fiscal year 2006 the Cooperative Society incurred outflows for investments (net of transfers) of approximately 4 million euros.

This amount differs from the projection for the fiscal year of net investments of 10 million euros.

CPL Concordia made net investments in Intangible Assets of 3.3 million euros, of which approximately 2 million euros was in reference to “Work performed on third parties’ assets.” These were mainly investments made by the Energy Division (which provides the largest contribution to the value of production: approximately 40% of the total value produced) whose main activities involve heat management and cogeneration.

These activities, which are characterized by the stipulation of multiyear contracts with the customers, initially require investments in assets that will remain the property of third parties at the end of the contract. They are repaid by means of the good margins on the work orders. The establishment of a portfolio of acquired works, consisting of many different multiyear contracts of large amounts with good margins, is considered to represent a valid guarantee for the Cooperative Society’s future activities. From the point of view of financing, this type of work order results in the use of current assets, because the customers are mainly public entities, and it is well known that they are experiencing difficulties due to receiving fewer subsidies from the national government. However, it is actually the customers’ characteristics that allow the Cooperative Society to make the release of the receivable possible, because these

62

(6,375)

customers’ credit ratings are generally high (as a further guarantee of payment).

The investments made in software refer to the capitalization of costs incurred for the development of several programs used mainly for managing services for public utilities.

Overall investments recorded under the item “Intangible Assets” were approximately 2 million euros less than projected. The difference is attributable to the smaller investments made by the Cooperative Society with regard to the execution of the heat management contracts (which in any case, as has been seen previously, constitute a significant portion of the Value of Production.

In reference to the macro-class “Tangible Assets,” the investment plan projected net outflows of 4.2 million euros. The balance sheet shows net investments of approximately 7 million euros. This difference is mainly attributable to the item “Networks in concession,” which includes the costs incurred for the construction of the methane gas supply networks located in the following service areas: Campania 25, Campania 30, Calabria 20, Sicily 12, Sicily 17, the municipalities of Palma di Montechiaro and Camastra in Sicily, and the municipality of Cittanova in Calabria. It should be noted that after the transfer of the Management Division to the former subsidiary Co.Gas S.p.A., CPL Concordia began construction of the networks in the service areas specified above, which had been awarded to it through a public tender. Once this had been completed, these service areas should have been transferred to Co.Gas S.p.A. as well,

annual accounts but subsequent events prevented this from taking place. Therefore, CPL Concordia felt it to be opportune to resume the direct activity of management, a natural complement to the construction of the supply networks, even though it requires large investments that are concentrated in the initial phase especially.

The item “Capital assets” is recorded as a positive 246,500 euros (to which must be added 821,533 euros for the reclassification of the item “assets under construction”) and is attributable to the completion of work on the building that hosts the office of Sant’Omero; this is only a small variation from the projected value in the plan. It should be noted that, in the context of the reorganization and restructuring of the group’s operations, the Cooperative Society felt it to be important in 2004 to transfer the real property of the Cooperative Society’s headquarters in Concordia sulla Secchia, allocating the financial resources to cover the cost of investments in activities connected with its traditional core business.

Lastly, in reference to long-term investments, as of the end of fiscal year 2006 the Cooperative Society recorded net disinvestments of 6.4 million euros (in comparison to a projection of 0.5 million euros of investments).

This decrease consists of the following: Increases in equity investments of 7.2 million euros (1.4 million euros in Marigliano Gas S.r.l. by contributions of capital; approximately 1.4 million euros to acquire 100% of Si.Gas S.r.l.; 1.3 million euros in Ischia Gas S.r.l. by contributions of capital; 0.6 million euros to balance the losses in CPL Hellas, whose headquarters are located in Athens; and 2.1 million in the associated company Enerfin S.r.l. to take over a loan granted by Mediocredito Centrale).

Transfers of equity investments for an amount of 3.5 million euros (2.9 million euros for the reduction of the share capital of Coopgas S.r.l. and 0.5 million euros for transferring the equity investment in Coop Gas S.r.l., which was then absorbed by Coopgas S.r.l., as described below).

Reduction of financing to subsidiary companies, for an amount of 5.1 million euros.

Reduction in long-term receivables due from other, for an amount of 1.4 million euros (decrease in non-interest bearing financing granted to Nebrodi Gas Service).

Writedown on equity investments of approximately 3.5 million euros (specifically, Enerfin S.r.l. for 1.9 million euros; Immobiliare della Concordia S.r.l. for 0.7 million euros; CPL Hellas for 0.6 million euros; Erregas S.r.l. for 0.2 million euros; and Ischia Gas S.r.l. for 0.1 million euros).

In the context of the Group reorganization process and, therefore, for the purpose of concentrating its efforts on its core business, the subsidiary company Gas della Concordia S.p.A. in 2005 transferred the company division performing the activity of exploration and production of liquid and gaseous petroleum product fields (E&P).

In 2006 Gas della Concordia assigned to Coop Gas S.r.l. the activity of natural gas production and marketing, acquiring at the same time a controlling stake in the company. Subsequently, Gas della Concordia should have been merged into CPL Concordia, but the Internal Revenue Office ruled that the operation would not be possible due to tax avoidance issues. Therefore, it was decided to merge Coop Gas S.r.l. into Gas della Concordia, which then took the name Coopgas S.r.l. (the operation was completed in December 2006).

The variation (6.9 million euros) between the projected values and the actual values of long-term investments can be explained mainly by the reduction in the cost value of several of the equity investments following the Coop Gas operation and the need to balance the losses of some subsidiary companies and associated companies.

Financial coverage of the investments Subsequent to the differences from the data projected by the five-year investment program for fiscal year 2006 described previously, during fiscal year 2006 the Cooperative Society incurred outflows for investments, net of collections from transfers, of 4.03 million euros.

The financing to cover these investments was guaranteed to a large degree by the resources (cash flow) generated from the core business.

The net variation in the share capital represented by Cooperative Shares, following the repayment of shares that were subscribed to in 1999, was approximately a negative 1.7 million euros.

In any case, as can be seen from the figure on the last line of the table included in Addendum 2, with regard to 2006 company results, the net investments made by the Cooperative Society were financed with ample margin, resulting in a decrease in exposure to credit institutes (the net financing position as of December 31, 2006 was 58.3 million euros, which represents a decrease of 9.4 million euros from the previous fiscal year).

Conclusions The data for CPL Concordia regarding the investments made in fiscal year 2006 show a variation of approximately 6 million euros, which is a significant amount, but much lower than the variations recorded in previous years. This difference in the company data is explained in large part by the different investment and disinvestment choices that were made with regard to the long-term investments.

This lower amount, which therefore represents smaller cash disbursements, permitted the Cooperative Society to achieve an important result: a positive cash balance (approximately 3.8 million euros) after taking into account the disbursements for net investments and the financing sources represented by self-financing and by the variations in share capital with regard to the Cooperative Shareholders.

It is possible to express a decidedly positive opinion regarding the validity of the new strategies that CPL Concordia’s Board of Directors adopted during the second half of 2004, which were to a large degree responsible for the variations seen in the last two fiscal years.

The decision to return the majority of the Cooperative Society’s activities into the sphere of its traditional core business, the source of great satisfaction which in the past allowed us shareholders to benefit from the excellent results achieved by CPL Concordia (and to benefit also in a concrete manner by means of the large dividend payments), has resulted in the Cooperative regaining its production efficiency and its profitability, as was hoped by our Members’ Meeting at the time the balance sheets for fiscal years 2004 and 2005 were evaluated.

Also, the credit industry has approved of the Cooperative Society’s new strategic decisions. The demonstration of this is the 3.0 million euros of new Cooperative Shares that were subscribed to by institutional inve-

63

stors and which were issued in December 2004 in relation to the new 2004-2008 investment program as well as the large medium- and longterm financing operations that CPL Concordia and its subsidiary companies concluded in the last few fiscal years.

Expected evolution of operations As has been stated often over the past few years, a period of diversification, during which the Cooperative Society and the Group invested in new markets, was followed by a period of divestitures, the purpose of which was to return to the group’s core business. In fact, fiscal year 2006 was characterized by the consolidation of the Cooperative Society’s core business and by a reorganization process whose goal was a greater penetration of the local markets, offering all the services the group is able to provide. Organization by geographical area makes it possible to carry on a direct dialog with the local institutions, thereby providing us with knowledge of the local area’s needs. In this sense we pay a great deal of attention to the economic development of those regions that have planned investments in the medium term regarding the installation of methane gas supply networks and related services.

The construction and management of methane gas supply networks has always been a strong point of the Cooperative. In fact, the Cooperative Society took part in the presentation of six financing projects in connection with several large service areas in the Region of Sardinia, and another six financing projects will be presented by June 30 of this year.

At the beginning of 2007 the Cooperative Society established the special purpose vehicle Progas Metano S.r.l. for the construction and management of the methane gas supply network on the island of Procida (province of Naples).

Besides the initiatives that have already been undertaken or formalized or that are in the process of being awarded, the Cooperative Society intends to take part in the next awarding of tenders for gas concessions, even in reference to those concessions that, for the purposes of Italian Legislative Decree no. 164/2000, will reach their natural expiration date within the next few years. A company that wants to compete in a market undergoing continuous evolution must also know how to evaluate new technologies and respond to its customers’ new needs.

With regard to research and experimentation, an active heating and intelligent lighting project was carried out at the Enrico Fermi Technical Institute in Modena, where 56 rooms and areas of the school network have been computerized. This represents a typical employment of home automation in settings that represent a possible future.

The installment of the Prodi government has resulted in a great deal of attention being paid to the national energy system, about which Minister Bersani has shown himself to be very concerned. There is again talk about regasifiers and alternative energies. On both fronts the Cooperative Society is very careful about future scenarios, in terms of both construction and acquisition at true market prices, of a real market that is not basically a monopoly such as is the case today.

In reference to alternative energies, the government has taken concrete actions by issuing tax provisions that provide incentives for energy produced from renewable resources such as biomass, wind, and sunlight.

The Cooperative Society has been actively involved with cogeneration for many years, both when using fuels (diesel fuel or gas) for producing electricity and when using biogas produced from dumps. Over the past few months a biomass project has been evaluated that could soon become one of the Cooperative Society’s current activities.

The Cooperative Society has even made solar energy investments at its headquarters in Concordia and its offices in Sant’Omero, acquiring the necessary know-how to become an active participant in this market.

These experiences permitted the Cooperative in 2007 to acquire the contract for the construction of a photovoltaic solar system for the city of Carano in Trentino.

On the basis of the work orders in its portfolio and in consideration of the projects that it currently has under evaluation, the Cooperative Society is preparing an update to its 2007-2009 three-year plan, which will soon be approved by the Board of Directors.

The 2007 projection has already been approved; it was drawn up on the basis of the work orders acquired up until the end of December 2006 as well as those that are in the process of being acquired. This projection was adjusted on the basis of the valuations performed when the present balance sheet was closed and when the quarterly update was given.

The reclassified profit and loss statements and statements of assets and liabilities for the 2007 fiscal year are analyzed below and compared with the four previous fiscal years:

Statements of Assets and Liabilities reclassified using the items liquidity method (Amounts expressed in euros) Projected data As of Dec. 31,2007

ASSETS Quick assets

Liquid assets Financial activities that do not constitute

assets Accounts receivable due from customers and

others

Inventory

Capital due from shareholders

Accrued income and prepayments Total quick assets

64

Actual data As of Dec. 31,2006

As of Dec. 31,2005

As of Dec. 31,2004

As of Dec. 31,2004

5,747,332

11,127,629

5,046,492

12,719,079

3,972,279

0

0

0

0

1,350

107,844,303

114,793,337

109,284,631

100,511,093

92,118,130

27,446,647 1,100,000 4,300,000 146,438,283

19,608,968 1,210,554 4,968,267 151,708,755

21,519,647 1,246,406 4,909,661 142,006,836

24,311,527 1,265,512 4,930,132 143,737,343

21,353,911 992,886 565,767 119,004,324

annual accounts Projected data As of Dec. 31,2007

Capital assets

Intangible assets

Tangible assets

Long-term investments Total capital assets

Total ASSETS

SUSPENSE ACCOUNTS LIABILITIES Short-term liabilities

Payables due to banks

Payables due to other lenders Payables due to subsidiaries and associated

companies, for financing

Advance payments

Payables due to suppliers

Payables in the form of credit instruments

Payables due to subsidiary companies

Payables due to associated companies

Taxes payable

Payables due to social security institutions

Other short-term payables

Accrued liabilities and deferred income Total short-term liabilities

Medium- and long-term liabilities Debentures

Payables due to banks

Payables due to other lenders

Payables due to suppliers

Payables in the form of credit instruments

Provisions for severance indemnity Provisions for retirement pensions and similar

obligations

Other provisions Total medium- and long-term liabilities

Shareholders’ equity

Share capital

Revaluation reserve

Legal reserve

Statutory Reserves

Reserve for exchange rate fluctuations

Surplus from merger Reserve for contributions of capital,

Italian Law no. 784/80

Profit / loss for the year Total shareholders’ equity

Total LIABILITIES SUSPENSE ACCOUNTS

Actual data As of Dec. 31,2006

16,522,804 42,878,652 38,658,763 98,060,218 244,498,501 170,000,000

As of Dec. 31,2005

11,408,796 42,099,293 55,983,102 109,491,190 261,199,946 177,431,671

As of Dec. 31,2004

12,243,148 36,715,963 62,679,434 111,638,544 253,645,380 184,742,912

As of Dec. 31,2004

11,929,375 44,255,988 58,742,296 114,927,659 258,665,001 167,041,130

9,221,627 48,267,180 59,647,266 117,136,073 236,140,397 157,174,363

17,400,061 2,300,000

10,701,805 2,545,157

9,645,384 2,331,665

40,298,359 2,427,745

23,604,381 3,545,959

0

10,914,000

10,650,000

1,700,000

0

11,301,333 59,915,474 0 994,278 50,000 4,056,019 1,532,716 3,549,183 600,000 101,699,063

12,389,313 63,749,194 0 4,306,318 90,904 6,817,606 1,425,301 3,965,238 340,704 117,245,540

12,218,806 55,066,894 0 4,927,300 503,126 3,474,793 1,321,314 6,213,651 507,784 106,860,718

9,540,411 52,715,486 0 5,784,269 167,236 4,058,863 1,376,026 4,528,828 576,489 123,173,712

4,898,788 46,032,160 0 1,065,922 437,850 2,690,631 1,259,661 5,991,864 482,595 90,009,810

0 39,281,034 0 2,025,798 0 6,450,260

0 45,273,309 0 1,701,134 0 6,507,062

0 50,097,220 0 2,255,596 0 5,832,038

0 39,361,654 0 2,884,933 0 5,461,142

0 46,586,869 0 2,164,004 0 5,205,849

21,527

21,526

21,526

21,633

45,825

1,582,613 49,361,233

1,839,090 55,342,121

2,836,404 61,042,784

4,494,620 52,223,982

3,705,046 57,707,593

13,000,000 656,679 72,387,954 78,184 0 235,597

12,952,749 656,679 69,866,959 78,184 0 235,597

12,702,218 656,679 67,692,238 78,184 0 235,597

13,335,213 656,679 67,692,238 78,184 0 3,102,096

14,878,043 656,679 66,683,567 78,184 0 3,102,096

1,269,396

1,269,396

1,269,396

1,269,396

1,269,396

5,810,394 93,438,205

3,552,720 88,612,285

3,107,566 85,741,878

-2,866,499 83,267,307

1,755,028 88,422,994

244,498,501 170,000,000

261,199,946 177,431,671

253,645,380 184,742,912

258,665,001 167,041,130

236,140,397 157,174,363

65

Among the activities should be noted the decrease in long-term investments following the reduction in the share capital of the subsidiary company Coopgas S.r.l. and its corresponding liquidation, which took place in April. The quick assets decrease as a consequence of a decrease in liquid assets.

Under liabilities, with regard to short-term liabilities a reduction in business payables occurs as a result of larger estimated payments due to gas suppliers and the simultaneous increase in short-term bank debt, even as

a result of the conversion of the loans to long-term loans. In fact, a corresponding reduction in medium- and long-term debt occurs, especially regarding bank debts.

The net assets, as a result of the allocation of the profits for 2006 to the indivisible reserve and the profit for 2007, will exceed 93 million euros.

The following is an analysis of the profit and loss statement with the 2007 projection compared with the previous four fiscal years:

Profit and Loss Statements reclassified using the Value Added Method (Amounts expressed in euros) Projected data As of Dec. 31,2007

Revenues from sales and services Differences in the inventory of semi-finished and finished products Differences in work in progress Work performed on a time and material basis Other income VALUE OF PRODUCTION

Costs for purchases Differences in the inventory of raw materials Miscellaneous costs for services Expenses for the use of third parties’ assets Other operating charges ADDED VALUE

Cost of labor and related charges GROSS OPERATING MARGIN

Depreciation of tangible assets Depreciation of intangible assets Provisions and writedowns Depreciation and provisions OPERATING RESULTS

Interest and other financial charges Other financial income TOTAL FINANCIAL MANAGEMENT CURRENT RESULTS

Financial income from equity investments Adjustments to financial activities Shareholder distributions Extraordinary operating items PROFITS (LOSS) BEFORE TAXES Income taxes for the year NET PROFITS (LOSS)

66

%

Actual data As of Dec. 31,2006

%

As of Dec. 31,2005

%

As of Dec. 31,2004

%

As of Dec. 31,2004

%

186,393,453 88,75% 172,845,785 93,88% 165,438,299 91,44% 163,812,968 92,83% 126,624,794 71,76% 0

0,00% (1,552,050) -0,84%

0

0,00%

0

0,00%

0

0,00%

1,722,321

0,98%

8,00% 17,285,600

9,80%

3,664,467

1,74%

(892,233) -0,48% (3,494,561) -1,93% (15,099,987) -8,56%

16,371,594

7,80%

9,945,241

5,40% 10,475,074

5,79% 14,111,186

3,587,956 1,71% 3,771,923 2,05% 8,510,074 4,70% 13,639,837 7,73% 10,186,712 6,54% 210,017,470 100,00% 184,118,665 100,00% 180,928,886 100,00% 176,464,004 100,00% 155,819,427 100,00%

(67,300,000) -32,04% (54,226,507) -29,45% (52,715,594) -29,14% (49,754,348) -28,20% (46,642,774) -29,93% 0

0,00%

274,277

0,15%

(346,772) -0,19%

(482,830) -0,27%

(378,994) -0,24%

(76,500,000) -36,43% (67,308,739) -36,56% (71,767,063) -39,67% (73,695,523) -41,76% (68,682,473) -44,08% (9,500,000) -4,52% (9,881,067) -5,37% (10,826,715) -5,98% (8,310,388) -4,71% (6,013,257) -3,86%

(1,883,647) 54,833,823

(34,000,000) 20,833,823

(1,600,000) (5,000,000) (800,000) (7,400,000) 13,433,823

-0,90% 26,11%

-16,19% 9,92%

-0,76% -2,38% -0,38% -3,52% 6,40%

(1,958,381) 51,018,249

(31,026,611) 19,991,638

(1,673,715) (4,178,341) (1,544,703) (7,396,758) 12,594,880

(3,435,950) -1,64% (3,668,045) 335,950 0,16% 904,825 (3,100,000) -1,48% (2,763,220) 10,333,823 4,92% 9,831,661

0

0,00%

550,195

-1,06% 27,71%

-16,85% 10,86%

-0,91% -2,27% -0,84% -4,02% 6,84%

(2,164,174) 43,108,568

(30,693,673) 12,414,895

(1,863,046) (4,021,661) (1,023,965) (6,908,672) 5,506,223

-1,20% 23,83%

-16,96% 6,86%

-1,03% -2,22% -0,57% -3,82% 3,04%

(2,242,431) 41,978,484

(30,686,348) 11,292,136

(2,581,728) (2,884,484) (643,054) (6,109,266) 5,182,870

-1,27% 23,79%

-17,39% 6,40%

-1,46% -1,63% -0,36% -3,46% 2,94%

(2,681,744) 31,420,185

(28,128,605) 3,291,580

(2,075,324) (1,515,615) (1,179,448) (4,770,388) (1,478,808)

-1,99% (4,066,967) -2,25% (3,913,559) -2,22% (3,214,228) 0,49% 579,726 0,32% 317,057 0,18% 935,438 -1,50% (3,487,241) -1,93% (3,596,502) -2,04% (2,278,790) 5,34% 2,018,981 1,12% 1,586,367 0,90% (3,757,598)

0,30%

4,527,721

2,50%

2,336,675

-1,72% 20,16%

-18,05% 2,11%

-1,33% -0,97% -0,76% -3,06% -0,95% -2,06% 0,60% -1,46% -2,41%

1,32% 20,404,475 13,09%

(521,221) -0,25% (2,347,069) -1,27% (2,162,320) -1,20% (5,131,523) -2,91% (10,946,643) -7,03% 0 0,00% (750,000) -0,41% (500,000) -0,28% 0 0,00% 0 0,00% 0 0,00% 1,402,234 0,76% 1,889,160 1,04% 1,449,751 0,82% (1,058,513) -0,68% 9,812,602 4,67% 8,687,021 4,72% 5,773,543 3,19% 241,271 0,14% 4,641,721 2,98% (4,002,208) -1,91% (5,134,301) -2,79% (2,665,977) -1,47% (3,107,770) -1,76% (2,886,693) -1,85% 5,810,394 2,77% 3,552,720 1,93% 3,107,566 1,72% (2,866,499) -1,62% 1,755,028 1,13%

annual accounts The economic projection for fiscal year 2007 indicates that the Value of Production will exceed 210 million euros, which includes works that are performed on a time and material basis, net of the contributions specified in Italian Law no. 784/91 of 19 million euros.

The gross operating margin is approximately 21 million euros, which is equivalent to almost 10% of the value of production. The projected depreciation and provisions amount to 7.4 million euros, while the financial

management will generate charges of approximately 3.1 million euros.

It is estimated that the profits before taxes will be 9.8 million euros, and taxes are projected to be 4 million euros; therefore, the profits for fiscal year 2007 are expected to be 5.8 million euros.

The following table provides the most representative indices of 2007 compared with those of previous fiscal years:

Principal balance sheet indices ECONOMIC ANALYSIS

R.O.E. (Return on Equity) R.O.I. (Return on Investment) Ratio of Gross Operating Margin/Value of Production Influence of one-time income and charges Influence of Financial Charges on Value of Production Influence of Net Financial Charges on R.O.

Principal balance sheet indices FINANCING AND ECONOMIC ANALYSIS

Liquidity index Leverage Ratio of Debt Burden Elasticity index EBITDA/DEBT DEBT/EBITDA

Projected Data Dec. 31, 2007 Dec. 31, 2006 6,63% 4,18% 5,49% 4,82% 9,92% 10,86% 43,25% 28,21% 1,48% 1,50% 23,08% 21,94%

Projected Data Dec. 31, 2007 Dec. 31, 2006 1,44 1,29 2,79 3,07 0,61 0,69 1,49 1,39 39,14% 34,29% 2,56 2,92

The gross operating margin of approximately 10% represents a decrease from the previous year due to the large impact of the investments. The capital indices are quite interesting: the debt burden ratio expresses the relationship between own means (net assets – results for the period) and debt, and has dropped below 0.61, and the DEBT/EBITDA (gross operating margin) ratio has decreased to 2.56.

The projected data basically show a general consolidation of the economic and capital values achieved in 2006, with a growing amount of investments in intangible assets (supply networks under management and heat management) as well as tangible assets (gas supply networks), in conformity with the strategic plan adopted in 2004.

Important events that occurred after the end of the fiscal year On April 23, 2007 in the presence of Mr. Silvio Vezzi, Notary Public in Modena, who recorded the relative document with registration no. 114585 and file no. 17714, was established the company Progas Metano S.r.l., a special purpose vehicle in conformity with Article 156 of Italian Legislative Decree no. 163 of April 12, 2006, which will manage the construction and subsequent management under concession of the supply network in the municipality of Procida.

On May 14, 2007 was completed the transaction with Thuga

Actual Data Dec. 31, 2005 Dec. 31, 2004 3,76% -3,33% 2,17% 2,00% 6,86% 6,40% 56,44% -55,31% 1,93% 2,04% 63,33% 69,39%

Actual Data Dec. 31, 2005 Dec. 31, 2004 1,33 1,17 3,07 3,00 0,82 0,83 1,27 1,25 18,34% 15,89% 5,45 6,29

Dec. 31, 2003 2,03% -0,63% 2,11% -118,68% 1,46% -154,10%

Dec. 31, 2003 1,32 2,72 0,80 1,02 4,72% 21,19

Mediterranea S.r.l. regarding the transfer back of the Cittanova concession, with the recognition of the higher value of 97 thousand euros and the simultaneous payment of all the amounts withheld by Thuga as a guarantee.

Other information It should also be noted that the Cooperative Society updated, within the terms established by the relevant decree, the security program document in observance of Annex B of Italian Legislative Decree no. 196/03 (also known as the “Unified Body of Privacy Laws”) which contains the provisions on the technical procedures to be adopted if sensitive data is handled with electronic instruments.

It should also be noted that the Cooperative, together with the interested companies of the Group, is drafting the lists required by Italian Legislative Decree no. 164/2000 and by Resolution no. 311/01 of the Electrical Energy and Methane Gas Authority, regarding the accounting separation in reference to the production processes inherent to the methane gas industry.

It should be noted that pursuant to Article 2497 of the Italian Civil Code, the Cooperative Society is not subject to management and coordination activities. In fact, the Cooperative Society exercises management and coordination activities in relation to the following subsidiary companies:

67

Coopgas S.r.l.

Energia della Concordia S.p.A. Immobiliare della Concordia S.r.l.

Borgoverde S.r.l.

Cristoforetti Servizi Energia S.r.l.

Erre.Gas S.r.l.

Marigliano Gas S.r.l.

Ischia Gas S.r.l.

Si.gas S.r.l.

Nuoro Servizi S.r.l.

Serio Energia S.r.l.

Cpl Filiala Cluj Romania S.r.l.

in conformity with the provisions of Article 12 of Italian Law no. 904 of December 16, 1977.

An amount of 1,455,178.94 euros to the Reserve Fund which is indivisible among the shareholders not only during the life of the Cooperative, but also at the time of its dissolution, as prescribed by the Articles of Association and in conformity with the provisions of Article 12 of Italian Law no. 904 of December 16, 1977.

Thank you for the confidence and trust you have placed in us. We recommend that you approve the Annual Accounts as of December 31, 2006 as they have been presented to you.

Concordia sulla Secchia, May 14, 2007

Roberto CASARI The Chairman (for the Board of Directors)

Cpl Hellas A.B. & T.E. NET PROFITS (amounts expressed in thousands of euros)

Allocation of Profits The Board of Directors, on the basis of the financial results and after having also heard the informed opinions of the Special Meeting of Cooperative Shareholders, recommends to the Members’ Meeting that it approve the implementation of the multiyear investment plan regarding fiscal year 2006 and that the net Profits for the year of 3,552,720.00 euros be allocated as follows:

60,000 50,000 40,000 30,000 20,000 10,000

An amount of 374,447.83 euros to the Cooperative Shareholders (subscribers) as a gross dividend (for the period from January 1, 2006 to December 31, 2006) of 8.00% per share with a par value of 51.64 euros as of December 31, 2006, payable as of July 4, 2007.

An amount of 11,435.16 euros to the Cooperative Shareholders (stock options) as a gross dividend (for the period from January 1, 2006 to December 31, 2006) of 8.00% per share with a par value of 51.64 euros as of December 31, 2006, payable as of July 4, 2007.

An amount of 240,000.00 euros to the Cooperative Shareholders (subscribers) as a gross dividend (for the period from January 1, 2006 to December 31, 2006) of 8.00% per share with a par value of 500.00 euros as of December 31, 2006, payable as of July 4, 2007.

An amount of 224,445.39 euros to the Cooperating Shareholders and to the Supporting Shareholders as a gross dividend of 6.00% in proportion to the Share Capital that has actually been paid in, payable as of July 4, 2007.

An amount of 74,815.08 euros, equal to 2.00%, as a free increase (in accordance with Italian Law no. 59/92) of the share capital that has actually been paid in. This amount can be capitalized.

An amount of 106,581.60 euros, equal to 3.00% (three percent), to the Mutual Assistance Funds for the promotion and development of Cooperation, in conformity with Article 11 of Italian Law 59 of January 31, 1992.

An amount of 1,065,816.00 euros, equal to 30%, to the indivisible Legal Reserve Fund, as prescribed by the Articles of Association and

68

3.222

3.108

1.755

3.553

0 -2.866

-10,000

2002

2003

2004

2005

2006

ALLOCATION OF PROFITS FOR FISCAL YEAR 2006 Dividend to Cooperative Shareholders (subscribers) 17,30% Dividend to Cooperative Shareholders (stock options) 0,32% Dividend to Cooperating Shareholders and Supporting Shareholders 6,32%

Reserve Fund 70,69%

Revaluation of the Shareholders’ Share Capital 2,11% Mutual Assistance Funds 3,00%

balance sheet of CPL Concordia Soc. Coop. of december 31, 2006

69

PROFIT AND LOSS STATEMENT PROFIT AND LOSS STATEMENT A) 1) 2) 3) 4) 5)

B) 6) 7) 8) 9)

10)

11) 12) 13) 14)

VALUE OF PRODUCTION: Revenues from sales and services Differences in the inventory of products undergoing processing, semi-finished products, and finished products Differences in contract work in progress Increases in capital assets due to internal work Other revenues and income - Miscellaneous - Contributions for operating expenses Total COSTS OF PRODUCTION: Costs of raw materials, subsidiary materials, consumables, and goods Costs of services Costs for the use of third parties’ assets Personnel costs: a) Salaries and wages b) Social security charges c) Employee severance indemnity d) Retirement pensions and similar costs e) Other costs Depreciation and writedowns: a) Depreciation of intangible assets b) Depreciation of tangible assets c) Other writedowns of capital assets d) Writedown of receivables included in the current assets and of liquid assets Differences in the inventory of raw materials, subsidiary materials, consumables, and goods Provisions for risks Other provisions Other operating charges Total

AS OF DECEMBER 31, 2006 AS OF DECEMBER 31, 2005 Amounts expressed in euros Amounts expressed in euros

3,771,923 0

23,194,016 7,096,185 1,486,410 0 0

15)

16)

70

FINANCIAL INCOME AND CHARGES: Financial income from equity investments: - From subsidiary companies - From associated companies - From other companies Other financial income: a) From accounts receivable recorded under capital assets: - From subsidiary companies - From associated companies - From parent companies - From other companies b) From stocks recorded under capital assets that do not constitute equity investments

165,438,299

(1,552,050)

0

(892,233) 9,945,241

(3,494,561) 10,475,074

3,771,923 185,466,616

8,460,074 50,000

52,715,594

67,308,739 9,881,067

71,767,063 10,826,715

31,776,611

22,407,066 7,299,499 1,487,109 0 0

6,270,787

392,020

6,278,936

(274,277)

346,772

0 1,125,972 1,958,381 172,273,786

0 629,735 2,164,174 175,922,663

13,192,830

0 0 0 0

31,193,674

4,021,661 1,863,046 2,209

417,000

511,454 0 38,741

8,510,074 180,928,886

54,226,506

4,178,341 1,673,715 1,731

DIFFERENCE BETWEEN THE VALUE AND THE COSTS OF PRODUCTION (A - B) C)

174,193,735

5,006,223

550,195

2,687,266 1,527,900 312,556

4,527,722

0

0 0 0 0

0

annual accounts PROFIT AND LOSS STATEMENT

AS OF DECEMBER 31, 2006 AS OF DECEMBER 31, 2005 Amounts expressed in euros Amounts expressed in euros

c) From stocks recorded under current assets that do not constitute equity investments d) Other financial income not included above: - From subsidiary companies - From associated companies - From parent companies - From other companies 17) Interest and other financial charges - From subsidiary companies - From associated companies - From parent companies - From other companies 17 bis) CURRENCY EXCHANGE PROFITS AND LOSSES - Currency exchange profits and losses Total ( 15 + 16 - 17 - 17 bis ) D) 18)

19)

E) 20)

21)

ADJUSTMENTS OF THE VALUE OF FINANCIAL ACTIVITIES: Revaluations: a) Of equity investments b) Of long-term investments that do not constitute equity investments c) Of stocks recorded under current assets that do not constitute equity investments Writedowns: a) Of equity investments b) Of long-term investments that do not constitute equity investments c) Of stocks recorded under current assets that do not constitute equity investments Total adjustments ( 18 - 19 ) EXTRAORDINARY INCOME AND CHARGES: Extraordinary income: a) Capital gains on transfers, the revenues of which cannot be entered under item 5 b) Contributions of capital c) Other extraordinary income Extraordinary charges: a) Capital losses on transfers, the accounting effects of which cannot be entered under item 14 b) Taxes regarding preceding fiscal years c) Other extraordinary charges Total extraordinary income and charges ( 20 - 21 )

PROFITS (LOSS) BEFORE TAXES ( A - B ± C ± D ± E ) 22) 22 a) 22 b)

Income taxes for the year of which are income taxes for the year of which are taxes paid in advance/(deferred taxes)

26)

PROFITS (LOSS) FOR THE YEAR

531,726 323 0 372,777 0 2,403 0 3,673,965 (8,323)

904,826

424,027 0 0 155,700

579,727

3,676,368

223,041 42,936 0 3,758,803

4,024,780

(8,323) (2,213,024)

0

42,189

42,189 1,040,480

0

0

0

2,347,069

2,162,320

0

0

2,347,069

2,162,320

(2,347,069)

(2,162,320)

0

1,104,616

0 54,284

0 1,390,548

54,284

0

344,302

0 0

0 261,702

0 54,284 8,687,021

2,495,164

606,004 1,889,160 5,773,543

(5,134,301) (4,167,849) (966,452)

(2,665,977) (1,898,489) (767,488)

3,552,720

3,107,566

71

STATEMENT OF ASSETS AND LIABILITIES

ASSETS

ASSETS A)

CAPITAL DUE FROM SHAREHOLDERS Portion called for

B)

CAPITAL ASSETS INTANGIBLE ASSETS: Capital and expansion costs Research, development, and advertising costs Industrial patent rights and usufructuary rights of original works Concessions, licenses, trademarks, and similar rights Goodwill Assets in progress and advance payments Other intangible assets Total

I 1) 2) 3) 4) 5) 6) 7)

II 1) 2) 3) 4) 5)

III

AS OF DECEMBER 31, 2006 Amounts expressed in euros 1,210,554 1,210,554

AS OF DECEMBER 31, 2005 Amounts expressed in euros 1,246,406 1,246,406

0 155,196

40 123,420

0

0

50,907

508,376

0 831,912 10,370,781 11,408,796

0 437,705 11,173,607 12,243,148

1,411,515 38,060,370 283,566 1,318,574

367,400 33,702,562 212,183 1,188,520

1,025,267

1,245,298

42,099,292

36,715,963

28,471,622 2,495,112 0 1,654,782

28,879,743 2,295,413 0 1,302,179

TANGIBLE ASSETS: Land and buildings Plant and machinery Industrial and commercial equipment Other tangible assets Assets under construction and advance payments Total

LONG-TERM INVESTMENTS: Equity investments in: a) Subsidiary companies b) Associated companies c) Parent companies d) Other companies 2) Loans: a) To subsidiary companies: b) To associated companies: c) To parent companies: d) To others: 3) Other stocks 4) Own shares Total TOTAL CAPITAL ASSETS 1)

C) I 1) 2) 3) 4) 5)

72

CURRENT ASSETS INVENTORY: Raw materials, subsidiary materials, and consumables Products undergoing processing and semi-finished products Contract work in progress Finished products and goods Advance payments Total

(within 12 months) 8,485,000 10,754,000 381,299

8,485,000 10,754,000 0 2,357,440 0 0 54,217,956 107,726,044

(within 12 months) 13,648,075 0 0 407,735 0 0

13,648,075 10,734,000 0 3,733,877 0 0 60,593,287 109,552,398

2,675,373

2,388,756

3,858,438

3,214,257

11,305,318 243,257 1,526,582 19,608,968

12,929,501 1,807,646 1,179,486 21,519,646

annual accounts ASSETS II 1) 2) 3) 4) 4 bis) 4 ter) 5)

ACCOUNTS RECEIVABLE: Due from customers: Due from subsidiary companies: Due from associated companies: Due from parent companies: Tax credits Taxes paid in advance Due from others: Total

1) 2) 3) 4) 5)

FINANCIAL ACTIVITIES THAT DO NOT CONSTITUTE ASSETS: Equity investments in subsidiary companies Equity investments in associated companies Other equity investments Own shares Other stocks Total

III

IV

D)

LIQUID ASSETS: 1) Bank and post office deposits 2) Checks on hand 3) Cash and equivalents on hand Total TOTAL CURRENT ASSETS ACCRUED INCOME AND PREPAYMENTS: TOTAL ASSETS

AS OF DECEMBER 31, 2006 AS OF DECEMBER 31, 2005 Amounts expressed in euros Amounts expressed in euros (beyond 12 months) (beyond 12 months) 1,765,146 108,441,689 2,086,148 101,429,021 5,394,431 0 5,107,713 8,103 224,209 22,867 131,093 0 0 0 415,835 0 1,584,100 1,187,597 0 2,276,318 894,723 0 842,532 116,558,484 111,370,777

0 0 0 0 0 0

0 0 0 0 0 0

11,116,883 1,903 8,843 11,127,629 147,295,081

5,026,264 3,752 16,476 5,046,492 137,936,915

4,968,267

4,909,661

261,199,946

253,645,380

73

STATEMENT OF ASSETS AND LIABILITIES

LIABILITIES AS OF DECEMBER 31, 2006 AS OF DECEMBER 31, 2005 Amounts expressed in euros Amounts expressed in euros

LIABILITIES A) I II III IV V VI VII

VIII IX

B)

SHAREHOLDERS’ EQUITY SHARE CAPITAL SHARE PREMIUM RESERVE REVALUATION RESERVES LEGAL RESERVE STATUTORY RESERVES RESERVE FOR THE REPURCHASE OF OWN STOCK OTHER RESERVES: SURPLUS FROM MERGER EXCHANGE RATE FLUCTUATION RESERVE CONTRIBUTIONS OF CAPITAL, LAW NO. 784/80 PROFITS (LOSSES) CARRIED FORWARD NET PROFIT (LOSS) FOR THE YEAR TOTAL PROVISIONS FOR RISKS AND CONTINGENCIES: 1) For retirement pensions and similar obligations 2) For taxes 3) Others TOTAL

C)

PROVISIONS FOR SEVERANCE INDEMNITY

D)

PAYABLES: 1) Debentures: 2) Convertible debentures: 3) Payables due to shareholders for financing 4) Payables due to banks: 5) Payables due to other lenders: 6) Advances: 7) Payables due to suppliers: 8) Payables in the form of credit instruments: 9) Payables due to subsidiary companies: 10) Payables due to associated companies: 11) Payables due to parent companies: 12) Taxes payable: 13) Payables due to social security institutions: 14) Other payables: TOTAL

E)

ACCRUED LIABILITIES AND DEFERRED INCOME: TOTAL LIABILITIES

74

12,952,749 0 656,679 69,866,959 78,184 0

12,702,218 0 656,679 67,692,238 78,184 0

235,597 0 1,269,396 0 3,552,720 88,612,284

235,597 0 1,269,396 0 3,107,566 85,741,878

21,526 0 1,839,090 1,860,616

21,526 0 2,836,404 2,857,930

6,507,062

(beyond 12 months)

5,832,038

(beyond 12 months)

0 0 0 45,273,309 0 0 1,701,134 0 0 0 0 0 0 0

0 0 2,545,157 55,975,114 0 12,389,313 65,450,328 0 15,220,318 90,904 0 6,817,606 1,425,301 3,965,239 163,879,280 340,704 261,199,946

0 0 0 50,097,220 0 0 2,255,596 0 0 0 0 0 0 0

0 0 2,331,665 59,742,604 0 12,218,806 57,322,490 0 15,577,300 503,126 0 3,474,793 1,321,314 6,213,652 158,705,750 507,784 253,645,380

annual accounts LIABILITIES SUSPENSE ACCOUNTS I) Guarantees furnished - Sureties - Collateral Total II) Other suspense accounts - Notes subject to collection - Others Totale TOTAL SUSPENSE ACCOUNTS

AS OF DECEMBER 31, 2006 AS OF DECEMBER 31, 2005 Amounts expressed in euros Amounts expressed in euros

113,817,505 59,500,000

103,901,557 74,500,000 173,317,505

199,420 3,914,746

178,401,557 659,058 5,682,297

4,114,166 177,431,671

6,341,355 184,742,912

75

details of the profit end loss statement

76

annual accounts Profit and Loss Statements reclassified using the Value Added method Amounts expressed in euros Actual data

As of Dec. 31, 2006

Revenues from sales and services Differences in the inventory of semi-finished and finished products Differences in work in progress Work performed on a time and material basis Other income VALUE OF PRODUCTION

Costs for purchases Differences in the inventory of raw materials Miscellaneous costs for services Expenses for the use of third parties’ assets Other operating charges

As of Dec. 31, 2005

%

As of Dec. 31, 2004

%

As of Dec. 31, 2003

%

As of Dec. 31, 2002

%

%

172,845,785 93,88% 165,438,299 91,44% 163,812,968 92,83% 126,624,794 81,26% 99,212,098 63,67% (1,552,050)

-0,84%

0

0,00%

0

0,00%

0 1,722,321

0,00%

0

0,00%

(892,233)

-0,48% (3,494,561)

-1,93% (15,099,987)

-8,56%

1,11% 11,318,338

7,26%

9,945,241

5,40% 10,475,074

5,79% 14,111,186

8,00% 17,285,600 11,09% 13,439,105

8,62%

3,771,923

2,05%

4,70% 13,639,837

7,73% 10,186,712

5,87%

8,510,074

6,54%

7,730,388

184,118,665 100,00% 180,928,886 100,00% 176,464,004 100,00% 155,819,427 100,00% 131,699,931 100,00%

(54,226,507) -29,45% (52,715,594) -29,14% (49,754,348) -28,20% (46,642,774) -29,93% (32,757,916) -24,87% 274,277

0,15%

(346,772)

-0,19%

(482,830)

-0,27%

(378,994)

-0,24%

89,980

0,07%

(67,308,739) -36,56% (71,767,063) -39,67% (73,695,523) -41,76% (68,682,473) -44,08% (56,341,290) -42,78%

ADDED VALUE

(9,881,067)

-5,37% (10,826,715)

-5,98% (8,310,388)

-4,71% (6,013,257)

-3,86% (7,023,265)

-5,33%

(1,958,381)

-1,06% (2,164,174)

-1,20% (2,242,431)

-1,27% (2,681,744)

-1,72% (2,461,457)

-1,87%

51,018,249 27,71% 43,108,568 23,83% 41,978,484 23,79% 31,420,185 20,16% 33,205,983 25,21%

Cost of labor and related (31,026,611) -16,85% (30,693,673) -16,96% (30,686,348) -17,39% (28,128,605) -18,05% (23,992,016) -18,22% charges GROSS OPERATING 19,991,638 10,86% 12,414,895 6,86% 11,292,136 6,40% 3,291,580 2,11% 9,213,967 7,00% MARGIN

Depreciation of (1,673,715) -0,91% (1,863,046) -1,03% (2,581,728) -1,46% (2,075,324) -1,33% (1,274,303) -0,97% tangible assets Depreciation of (4,178,341) -2,27% (4,021,661) -2,22% (2,884,484) -1,63% (1,515,615) -0,97% (992,827) -0,75% intangible assets Provisions and (1,544,703) -0,84% (1,023,965) -0,57% (643,054) -0,36% (1,179,448) -0,76% (317,663) -0,24% writedowns Depreciation (7,396,758) -4,02% (6,908,672) -3,82% (6,109,266) -3,46% (4,770,388) -3,06% (2,584,794) -1,96% and provisions OPERATING RESULTS

Interest and other financial charges Other financial income TOTAL FINANCIAL MANAGEMENT

12,594,880

6,84%

(3,668,045) 904,825

3,04%

5,182,870

2,94% (1,478,808)

-0,95%

6,629,173

5,03%

-1,99% (4,066,967)

-2,25% (3,913,559)

-2,22% (3,214,228)

-2,06% (3,936,084)

-2,99%

0,49%

0,32%

0,18%

0,60%

1,403,950

1,07%

579,726

317,057

935,438

-1,50% (3,487,241)

-1,93% (3,596,502)

-2,04% (2,278,790)

-1,46% (2,532,134)

-1,92%

9,831,661

5,34%

2,018,981

1,12%

1,586,367

0,90% (3,757,598)

-2,41%

4,097,039

3,11%

Adjustments to financial 550,195 activities Shareholder distributions (2,347,069) (750,000) Ristorno ai soci Extraordinary operating 1,402,234 items PROFITS (LOSS) 8,687,021 BEFORE TAXES Income taxes for the year (5,134,301)

0,30%

4,527,721

2,50%

2,336,675

1,32% 20,404,475 13,09%

979,640

0,74%

CURRENT RESULTS

NET PROFITS (LOSS)

(2,763,220)

5,506,223

3,552,720

-1,27% (2,162,320) -0,41% (500,000)

-1,20% (5,131,523) -0,28% 0

-2,91% (10,946,643) 0,00% 0

-7,03% (1,808,541) 0,00% (295,430)

-1,37% -0,22%

0,76%

1,889,160

1,04%

1,449,751

0,82% (1,058,513)

-0,68%

2,534,621

1,92%

4,72%

5,773,543

3,19%

241,271

0,14%

2,98%

5,507,328

4,18%

4,641,721

-2,79% (2,665,977)

-1,47% (3,107,770)

-1,76% (2,886,693)

-1,85% (2,285,145)

-1,74%

1,93%

1,72% (2,866,499)

-1,62%

1,13%

2,45%

3,107,566

1,755,028

3,222,183

77

Comparison of the Budget and the final Reclassified Profit and Loss Statements Amounts expressed in euros Actual data

Dec. 31, 2005

Budget

Percent.

Dec. 31, 2005

Variation Percent.

172,845,785

93,88%

172,306,297

92,55%

(1,552,050)

-0,84%

0

0,00%

Differences in work in progress

(892,233)

-0,48%

5,015,000

2,69%

Work performed on a time and material basis

9,945,241

5,40%

7,777,500

4,18%

Other income

3,771,923

2,05%

1,078,775

0,58%

VALUE OF PRODUCTION

184,118,665

100,00%

186,177,572

100,00%

Costs for purchases

(54,226,507)

-29,45%

(59,000,000)

-31,69%

274,277

0,15%

0

0,00%

(67,308,739)

-36,56%

(68,680,000)

-36,89%

Expenses for the use of third parties’ assets

(9,881,067)

-5,37%

(9,400,000)

-5,05%

Other operating charges

(1,958,381)

-1,06%

(1,662,704)

-0,89%

ADDED VALUE

51,018,249

27,71%

47,434,868

25,48%

(31,026,611)

-16,85%

(31,830,000)

-17,10%

GROSS OPERATING MARGIN

Depreciation of tangible assets

19,991,638

10,86%

15,604,868

8,38%

(1,673,715)

-0,91%

(1,813,000)

-0,97%

Depreciation of intangible assets

(4,178,341)

-2,27%

(3,887,000)

-2,09%

Provisions and writedowns

(1,544,703)

-0,84%

(800,000)

0,43%

Depreciation, provisions, and writedowns

(7,396,758)

-4,02%

(6,500,000)

-3,49%

OPERATING RESULTS

Interest and other financial charges

12,594,880

6,84%

9,104,868

4,89%

(3,668,045)

-1,99%

(4,280,000)

-2,30%

904,825

0,49%

350,000

0,19%

(2,763,220)

-1,50%

(3,930,000)

-2,11%

1,166,780

9,831,661

5,34%

5,174,868

2,78%

4,656,793

Shareholder distributions

550,195

0,30%

503,519

0,27%

Shareholder distributions

(2,347,069)

-1,27%

(2,535,500)

-1,36%

Shareholder distributions

(750,000)

-0,41%

(500,000)

-0,27%

Extraordinary operating items

1,402,234

0,76%

3,207,500

1,72%

PROFITS (LOSS) BEFORE TAXES

8,687,021

4,72%

5,850,387

3,14%

(5,134,301)

-2,79%

(3,371,980)

-1,81%

3,552,720

1,93%

2,478,407

1,33%

Revenues from sales and services Differences in the inventory of semi-finished and finished products

Differences in the inventory of raw materials Miscellaneous costs for services

Cost of labor and related charges

Other financial income TOTAL FINANCIAL MANAGEMENT CURRENT RESULTS

Income taxes for the year NET PROFITS (LOSS)

78

(2,058,907)

3,583,381

4,386,770

3,490,012

2,836,634 1,074,313

annual accounts Statements of Assets and Liabilities reclassified using the items liquidity method Amounts expressed in euros Actual data As of Dec. 31,2006

ASSETS Quick assets

Liquid assets

Financial activities that do not constitute assets

Accounts receivable due from customers and others

Inventory

Capital due from shareholders

Accrued income and prepayments Total quick assets

Capital assets

Intangible assets

Tangible assets

Long-term investments Total capital assets

Total ASSETS

SUSPENSE ACCOUNTS LIABILITIES Short-term liabilities

Payables due to banks

Payables due to other lenders Payables due to subsidiaries and associated

companies, for financing

Advance payments

Payables due to suppliers

Payables in the form of credit instruments

Payables due to subsidiary companies

Payables due to associated companies

Taxes payable

Payables due to social security institutions

Other short-term payables

Accrued liabilities and deferred income Total short-term liabilities

Medium- and long-term liabilities Debentures

Payables due to banks

Payables due to other lenders

Payables due to suppliers

Payables in the form of credit instruments

Provisions for severance indemnity

11,127,629 0 114,793,337 19,608,968 1,210,554 4,968,267 151,708,755

261,199,946 177,431,671

As of Dec. 31,2004

5,046,492 0 109,284,631 21,519,647 1,246,406 4,909,661 142,006,836

11,408,796 42,099,293 55,983,102 109,491,190

Provisions for retirement pensions and similar obligations

Other provisions Total medium- and long-term liabilities

As of Dec. 31,2005

12,719,079 0 100,511,093 24,311,527 1,265,512 4,930,132 143,737,343

12,243,148 36,715,963 62,679,434 111,638,544 253,645,380 184,742,912

As of Dec. 31,2004

3,972,279 1,350 92,118,130 21,353,911 992,886 565,767 119,004,324

11,929,375 44,255,988 58,742,296 114,927,659 258,665,001 167,041,130

9,221,627 48,267,180 59,647,266 117,136,073 236,140,397 157,174,363

10,701,805 2,545,157

9,645,384 2,331,665

40,298,359 2,427,745

23,604,381 3,545,959

10,914,000

10,650,000

1,700,000

0

12,389,313 63,749,194 0 4,306,318 90,904 6,817,606 1,425,301 3,965,238 340,704 117,245,540

12,218,806 55,066,894 0 4,927,300 503,126 3,474,793 1,321,314 6,213,651 507,784 106,860,718

9,540,411 52,715,486 0 5,784,269 167,236 4,058,863 1,376,026 4,528,828 576,489 123,173,712

4,898,788 46,032,160 0 1,065,922 437,850 2,690,631 1,259,661 5,991,864 482,595 90,009,810

0 45,273,309 0 1,701,134 0 6,507,062

0 50,097,220 0 2,255,596 0 5,832,038

0 39,361,654 0 2,884,933 0 5,461,142

0 46,586,869 0 2,164,004 0 5,205,849

21,526

21,526

21,633

45,825

1,839,090 55,342,121

2,836,404 61,042,784

4,494,620 52,223,982

3,705,046 57,707,593

79

Actual data As of Dec. 31,2006

Shareholders’ equity

Share capital

Revaluation reserve

Legal reserve

Statutory Reserves

Reserve for exchange rate fluctuations

Surplus from merger Reserve for contributions of capital,

Italian Law no. 784/80

Profit / loss for the year Total shareholders’ equity

Total LIABILITIES SUSPENSE ACCOUNTS

As of Dec. 31,2005

As of Dec. 31,2004

As of Dec. 31,2004

12,952,749 656,679 69,866,959 78,184 0 235,597

12,702,218 656,679 67,692,238 78,184 0 235,597

13,335,213 656,679 67,692,238 78,184 0 3,102,096

14,878,043 656,679 66,683,567 78,184 0 3,102,096

1,269,396

1,269,396

1,269,396

1,269,396

3,552,720 88,612,285

3,107,566 85,741,878

-2,866,499 83,267,307

1,755,028 88,422,994

261,199,946 177,431,671

ITEMS

253,645,380 184,742,912

258,665,001 167,041,130

as of Dec. 31, 2005

236,140,397 157,174,363

as of Dec. 31, 2004

SHORT-TERM PAYABLES DUE TO BANKS

10.701.805

9.645.384

LONG-TERM PAYABLES DUE TO BANKS

45.273.309

50.097.220

2.545.157

2.331.665

(11.116.883)

(5.026.264)

47.403.388

57.048.006

LOAN FROM SHAREHOLDERS AND OTHER LENDERS - DEDUCTING LIQUIDITY NET DEBT BURDEN

R.O.I. (Operating Income/Invested Capital)

R.O.E. (Net Income/Shareholders’ Equity) 4,82%

5,00% 4,00% 3,00%

2,35%

2,00% 2,17%

2,00% 1,00% 0,00% -1,00% -2,00%

80

-0,63%

2002

2003

2004

2005

2006

160,00% 140,00% 120,00% 100,00% 80,00% 60,00% 40,00% 20,00% 0 -20,00%

4,18% 3,36% 2,03%

2002

2003

3,76% -3,33% 2004 2005

2006

annual accounts Principal balance sheet indices ECONOMIC ANALYSIS

R.O.E. (Return on Equity) R.O.I. (Return on Investment) Ratio of Gross Operating Margin/Value of Production Influence of one-time income and charges Influence of Financial Charges on Value of Production Influence of Net Financial Charges on R.O.

Principal balance sheet indices FINANCING AND ECONOMIC ANALYSIS

Liquidity index Leverage Ratio of Debt Burden Elasticity index EBITDA/DEBT DEBT/EBITDA

as of Dec. 31, 2006 4,18% 4,82% 10,86% 28,21% 1,50% 21,94%

as of Dec. 31, 2006 1,29 3,07 0,69 1,39 34,29% 2,92

Actual Data as of Dec. 31, 2005 as of Dec. 31, 2004 3,76% -3,33% 2,17% 2,00% 6,86% 6,40% 56,44% -55,31% 1,93% 2,04% 63,33% 69,39%

Actual Data as of Dec. 31, 2005 as of Dec. 31, 2004 1,33 1,17 3,07 3,00 0,82 0,83 1,27 1,25 18,34% 15,89% 5,45 6,29

as of Dec. 31, 2003 2,03% -0,63% 2,11% -118,68% 1,46% -154,10%

as of Dec. 31, 2003 1,32 2,72 0,80 1,02 4,72% 21,19

81

Members, In compliance with the functions and duties you have assigned to the Board of Auditors, we would like to provide you with information regarding the supervisory activities we performed during the past fiscal year in fulfillment of our obligations as per Article 2403 of the Italian Civil Code.

The Board of Auditors attended the Members’ Meetings and the meetings of the Board of Directors, which took place in observance of the regulations and laws by which they are governed, and obtained the required information regarding the general operations and their expected evolution, as well as the most important operations executed by the company and its subsidiary companies. Specifically, the Board of Auditors monitored the operations that were executed and ensured that they were in compliance with the law and the articles of association, were not obviously imprudent or dangerous, did not conflict with the resolutions that had been passed or represent a potential conflict of interests, and did not jeopardize the integrity of the company assets.

In the performance of its supervisory duties the Board of Auditors remained in close contact with PriceWaterhouseCoopers S.p.A., the auditing company encharged with accounting oversight of the accounts.

We can assure you that the Board of Auditors, in its supervisory role, performed its duties of monitoring and consultation by actively taking part in the meetings of the Board of Directors and, when expressly requested, also the meetings of the Executive Committee.

During the past fiscal year, in conjunction with the reorganization of the company by divisions and by geographical zones, we met with the division heads to assess the degree of efficiency achieved through the new corporate structure that was introduced.

At these meetings we were able to note the high degree of professionalism shown by the division heads, the cultural growth of the personnel, and the individual responsibilities of the personnel listed on the functional corporate organization chart, with regard to the division and geographical zone.

We confirm that the administrative efficiency noted during these visits allowed us to give a positive assessment of the operations by means of the internal managerial oversight service.

Proof of the confirmed increase in efficiency can be seen in the measurable progress in the financial, capital, and economic indices expressed implicitly and explicitly in the balance sheet submitted to you for approval.

Also during the fiscal year that ended on December 31, 2006, our activities were conducted according to the Rules of Conduct for Boards of Auditors recommended by the Consiglio Nazionale dei Dottori Commercialisti e dei Ragionieri (National Council of Business Consultants and Accountants).

Therefore, in the performance of the specific supervisory duties assigned to us, we have acquired know-how and monitored the adequacy of the company’s organizational structure. In fact, we confirm that the company management, the directors who possess the power to supervise the internal managerial oversight, actively collaborated with the Board of Auditors by providing us with materials and information on the various current problems.

During the year the collaborative relationship continued between the Board of Auditors, the administrative body, and the general management which allowed us to deepen our knowledge of the organizational structure of the company’s divisions and, therefore, to perform our supervisory

82

report of the board of auditors of december 31, 2006

annual accounts duties with a high level of security.

The Board of Auditors would also like to thank Mr. Massimo Continati and his closest colleagues for their collaboration and for the high degree of responsibility that they have imparted to the accounting office, where they work.

We evaluated and monitored the suitability of the administrative and accounting system as well as the reliability of the latter to correctly present the facts and details of operations, by obtaining information from the heads of departments, offices, and operations and from our examination of the corporate documents; we have no particular observations to report. No notices were received pursuant to Article 2408 of the Italian Civil Code.

While performing our supervisory duties as described above, no further significant facts came to light that would require mention in this report.

To the extent of our responsibility, we examined the balance sheet as of December 31, 2006. As it was not our responsibility to perform an in-depth analytical analysis of the contents of the balance sheet, we checked its general structure and its general compliance with the law with regard to its preparation and structure; we have no particular observations to report.

To our knowledge the Directors, when preparing the balance sheet, did not depart from legal regulations, in compliance with paragraph 4 of Article 2423 of the Italian Civil Code.

Upon completing our duties, we confirmed that the balance sheet reflects the facts and information of which we are aware; we have no particular observations to report.

We verified observance of the regulations regarding the preparation of the Report on Operations, and we have no particular observations to report. We also verified observance of the regulations regarding the preparation of the Notes to the Annual Accounts, which is written clearly and is comprehensible to both cooperative members and others.

It contains the latest information required by the law and by specific regulations regarding manufacturing and labor cooperative societies.

Pursuant to Article 2426 of the Italian Civil Code, we expressed our approval of the entry of the following items under assets of the Statement of Assets and Liabilities: Capital and expansion costs.

Research, development, and advertising costs.

Startup.

For these items the Notes to the Annual Accounts specify, in a similar manner, the criteria that were adopted in reference to the depreciation policy according to a schedule with criteria of which we approve.

In compliance with Article 2 of Italian Law no. 59/92, the Board of Auditors declares that the Directors, during the past fiscal year, in the execution of their duties, acted and managed the company in pursuit of the corporate purposes according to the principles of cooperative mutual assistance.

Members, At the end of our report on the 2005 balance sheet, we had expressed the hope that the Cooperative would follow the virtuous path of improving its financial structure to allow it to pursue improved financial, capital, and economic indices.

We would like to confirm that in 2006, as can be seen from the balance sheet submitted for your approval, this virtuous process successfully moved forward. Therefore, we express our hopes that the Cooperative

can achieve further successes, and we express a favorable opinion towards the approval of the balance sheet as of December 31, 2006 and the proposals submitted by the Directors regarding the allocation of the profits.

Concordia sulla Secchia, June 11, 2007

THE BOARD OF AUDITORS Mr. Carlo Alberto Pelliciardi (Chairman) Mr. Fausto Ascari Mr. Mauro Casari

83

certification report

84

annual accounts

85

certificazione UNI EN ISO 9001:2000

86

annual accounts

87

consolidated annual accounts

annual accounts

CPL CONCORDIA Soc. Coop Via A. Grandi 39 - 41033 Concordia s/S. (MO) Italy tel. +39.535.616.111 - fax +39.535.616.300 info@cpl.it - w w w . c p l . i t