C o s t r u z i o n i El e t t r o m e c c a n i c h e Br e s c i a n e. REPORT and ACCOUNTS

Transcription

1 C o s t r u z i o n i El e t t r o m e c c a n i c h e Br e s c i a n e REPORT and ACCOUNTS

2 Cembre S.p.A. Head Office: Via Serenissima, 9, Brescia, Italy Share Capital: EUR 8,840,000 (fully paid-up) Registration no: (Commercial Register of Brescia) This document contains translations of the official financial statements and managements reports prepared in the Italian language for the purpose of the Italian law.

3 R E P O R T A N D AC C O U N T S 2007 CONTENTS Group Structure 12 Report on Operations for the Financial Year Attachment 1: Consolidated Income Statement Attachment 2: Investments held by Directors and Statutory Auditors 30 - Attachment 3: Corporate Boards 31 Consolidated Financial Statements at December 31, Consolidated Balance Sheet Consolidated Income Statement 35 - Consolidated Statement of Cash Flows 36 - Statement of Changes in the Consolidated Shareholders' Equity 38 - Notes to the Consolidated Financial Statements 39 Auditing Report on Consolidated Financial Statements 68 Report of the Board of Statutory Auditors on Consolidated Financial Statements 69 Certification pursuant to article 81-ter of the regulation issued by the Italian market regulatory body (CONSOB) no of May 14, 1999 and subsequent integrations and updatings. 70 Financial Statements at December 31, 2006 of Cembre SpA - Balance Sheet Income Statement 73 - Statement of Cash Flows 74 - Statement of Changes in the Shareholders' Equity 76 - Notes to the Financial Statements 77 - Attachments 102 Auditing Report on Cembre S.p.A. Financial Statements 105 Report of the Board of Statutory Auditors on Cembre S.p.A. Financial Statements 113 Certification pursuant to article 81-ter of the regulation issued by the Italian market regulatory body (CONSOB) no of May 14, 1999 and subsequent integrations and updatings. 114 Abstract of Shareholders General Meeting resolution 115 1

4 headq adquarters Cembre S.p.A. Group headquarters located in Brescia, Italy 2

5 Cembre is today the leading Italian manufacturer and one of the largest European manufacturers of electric compression connectors and related installation tools*. The company s extensive know-how in the field of electrical connectors, strong R&D activity and the continuous innovation in manufacturing technologies and product specifications, allow Cembre to respond quickly to the needs of an increasingly demanding market offering high-quality products that are reliable, durable and safe. The wide product range, the capillary and efficient domestic and international sales network and the strong focus on customer needs repre- sent the strengths of the Cembre Group and ensure a strong competi- tive advantage in a continuously evolving world market. * Source Cembre S.p.A. 3

6 Products PRODUCT RANGE Cembre designs and manufactures a wide range of electrical connectors and tools ols for their installation. Cembre, in particular, has adopted and developed a compression connection system that enables it to exploit the hardening proper-rties of selected metals (copper and aluminium), whereby these metals acquire greater strength and resistance when bent by force, thereby guaranteeing the achievement of better performances by these types of connectors than would have otherwise been obtained by more conventional welding and mechanical clamping (screws and bolts) connection methods. 4

7 Compression connectors are characterised by lower electrical resistance and by excellent quality electri- cal contact. Installation tools used for compressing the connectors and cutting the cables enable quick installation and the achievement of easy and safe optimal connections. The range of tools includes, according to the application, mechanical, pneumatic, hydraulic and electrical tools. 5

8 Strategy te ES The Cembre e Group is growing rapidly and investing strongly in the opment estro of its product range and the devel- consolidation its sales and distribution network, tof tking trk, seeking to increase its presence in the international markets. anal aernation DEVELOPMENT OF THE PRODUCT RANGE ate STRATEGIES B54Y, "In line" portable battery crimping tool specifically developed for the American market R&D activities focuse primarily on the development of new products aimed at markets with the highest growth potential such as rail transport, civil and industrial equipment. Implementation of new European Union safety regulations require the adoption of modern connection systems as those manufactured by Cembre Group. Constant attention devoted to trends in demand and the monitoring of customer satisfaction allowed Cembre to develop solutions in line with an increasingly demanding market, stretching the use of own technologies to a growing number of applications. Cembre Group s expansion of product offer was achieved by launching leading-edge technology products, including new battery powered hydraulic tools, a new range of professional mechanical tools, electrically insulated hydraulic tools, linked cable terminals insulated with halogen free material, drills for wooden railsleepers etc. Whole families of already existing products were moreover updat- ed and improved to enhance user friendliness and quali- tative and performance standards. New "Universal" unit for the insertion and extraction of Pandrol FastClip type clips fastening rails on sleepers 6

9 New range of cordless hydraulic cutting toolsols The wide knowledge of the sector and the strong presence on the territory allowed Cembre to identify and understand the needs of the different local markets, ing products to the specific requirements in adapt- terms of quality imposed by safety regulations in the different countries in which it operates. WEB SITE The Web site allows the company to interact with customers, providing a number of services such as technical assistance, promotions, the presentation of new products and the possibility to liaise with wholesalers operating in the territory. Intern net The sections "Products" and "News" in the internet t site 7

10 made signifi cant investments in the optimization of its manunbre ring ncembnivities acti and enlarging its production capacity at the Brescia, and Bergamo facilities. rescia, iingham Cembre have modern numerical control work centres as well as equip guaranteeing high fl exibility and quality of the producnher othnompany Co has an automated warehouse and its own tinplating tment w allows to reduce production time and costs, ensuring tight ty npment nthe nrntion. nwhich control. se ening of production capacity and effi ciency involved also the ingham estrengthe ethe plant, dedicated to the production of particular specifi c product lines some markets. ral Mar Srl during the 2003 moved its operating headquarters he hfor hehrking tby Bergamo, in a new bigger building suitable to cope with the develop- n for the next years. tment Strengthening th ni infacturin ibirmii nearbth hgenehbirmihe qualiten ndeparn INCREASE IN PRODUCTION CAPACITY In Brni t foreseen Selection of our current hydraulic, battery operated tools 8

11 Multi-site certification of the Cembre Group Quality Management System ENVIRONMENT Cembre SpA has recently recognised the need to align its Environmental Management System with the spirit and content of UNI EN ISO as fundamental to future development. To this end the company is undertaking a wide-ranging review of all functions including development and design stages, material selection, usage and manufacturing processes. The resulting definition of operational procedures in line with these aims and provisions will enable Cembre SpA to achieve the target of Environmental Certification within 2008, further highlighting the companies sensitive and careful approach to environmental protection. QUALITY Cembre Quality System was first certified by LRQA in Initially referring only to Manufacturing according to ISO 9002:1987, certification was extended in 1992 to cover the Design provisions of ISO 9001:1987 norm. Nowadays the activities of the main premises in Brescia, the regional offices in Italy and subsidiary companies in Great Britain, France, Spain, Germany and USA are governed by a single multi-site Quality System conforming to ISO 9001:2000 for the "Design, Manufacture, Marketing of cable accessories, electrical connectors and related equipments as well as repairing, refurbishment and associated equipment recalibration". This assures our customers of the homogenous high quality of Cembre e products and services. Environm ment & Quality 9

12 Manufacturi anufacturing MANUFACTURING Cembre quickly developed after its creation in 1969, until it became the leading company* in Italy, specialising in the manufacturing of electrical compression connectors and related installation tools, while gaining important market shares elsewhere in Europe, where it is now recognised as the leading crimping tools manufacturer. Cembre Group s growth has traditionally been driven by its ability to continually anticipate the evolution of the electrical connectors market, enabling it to develop new products with the highest standards in quality, reliability and safety, as well as to improve the performance of existing products. CNC Machine Department Press and high speed press machines department * Source Cembre S.p.A. 10

13 View of the automated warehouse View of insulated connectors and terminal blocks assembly department Cembre is currently a group employing 525 persons, with a turnover in 2007 amounting to 93,4 million. The parent company, Cembre S.p.A., is based in Brescia where, on an area of aproximately 115,000 square meters, are the Head Office, sales offices, technical offices, Research & Development, the automated warehouse, production facilities and test laboratories. Tin plating department 11

14 Group Structure GROUP STRUCTURE Cembre SpA Brescia (Italy) Cembre Ltd Birmingham (UK) Cembre S.a.r.l. Paris (France) Cembre España S.L. Madrid (Spain) BIRMINGHAM Cembre AS Stokke (Norway) Cembre GmbH Munich (Germany) Cembre Inc. Edison (USA) General Marking Srl Brescia (Italy) PARIS MUNICH BRESCIA STOKKE MADRID BARCELONA VALENCIA Group companies and branch offices Main importers Agents in Italy 12

15 Marketing Companies Production Units Holdings situation at March 25, 2008 The Cembre Group consists of eight companies. The parent company is based in Brescia and is the largest manufacturer of the Group. Other manufacturing companies are the UK subsidiary, based in Birmingham, and Italian subsidiary General Marking, based in Brescia and with manufacturing facilities in Bergamo. The other five subsidiaries are all commercial companies and are based in Paris, Madrid, Stokke (Norway), Munich, and Edison (New Jersey, USA). Direct presence in important Western European countries allows the Group to effectively reach individual markets, establishing close contact with its customers and ensuring timely and qualified technical and sales assistance. Cembre operates in Italy through a capillary distribution network, with offices and own warehouses in Milan, Padua, Bologna and Rome. Other regions in Italy are served by agents trained to provide both technical and commercial assistance and by warehouses providing fast deliveries. The sales network assists customers in the choice of the product and the maintenance of tools, optimizing efficiency and speed of delivery. It also informs management of market trends, national standards and competitors. Cembre Group is present in the USA market through Cembre Inc. located in Edison (New Jersey). 13

16 Cembre Ltd Cembre Ltd Birmingham Cembre Ltd is Cembre Group s second largest manufacturing unit. Since its establishment in 1986, it has enjoyed constant growth and presently benefits from a good positioning in the market. Cembre Ltd is located in a manufacturing centre on the north-eastern outskirts of Birmingham, England s second largest city, in the heart of the Midlands region, recognised for its high concentration of manufacturing industries, particularly in the areas of steel and motor vehicles. It therefore provides Cembre with an excellent source of highly trained labour skilled in the advanced mechanical technologies fundamental to Cembre s manufacturing needs. Its operations cover an area of 8,000 m 2, of which 5,100 m 2 are occupied by manufacturing facilities and office buildings. Cembre Ltd is primarily focused on serving the specific needs of the United Kingdom market. In addition, its flexibility enables it to support other Group operations Productions Departments Test Laboratory 14

17 Brass terminal block and cable clamps Oelma Srl was acquired by Cembre in February 1999 and subsequently merged into the parent company from January 1, Oelma s product line consists of over 1,500 articles for industrial and civil applications. Cable glands with increased safety line Oelma 15line linea l Polyamide, nickel plated brass and stainless steel cable glands and accessories

18 General eral Marking Warning and safety signs Industrial Marking Systems General Marking srl was recently incorporated and is a wholly-owned subsidiary of Cembre SpA. The company is active in the sector of industrial marking, manufacturing cable marking equipment and products for the marking of cables and electrical components. The company has its registered office in Brescia, has operating facilities in Calcinate (Bergamo) and a catalogue of over 12,000 articles. Thermal transfer system for reel media printing SIGN stick-onsys Thermal transfer printer for identification and labelling designed and manufactured by Cembre SpA. Pc-driven ink plotter marker printing system RING cablesys Manual cable marking systems 16

19 Development C e m b r e S. p. A. Cembre has progressed and developed steadily with the dedication and responsible attitude of all the staff. We can look forward to the future with confidence and commitment. Cembre Group Cembre SpA ,4 95,8 93,2 90,6 88,0 85,4 82,8 80,2 77,6 75,0 72,4 69,8 67,2 64,6 62,0 59,4 56,8 54,2 51,6 49,1 46,5 43,9 41,3 38,7 36,2 33,6 31,0 28,4 25,8 23,2 20,7 18,1 15,5 12,9 10,3 7,7 5,2 0 TURN OVER (millions) ,5 14,5 13,4 12,4 11,4 10,3 9,3 8,3 7,2 6,2 5,2 4,1 3,1 2,1 1, CASH FLOW (millions) C e m b r e S. p. A Group STAFF (n ) TURN OVER (millions) EXPORT (millions) % of turn over CASH FLOW (millions) STAFF (N ) QUOTED ON THE ITALIAN STOCK EXCHANGE 17

20 Report on Operations for the financial year ended December 31, 2007

21 R E P O R T A N D AC C O U N T S RE P O R T O N OP E R A T I O N S Report on Operations for the financial year ended December 31, 2007 Operating Review Despite an anomalous year for the market, registering a positive trend in the first half of the year while stagnating in the second half, the Cembre Group closed 2007 reporting good results, with consolidated sales growing by 11.4%, from 83.9 million in 2006 to 93.4 million in Its ability to exploit the good market trend in the first half of the year and the ongoing development of the product range and of process innovation, allowed the Cembre Group to strengthen its presence in its key markets. Domestic sales amounted to 39.3 million, increasing by 5.9%, while exports amounted to 54.1 million, up 15.7% on the previous year. A total of 42% of Group sales in 2007 were represented by Italy (as compared with 44.2% in 2006), 46.4% by the rest of Europe (45.7% in 2006), and the remaining 11.6% by the rest of the World (10.1% in 2006). Sales by geographical area: ( 000) Italy 39,286 37,098 Rest of Europe 43,316 38,365 Rest of the World 10,815 8,407 Total 93,417 83,870 Revenues by Group company (net of intragroup sales) ( 000) Parent company 51,817 46,661 Cembre Ltd. (UK) 12,317 12,609 Cembre S.a.r.l. (France) 6,303 5,325 Cembre España S.L. 11,499 9,926 Cembre GmbH (Germany) 4,839 4,503 Cembre AS (Norway) Cembre Inc. (USA) 5,336 3,931 General Marking srl (Italy) Total 93,417 83,870 Figures for General Marking Srl include only sales to third parties managed directly by the subsidiary. Part of General Marking s sales to other Group companies that distribute products in their respective markets are not attributed to General Marking in the table above. Such sales grew by 18.6% from 1,554 20

22 R E P O R T A N D AC C O U N T S RE P O R T O N OP E R A T I O N S thousand to 1,838 thousand. In 2007, Group companies reported the following results, before the consolidation: Sales Net profit ( 000) Parent company 73,623 65,471 8,987 6,665 Cembre Ltd. (UK) 13,798 13, Cembre S.a.r.l. (France) 6,361 5, Cembre España S.L. 11,542 9,935 1, Cembre AS (Norway) Cembre GmbH (Germany) 4,888 4, Cembre Inc. (USA) 5,352 4, General Marking srl (Italy) 2,369 1, For a more direct evaluation of the effect of foreign exchange translation, we include below sales figures of companies operating outside the euro area in the respective currency. Currency Sales Net profit ( 000) Cembre Ltd. (UK) 9,442 9, Cembre AS (NOR) NKR 6,256 4, Cembre Inc (Usa) US$ 7,335 5, To provide a better understanding of the Company s financial performance for 2007, a Reclassified Consolidated Income Statement for the year ended December 31, 2007 and 2006 is enclosed as Attachment 1. Consolidated gross operating profit amounts to 21,710 thousand, representing a 23.2% margin on sales, up 13.5% on the previous year when it amounted to 19,131 thousand, representing a 22.8% margin on sales. The increase in the price of copper had a negative impact on profit margins, causing an increase in the cost of goods sold. The average number of employees of the Group grew from 489 in 2006, to 525 in Normative changes regarding employee termination indemnities generated a non-recurrent gain commented below. Consolidated operating profit for 2007 amounted to thousand, representing a 19.7% margin on sales, up 15.6% on 15,941 thousand in 2006, when it represented a 19% margin on sales. Consolidated profit before taxes amounted to 18,118 thousand, representing a 19.4% margin on sales, up 14.1% on 15,861 thousand in 2006, when it represented an 18.9% margin on sales. The balance between interest income and charges is negative by 101 thousand, due to interest accrued on loans taken out and repaid in the year, and interest on current account overdrafts. Foreign-exchange differences were also negative, particularly those relating to the US dollar, resulting in a loss of 210 thousand. The net financial position declined from 1.1 million at December 31, 2006 to an indebtedness of

23 R E P O R T A N D AC C O U N T S RE P O R T O N OP E R A T I O N S million at the end of December 2007, due mainly to the growth of inventories from 26 million to 31.7 million, the payment of 3.7 million in dividends for the 2006 financial year (as compared with 2.5 million in the previous year). The net financial position was also affected by capital expenditure for the period, up from 5.4 million in 2006 to 6.9 million in Cash and cash equivalents grew instead from 4 million at the end of 2006, to 4.5 million at the end of 2007, thanks to the cash flow generated by operating activities, amounting to 6.7 million. Consolidated net profit for the year amounted to 11,896 thousand, representing a 12.7% margin on sales, up 27.5% on 2006, when it amounted to 9,327 thousand and represented an 11.1% margin on sales. Non-recurring effect of changes in the accounting of employee termination indemnities Consolidated results for 2007 were affected to a relevant degree by a non recurrent operation generated by new norms regulating employee termination indemnities that came into effect January 1, The restatement of termination indemnities accrued at December 31, 2006 using different actuarial assumptions resulted in a reduction of 1,026 thousand in the value of the same (gross of the related tax effect of 339 thousand). The above reduction was recorded in full in the income statement for Figures for 2007 and the related changes on the previous year, net of the effect of the mentioned event, are shown in the table below: 2007 % of sales 2006 % of sales Change ( 000) Restated Restated Sales 93, , % Gross operating profit 20,684 22,1 19,131 22,8 8.1% Operating profit 17,394 18,6 15,941 19,0 9.1% Pre-tax profit 17,092 18,3 15,861 18,9 7.8% Net profit 11,209 12,0 9,327 11,1 20.2% Results of the parent company Results of the parent company for 2007 are shown in the table below. ( 000) 2007 % of sales 2006 % of sales Change Sales 73, , % Gross operating profit 16,042 21,8 14,266 21,8 12.5% Operating profit 13,666 18,6 11,937 18,2 14.5% Pre-tax profit 13,900 18,9 11,920 18,2 16.6% Net profit 8,987 12,2 6,665 10,2 34.8% 22

24 R E P O R T A N D AC C O U N T S RE P O R T O N OP E R A T I O N S Sales revenues grew by 12.5% from 65,471 thousand in 2006 to 73,623 thousand in Domestic sales grew by 5.8%, while sales in other European countries posted a 17.8% increase, and sales in the rest of the World grew by 32.8%. Sales by geographical area ( 000) Italy 39,296 37,152 Rest of Europe 25,843 21,930 Rest of the World 8,484 6,389 Total 73,623 65,471 In 2007 Cembre SpA received 461 thousand in dividends from UK subsidiary Cembre Ltd. The restatement of deferred tax assets and liabilities in line with reduced tax rates introduced by the 2008 Budget Law resulted in the recording of 582 thousand in prepaid tax assets. Net of the non-recurrent gain resulting from the restatement of employee termination indemnities accrued at December 31, 2006 commented above, results of Cembre SpA would have been as follows: 2007 % of sales 2006 % of sales Change ( 000) Restated Restated Sales 73, , % Gross operating profit 15, , % Operating profit 12, , % Pre-tax profit 12, , % Net profit 8, , % Definition of alternative performance indicators In compliance with Consob Communication DEM/ dated July 28, 2007, below we define alternative performance indicators used in the present document to illustrate the financial and operating performance of the Group. Gross operating profit (EBITDA): defined as the difference between sales revenues and costs for materials, of services received, and the net balance of operating income and charges. It represents the profit before depreciation, amortization and write-downs, financial flows and taxes. Operating profit (EBIT): defined as the difference between Gross operating profit and the value of depreciation, amortization and write-downs. It represents the profit achieved before financial flows and taxes. Net financial position: represents the algebraic sum of cash and cash equivalents, financial receivables and current and non-current financial debt. 23

25 R E P O R T A N D AC C O U N T S RE P O R T O N OP E R A T I O N S Shareholders Equity Consolidation adjustments determined the following differences between the Financial Statements of the parent company at December 31, 2007 and the consolidated accounts at the same date: ( 000) Shareholders Equity Net profit Parent company s statutory accounts 56,820 8,987 German subsidiary product warranty provision reversal (*) 17 2 Elimination of the write-down in the value of the equity investment in subsidiary General Marking S.r.l Release of General Marking S.r.l. losses reserve 58 - Book value of consolidated companies 11,963 4,002 Elimination of intra-group profits included in the value of inventories (*) (2,576) (651) Currency translation differences on elimination of intra-group payables and receivables (2) (15) Elimination of dividends - (429) Consolidated Financial Statements 66,712 11,896 (*) Net of the related tax effect The Company s activity is not affected by cyclical or seasonal factors. Capital expenditure In 2007, capital expenditure on property, plant and equipment, gross of depreciation and disposals, amounted to 6.9 million, as compared with 5.4 million in In addition to the normal turnover and upgrade of plant and equipment used in the production process, other relevant investments were made in 2007, among which a new building in Munich to host the offices of the German subsidiary for 2.6 million, and the migration to a new information system of the parent company, still underway, that involved the purchase of software ( 0.5 million) and of hardware ( 0.2 million). Revaluation of property, plant and equipment In compliance with article 10 of Law 72/1983, a list of property, plant and equipment recorded in the Balance Sheet at December 31, 2007 and revalued in the year is provided below: ( ) Law Law Law 576/75 72/83 413/91 Total Land and buildings - 248, , ,661 Plant and machinery 2, , ,134 Other assets 303 7,664-7,967 2, , ,441 1,069,762 24

26 R E P O R T A N D AC C O U N T S RE P O R T O N OP E R A T I O N S Research & Development In 2007 Research and Development activities focused in the field of cable terminals, railroad equipment, hydraulic tools, and cable marking. Research costs were not capitalized, while, in compliance with IAS 38, development costs were instead capitalized. An integrated data management system was designed for future implementation. The development of the new information system resulted in personnel costs amounting to 44 thousand and external consulting costs of 250 thousand. External consulting costs were capitalized. Research and Development activities and projects launched or underway consisted in the widening of the product range included in the catalogue with the introduction of new innovative products previously not available on the market, the improvement of technologies and the efficiency of the production process, and the enhancement of the company s presence in foreign markets. Research activities and projects launched or carried out in the year consisted in: - the continuation and completion of projects started in the previous year; - the launch of new projects for the development of innovative products in line with market trends; - the development of innovative processes. In 2007, research costs included 368 thousand of personnel costs, expensed in the income statement. Development costs in the year included 57 thousand of personnel costs, capitalized among intangible assets. Costs relating to technical advice and the acquisition of know-how amounted to 15 thousand. A description of Research and Development activities by sector is included in the section that follows. Research projects in the field of cable terminals Work continued on the study and development of new cable terminals and joints, in addition to the development and optimization of cable terminals from pipe. Railroad Equipment Research projects A number of projects in this field were launched or developed further, while projects underway include an electrically powered version of a wooden sleeper maintenance tool, a range of products for the mechanical and electrical connection to rail tracks and a control station for rail track maintenance. Hydraulic Tools research projects The following studies were undertaken in 2007: - new battery-operated tools for the compression of connectors that may be used for different types of dies specific for the US market; - two cable cutting hydraulic tools; - three battery-operated cable cutting tools; - a battery-operated hydraulic station; - a new small-size battery-operated hydraulic tool; - a small-size battery-operated hydraulic tool with a 3.5 ton head. 25

27 R E P O R T A N D AC C O U N T S RE P O R T O N OP E R A T I O N S Cable marking research projects The development of the following products continued: - a system for the labeling of pole terminal blocks consisting of labels and related supports; - a new series of flat labels; - a new series of cards for plotters. Related parties Transactions concluded between Cembre S.p.A. and its subsidiaries in 2007 were exclusively of a commercial nature and are summarized in the table below: ( ) Receivables Payables Revenues Purchases Cembre Ltd. 2,226,283 26,447 6,202, ,282 Cembre S.a.r.l. 750, ,993,500 42,624 Cembre España S.L. 2,271,666 39,885 5,852, Cembre AS 124,051 6, ,443 - Cembre GmbH 1,125,302 3,435 2,795,919 34,161 Cembre Inc. 1,024,716-3,391, General Marking srl 15, , ,430 1,833,362 TOTAL 7,538, ,267 21,864,245 2,112,580 Commitments of Cembre S.p.A. at the end of the year include a letter of patronage issued in favor of subsidiary General Marking S.r.l. against contractual obligations, amounting to 500 thousand, and a similar letter in favor of German subsidiary Cembre GmbH for 2.5 million. In 2008 the guarantee in favor of General Marking S.r.l. was increased to 2 million. Cembre SpA leased an industrial building to subsidiary General Marking S.r.l.. In 2007 rent for the building amounted to 96 thousand. Cembre SpA also currently leases property for a cumulative annual rent of 494 thousand from Tha Immobiliare SpA, with registered office in Brescia, owned by Anna Maria Onofri, Giovanni Rosani and Sara Rosani. Further detail of these transactions is provided in the notes. With reference to assets and liabilities relating to subsidiaries shown above, we confirm that transactions with the same and with related parties fall within the scope of normal operating activities. The 2 million one-year loan extended by Cembre SpA to subsidiary General Marking S.r.l. and expiring January 27, 2007, was renewed for one year at a fixed interest of 3%. At December 31, 2007, interest accrued on the loan amounted to 56 thousand. Upon expiration on January 25, 2008, interest was paid out and the loan was repaid. Absence of control and coordination Despite the fact that article 2497-sexies of the Italian Civil Code states that it is presumed that, 26

28 R E P O R T A N D AC C O U N T S RE P O R T O N OP E R A T I O N S unless otherwise proved, the direction and coordination activities of companies is exercised by the company or entity that is required to consolidate the same in its accounts or that, in any case, controls the former company pursuant to article 2359 (of the Italian Civil Code), Cembre S.p.A. believes to be operating in full autonomy from its parent Lysne S.p.A.. In particular, as a nonexhaustive example, the Company manages autonomously its own treasury and relationships with its customers and suppliers, and does not make use of any service provided by its parent company. Cembre S.p.A. s relationships with its parent company Lysne S.p.A. is limited to the normal exercise of shareholders rights on the part of the parent. Own shares and shares of parent companies In 2007, the Cembre Group did not acquire or shell any of its own shares, nor did it own, either directly or through any of its subsidiaries, trust companies or intermediaries, any of its own shares or any of its parent company s shares. Ownership Structure and Corporate Governance In compliance with norms contained in article 123-bis of Legislative Decree 58, dated February 24, 1998 (Testo Unico tax law), we refer to the Report on Corporate Governance which, in addition to providing a general description of corporate governance, contains information regarding the ownership structure of the Company, the adoption of the Code of Conduct and the observance of the resulting commitments. Said Report is available in the Investor Relations section of the Group s Internet site ( Risk management and financial instruments For information on risk management and financial instruments we refer to the related section in the notes. Handling of personal information Cembre S.p.A. (responsible for the handling of personal information) drafted a Privacy Plan through its Director for the Handling of Private Information. Subsequent events No event having significant effects on Cembre s financial or operating performance occurred after the closing of the financial year. Outlook The outlook for 2008, confirmed by the good performance of sales in the first months of the year, is positive, and we expect a growth in activity on 2007 and the maintenance of good profit levels. Proposal for the Allocation of the Company s Net Profit In order to complete the Company s planned investments and benefit from self-financed growth, it is advisable that at least a portion of net profit generated be retained. In seeking the approval for our 27

29 R E P O R T A N D AC C O U N T S RE P O R T O N OP E R A T I O N S actions by submitting to you the present Financial Statements and Report on Operations, we also invite you to approve our proposed allocation of net profit for 2007, amounting to 8,987, (rounded off to 8,987,113) as follows: to be distributed to each of the Company s 17,000,000 shares entitled to dividends, for a total of 4,420,000, payable from May 22, 2008, and an ex-dividend date of May 19, 2008; - the remainder, amounting to 4,567,113.37, to the extraordinary reserve. At December 31, 2007, there do not exist foreign-exchange conversion profits. Attachments This Report on Operations includes the following Attachments: Attachment 1 Reclassified Income Statement of Cembre S.p.A. for the year ended December 31, 2007; Attachment 2 Company shares held by Board Members and Statutory Auditors. Attachment 3 Company Boards. Brescia, March 25, 2008 THE CHAIRMAN OF THE BOARD OF DIRECTORS OF PARENT COMPANY CEMBRE S.P.A. CARLO ROSANI 28

30 R E P O R T A N D AC C O U N T S RE P O R T O N OP E R A T I O N S Attachment 1 Report on Operations 2007 CONSOLIDATED INCOME STATEMENT ( '000) 2007 % 2006 % change Revenues from sales and services provided 93, , % Other revenues TOTAL REVENUES 94,238 84,215 Cost of goods and marchandise (39,955) (42.8) (35,818) (42.7) 11.6% Cost of services received (13,645) (14.6) (12,191) (14.5) 11.9% Lease and rental costs (1,084) (1.2) (1,047) (1.2) 3.5% Personnel costs (24,975) (26.7) (22,498) (26.8) 11.0% Non-recurrent operations 1, Other operating costs (471) (0.5) (404) (0.5) 16.6% Change in inventories 6, , % Increase in assets due to internal construction % Write-down of receivables (145) (0.2) (124) (0.1) 16.9% Accruals to provisions for risks and charges (10) (0.0) (8) (0.0) 25.0% GROSS OPERATING PROFIT 21, , % Tangible assets depreciation (3,113) (3.3) (3,092) (3.7) 0.7% Intangible assets amortization (177) (0.2) (98) (0.1) 80.6% OPERATING PROFIT 18, , % Financial income (expense) (101) (0.1) (6) (0.0) Foreign exchange gains (losses) (201) (0.2) (74) (0.1) 171.6% PROFIT BEFORE TAXES 18, , % Income taxes (5,883) (6.3) (6,534) (7.8) -10.0% Deferred taxes on non-recurrent operations (339) (0.4) NET PROFIT FROM ORDINARY ACTIVITIES 11, , % NET PROFIT FROM ASSETS HELD FOR DISPOSAL - - NET PROFIT 11, , % 29

31 R E P O R T A N D AC C O U N T S RE P O R T O N OP E R A T I O N S Attachment 2 Report on Operations 2007 COMPANY SHARES HELD BY CORPORATE BOARDS MEMBERS COMPANY SHARES HELD SHARES SHARES SHARES HELD OWNERSHIP OWNERSHIP AT DEC. 31, 2006 PURCHASED SOLD AT DEC. 31, 2007 RIGHTS Lysne S.p.A. (1) Cembre SpA 9,059, ,059,892 full direct Carlo Rosani Cembre SpA 1,040, ,040,000 full direct Anna Maria Onofri Cembre S.p.A. 900, ,096 full direct Sara Rosani Cembre S.p.A. 560, ,000 full direct Giovanni Rosani Cembre S.p.A. 540, ,000 full direct Aldo Bottini Bongrani Cembre S.p.A. 360, ,000 full direct Giovanni De Vecchi Cembre S.p.A. 280, ,000 full direct Mario Comana Cembre S.p.A. 10, ,000 full direct Andrea Boreatti Cembre S.p.A. 1, ,500 full direct Statutory Auditors and Directors not listed above did not hold Cembre SpA shares at December 31, 2006 and did not acquire Cembre SpA shares in 2007 (1) The share capital of Lysne S.p.A., Cembre S.p.A. s parent company, is held by Anna Maria Onofri, Giovanni Rosani and Sara Rosani. 30

32 R E P O R T A N D AC C O U N T S RE P O R T O N OP E R A T I O N S Attachment 3 Report on Operations 2007 CORPORATE BOARDS Board of Directors Chairman and Managing Director Vice Chairman and Managing Director Managing Director Director Director Director Independent Director Independent Director Carlo Rosani Anna Maria Onofri Giovanni Rosani Sara Rosani Giovanni De Vecchi Aldo Bottini Bongrani Mario Comana Paolo Lechi di Bagnolo Secretary Board of Statutory Auditors Chairman Permanent Auditor Permanent Auditor Substitute Auditor Substitute Auditor Giorgio Rota Guido Astori Leone Scutti Andrea Boreatti Maria Grazia Lizzini Giorgio Astori Independent Auditors Reconta Ernst & Young The above list is updated at March 25, The Board of Directors and Board of Statutory Auditor s term expires with the approval of the Financial Statements at December 31, The Chairman and Managing Director Carlo Rosani holds by statute (article 18) powers of legal representation of the Company. The Board of Directors conferred to the Chairman all the ordinary management powers not specifically reserved to it by law. The Board of Directors conferred to Managing Director Giovanni Rosani all the ordinary management powers not specifically reserved to it by law and exclusive powers over the organization, management and monitoring of the internal control system. In case of absence or impediment of the Chairman and of Managing Director Carlo Rosani, Vice Chairman and Managing Director Anna Maria Onofri holds all ordinary management powers not reserved to the Board by law, with the exception of the appointment of professionals. All Managing Directors must keep the Board of Directors informed of all relevant transactions concluded in the context of their mandate. The Board of Directors has approved rules that define which particularly relevant transactions may be concluded exclusively by the same. 31

33 Consolidated Financial Statements at December 31, 2007

34 R E P O R T A N D AC C O U N T S CO N S O L I D A T E D FI N A N C I A L ST AT E M E N T S Consolidated Balance Sheet (euro '000) Notes Dec. 31, 2007 Dec. 31, 2006 ASSETS A) NON-CURRENT ASSETS of which: related parties Tangible assets 1 32,349 30,528 Intangible assets Financial assets available for sale 5 5 Other non-current assets Deferred tax assets 12 1,886 1,807 TOTAL NON-CURRENT ASSETS 34,783 32,575 B) CURRENT ASSETS Inventories 4 31,725 26,047 Trade receivables 5 26,355 26,504 Tax receivables Other receivables Cash and cash equivalents 4,549 3,964 TOTAL CURRENT ASSETS 62,947 56,981 C) NON-CURRENT ASSETS AVAILABLE FOR SALE - - TOTAL ASSETS(A+B+C) 97,730 89,556 of which: related parties LIABILITIES AND SHAREHOLDERS EQUITY A) SHAREHOLDERS EQUITY Capital stock 8 8,840 8,840 Reserves 8 45,976 41,268 Net profi t 8 11,896 9,327 TOTAL SHAREHOLDERS EQUITY 66,712 59,435 B) NON-CURRENT LIABILITIES Non-current fi nancial liabilities Employee Severance Indemnity and other personnel benefi ts 10 3, , Provisions for risks and charges Deferred tax liabilities 12 3,653 4,230 TOTAL NON-CURRENT LIABILITIES 7,386 9,247 C) CURRENT LIABILITIES Current fi nancial liabilities 9 6,183 2,822 Trade payables 13 11,013 11,464 Tax payables 14 1,033 1,816 Other payables 15 5,403 4,772 TOTAL CURRENT LIABILITIES 23,632 20,874 D) LIABILITIES ON ASSETS HELD FOR DISPOSAL - - TOTAL LIABILITIES (B+C+D) 31,018 30,121 TOTAL LIABILITIES AND SHAREHOLDERS EQUITY (A+B+C+D) 97,730 89,556 34

35 R E P O R T A N D AC C O U N T S CO N S O L I D A T E D FI N A N C I A L ST AT E M E N T S Consolidated Income Statement (euro '000) Notes Dec. 31, 2007 Dec. 31, 2006 of which: related parties Revenues from sales and services provided 16 93,417 83,870 Other revenues TOTAL REVENUES 94,238 84,215 Cost of goods and merchandise (39,955) (35,818) of which: related parties Cost of services received 18 (13,645) (723) (12,177) (623) Lease and rental costs 19 (1,084) (494) (1,047) (483) Personnel costs 20 (24,975) (185) (22,512) (206) Non recurring operations 21 1,026 - Other operating costs 22 (471) (404) Change in inventories 6,176 6,399 Increase in assets due to internal construction Write-down of receivables (145) (124) Accruals to provisions for risks and charges (10) (8) GROSS OPERATING PROFIT 21,710 19,131 Property, plant and equipment depreciation (3,113) (3,092) Intangible asset amortization (177) (98) OPERATING PROFIT 18,420 15,941 Financial income (expense) 23 (101) (6) Foreign exchange gains (losses) (201) (74) PROFIT BEFORE TAXES 18,118 15,861 Income taxes 24 (5,883) (6,534) Deferred taxes from non recurring operations 24 (339) - NET PROFIT FROM ORDINARY ACTIVITIES 11,896 9,327 NET PROFIT FROM ASSETS HELD FOR DISPOSAL - - NET PROFIT 11,896 9,327 BASIC EARNINGS PER SHARE

36 R E P O R T A N D AC C O U N T S CO N S O L I D A T E D FI N A N C I A L ST AT E M E N T S Consolidated Statement of Cash Flows (euro '000) Dec. 31, 2007 Dec. 31, 2006 A) CASH FLOW FROM OPERATING ACTIVITIES Net profi t for the period 11,896 9,327 Depreciation, amortization and write-downs 3,290 3,190 (Gains)/Losses on disposal of assets (399) (33) Net change in Employee Termination Indemnity (1,306) 180 Net change in provisions for risks and charges 7 (7) Operating profit (loss) before changes in working capital 13,488 12,657 (Increase) Decrease in trade receivables 149 (4,828) (Increase) Decrease in inventories (5,678) (6,300) (Increase) Decrease in other receivables and deferred tax assets 69 (475) Increase (Decrease) of trade payables (579) 4,410 Increase (Decrease) of other payables and deferred tax liabilities (729) 828 Change in working capital (6,768) (6,365) NET CASH FLOW (USED IN)/FROM OPERATING ACTIVITIES 6,720 6,292 B) CASH FLOW FROM INVESTING ACTIVITIES Capital expenditure on fi xed assets: - intangible (500) (87) - tangible (6,404) (5,353) Proceeds from disposal of tangible, intangible, available-for-sale fi nancial assets - tangible 1,869 (30) Increase (Decrease) of trade payables for assets NET CASH FLOW (USED IN)/FROM INVESTING ACTIVITIES (4,907) (5,432) C) CASH FLOW FROM FINANCING ACTIVITIES (Increase) Decrease in other non current assets 15 8 Increase (Decrease) in bank loans and borrowings 3,356 (314) Increase (Decrease) in other loans and borrowings 20 (21) Increase (Decrease) in derivative instruments - (21) Change in reserves (879) (24) Dividends distributed (3,740) (2,550) NET CASH FLOW (USED IN)/FROM FINANCING ACTIVITIES (1,228) (2,922) D) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (A+B+C) 585 (2,062) E) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,964 6,026 F) CASH AND CASH EQUIVALENTS AT END OF PERIOD (D+E) 4,549 3,964 36

37 R E P O R T A N D AC C O U N T S CO N S O L I D A T E D FI N A N C I A L ST AT E M E N T S CASH AND CASH EQUIVALENTS AT END OF PERIOD 4,549 3,964 Current fi nancial liabilities (6,183) (2,822) Non current fi nancial liabilities (86) (71) NET CONSOLIDATED FINANCIAL POSITION (1,720) 1,071 INTERESTS PAID IN THE YEAR (209) (76) BREAKDOWN OF CASH AND CASH EQUIVALENTS AT END OF PERIOD Cash Banks 4,530 3,946 4,549 3,964 37

38 R E P O R T A N D AC C O U N T S CO N S O L I D A T E D FI N A N C I A L ST AT E M E N T S Statement of Changes in the Consolidated Shareholders' Equity for the Year 2007 ( '000) Capital stock Share premium reserve Legal reserve Suspendedtax reserves Consolidation reserve Conversion differences Extraordinary reserve Urealized gains reserve Foreign exchange gains reserve Retained earnings Net profit Total Shareholders' Equity Balance at December 31, ,840 12,245 1, ,367 (9) 16,104 3, ,605 52,682 Conversion differences (21) (3) (24) Allocation of previous year net profi t (1) 105 1,867 2, (6,605) (2,550) Other changes 14 (14) - Net profi t for ,327 9,327 Balance at December 31, ,840 12,245 1, ,213 (12) 18,187 3, ,327 59,435 Conversion differences 87 (966) (879) Allocation of previous year net profi t (1) 2,661 2,926 (9,327) (3,740) Other changes (84) 84 - Net profi t for ,896 11,896 Balance at December 31, ,840 12,245 1, ,961 (978) 21,113 3, ,896 66,712 (1) Dividends resolved by the Shareholders' Meeting are included in the Total Shareholders' Equity column under Allocation of previous year net profi t. 38

39 R E P O R T A N D AC C O U N T S CO N S O L I D A T E D FI N A N C I A L ST AT E M E N T S Notes to the Consolidated Financial Statements I. CORPORATE INFORMATION Cembre S.p.A. is a joint-stock company with registered offi ce in Brescia, Via Serenissima 9. Cembre S.p.A. and its subsidiaries (hereinafter referred to jointly as the Cembre Group or the Group ) are active primarily in the manufacturing and sale of electrical connectors and related tools. The publication of the Consolidated Financial Statements of Cembre S.p.A. for the year ended December 31, 2007 was authorized by a resolution of the Board of Directors dated March 25, Cembre S.p.A. is controlled by Lysne S.p.A., a holding company based in Brescia, that does not direct or coordinate its subsidiary. II. FORM AND CONTENT OF THE FINANCIAL STATEMENTS The present Consolidated Financial Statements at December 31, 2007 were prepared under the International Financial Reporting Standards (IFRS) adopted by the European Union and the related implementation regulations issued in application of article 9 of Legislative Decree no. 38/2005. Principles adopted in the preparation of the Consolidated Financial Statements are those formally approved by the European Union as at December 31, The table that follows contains a list of international accounting principles and interpretations approved by the IASB that became effective starting in 2007, which were taken into account, where applicable, in the preparation of the present Consolidated Financial Statements. Effective IFRS 7: Financial Instruments: Disclosures Jan. 1, 2007 IFRIC 8: Scope of application of IFRS 2 Jan. 1, 2007 IFRIC 9: Subsequent valuation of implicit derivatives Jan. 1, 2007 IFRIC 10: Interim reports and durable loss in value Jan. 1, 2007 Items in the Consolidated Balance Sheet were recorded at the historical cost. Unless otherwise indicated, fi gures reported in the fi nancial statements and the related notes are expressed in thousands of euro. Future changes in accounting principles Starting with the 2008 fi nancial year, the following accounting principles will become effective: IFRS 2 Share based compensation Exercise terms and cancellations This change in IFRS 2 Share based compensation was published in 2008 and will come into effect on the fi rst fi nancial year subsequent to January 1, The principle restricts the defi nition of exercise terms to a condition that includes an explicit or implicit obligation to provide a service. Any other condition is considered a non-vesting condition and must be taken into account to determine the fair value of the instrument representing the capital assigned. In case the prize does not mature as a consequence of the fact that it does not satisfy a non-vesting condition that falls under the control of the entity or counterparty, this must be accounted for as a cancellation. The Group has not granted share-based benefi ts subject to non-vesting conditions and as a consequence does not expect material effects in the recording of share-based compensation plans. 39

40 R E P O R T A N D AC C O U N T S CO N S O L I D A T E D FI N A N C I A L ST AT E M E N T S IFRS 3R Business combinations and IAS 27/R Consolidated and statutory accounts The two revised accounting principles were approved in January 2008 and will come into effect on the fi rst fi nancial year subsequent to July 1, IFRS 3R introduces certain changes in the accounting of business combinations that will have an effect on the amount of goodwill recorded on the profi t for the year in which the acquisition takes place and on profi ts for subsequent years. IAS 27R requires that an adjustment to the ownership share held in a subsidiary be recorded as an equity transaction. As a result, such change has no impact on goodwill and does not generate either gains or losses. Revised principles also introduce changes in the accounting of losses reported by subsidiaries as well as in the case of the loss of control in a subsidiary. Changes introduced by principles IFRS 3R and IAS 27R must be applied prospectively and will have an impact on future acquisitions and transactions with minority shareholders. IAS 1 Revised Presentation of fi nancial statements Principle IAS 1 Revised Presentation of fi nancial statements was approved in September 2007 and will come into effect on the fi rst fi nancial year subsequent to January 1, The principle separates changes in the Shareholders Equity between shareholders and non-shareholders. The Statement of Changes in the Shareholders Equity will include only the detail of transactions affecting shareholders, while all other changes relating to transactions with non-shareholders will be reported under a single caption. The principle introduces also a comprehensive income table that contains all revenue and cost items for the period that are recorded in the income statement, in addition to all other revenue and cost items recorded. The comprehensive income table can be reported a single table or two related tables. The Group is still reviewing the possibility of reporting one or two tables. Changes to IAS 32 and IAS 1 Financial instruments held for sale Changes to IAS 32 and IAS 1 were approved in February 2008 and will come into effect in the fi rst fi nancial year subsequent to January 1, The revision of IAS 32 requires the classifi cation of certain fi nancial instruments held for sale and of certain bonds as equity instruments, in case certain conditions apply. The revision of IAS 1 requires that the notes to the accounts include certain information relating to options held for sale classifi ed as equity. The Group does not expect such changes to have a material effect on its consolidated fi nancial statements. Principles of consolidation The Consolidated Financial Statements of the Cembre Group include the statutory accounts at December 31, 2007 of Cembre SpA and of its subsidiaries. Accounting principles adopted in the preparation of the fi nancial statements of subsidiaries are consistent with those of the parent company. In the consolidated fi nancial statements, assets, liabilities, costs and revenues of consolidated companies are consolidated line-by-line. The book value of investments in subsidiaries is netted against the respective share in the Shareholders Equity held, inclusive of adjustments to the fair value of the related assets and liabilities at the date of their acquisition. The residual difference is attributed to goodwill. The following companies were consolidated at December 31, 2007: 40

41 R E P O R T A N D AC C O U N T S CO N S O L I D A T E D FI N A N C I A L ST AT E M E N T S % held 1. Cembre Ltd (UK) 100% 2. Cembre Sarl *(France) 100% 3. Cembre España SL *(Spain) 100% 4. Cembre AS (Norway) 100% 5. Cembre Gmbh*(Germany) 100% 6. Cembre Inc**(US) 100% 7. General Marking Srl (Italy) 100% * 5% share held through Cembre Ltd **29% share held through Cembre Ltd The consolidation area is unchanged with respect December 31, III. CONSOLIDATION PRINCIPLES AND VALUATION CRITERIA Form of the financial statements The fi nancial statements are prepared as follows: - current and non-current assets and liabilities are reported separately in the balance sheet; - the analysis of costs in the income statement is carried out based on the nature of the same; - the statement of cash fl ows is prepared by applying the indirect method. Finally, with reference to Consob Regulation no dated July 27, 2006, the Financial Statements include a separate reporting of amounts pertaining to related parties, where significant. Consolidation principles The Consolidated Financial Statements of the Cembre Group include the statutory accounts of Cembre SpA and those of its subsidiaries. The fi nancial statements of consolidated subsidiaries are consolidated under the line-by-line method, thus including all items, irrespective of the share held by the Group, of the elimination of intragroup transactions and of unrealized gains on transactions with third parties. The book value of investments was netted against the related share in the shareholders equity of consolidated companies, attributing to assets and liabilities the respective current value at the time control was acquired and recording contingent liabilities, where appropriate. Where positive, the residual amount was recorded among non-current assets as goodwill. Negative residual differences were recorded in the income statement. All subsidiaries are wholly-owned and in no case therefore have minority interests been recorded. Translation of fi nancial statements expressed in currencies other than the euro Translation of fi nancial statements expressed in currencies other than the euro The functional and reporting currency of the Group is the euro. Financial statements denominated in functional currencies other than the euro are translated according to the following criteria: - assets and liabilities are translated at the exchange rate applicable at the date of the financial statements; - income statement items are translated at the average exchange rate for the year; - foreign-exchange translation differences are recorded in a specific Shareholders Equity reserve. 41

42 R E P O R T A N D AC C O U N T S CO N S O L I D A T E D FI N A N C I A L ST AT E M E N T S At the time at which a foreign subsidiary is disposed of, accumulated foreign-exchange differences recorded under Shareholders Equity relating to the same are taken to the Income Statement. Exchange rates applied in the translation of financial statements of subsidiaries are shown in the table below. Currency Exchange rate at Dec. 31, 2007 Average exchange rate for 2007 British pound ( / ) US dollar ( /$) Norway kroner ( /NOK) Property, plant and equipment Property, plant and equipment is recorded at the historical cost and reported net of accumulated depreciation and losses in value. Ordinary maintenance and repair costs are not capitalized, and are charged to the income statement in the year in which they are incurred. Depreciation commences when the asset is available for use and is calculated on a straight line basis over the estimated residual useful life of the asset, taking into account its residual value. Depreciation rates applied refl ect the useful life generally attributed to the various classes of assets and are unchanged from the previous year. These are: - Buildings and light installations: 2% 10% - Plant and machinery: 5% 25% - Industrial and commercial equipment: 6% 25% - Other assets: 6% 33%. Land has an undetermined useful life and is therefore not subject to depreciation. The book value of property, plant and equipment is subjected to an impairment test whenever events or changes occurred indicate that the book value of the same can no longer be retrieved in line with the depreciation schedule originally set. Whenever there exists such an indication, the assets or cash generating units are written down to refl ect their expected realizable value. The residual value of assets, their useful life and methods applied are reviewed annually and adjusted, where necessary, at the end of each year. Tangible assets are eliminated from the Balance Sheet at the time of their sale or when there no longer exists the expectation of future economic benefi ts from its use or disposal. Losses and gains (calculated as the difference between net revenues from the disposal and the book value of the asset) are recorded in the Income Statement in the year in which they are disposed of. Leased assets Assets held under a fi nancial lease, through which all risks and benefi ts relating to ownership are transferred to the Group, are recorded under assets at the lower of their current value and the present value of minimum lease payments due according to the contract, including the bullet payment due at the end of the lease to exercise the repurchase option. The liability corresponding to the lease contract is recorded under fi nancial liabilities. Leased asset are classifi ed under the respective category among property, plant and equipment, and depreciated over the shorter period between the term of the lease and the expected residual useful life of the asset. 42

43 R E P O R T A N D AC C O U N T S CO N S O L I D A T E D FI N A N C I A L ST AT E M E N T S Lease contracts in which the lessor holds all risks and enjoys all benefi ts deriving from the leased asset are classifi ed as operating leases and recorded as costs in the Income Statement over the term of the contract. Intangible assets Intangible assets are recorded under assets, as provided by IAS 38 (Intangible assets), whenever it is probable that future economic benefi ts are generated through use and when the cost of the intangible asset can be determined in a reliable manner. Intangible assets acquired separately are initially capitalized at cost, while those acquired through mergers are capitalized at their fair value at the time of acquisition. With the exception of development costs, assets generated internally cannot be recorded as intangible assets. After the initial recording, intangible assets are carried in the balance sheet at cost, net of accumulated amortization calculated on a straight-line basis over their expected useful economic life, and of write-downs carried out as a result of durable losses in value. Intangible assets having an indefi nite useful life are not amortized and subjected periodically to an impairment test to assess possible loss in value. The useful life generally attributed to the various classes of assets is the following: - concessions and licenses: 5 to 10 years - software licenses 3 years - development costs: 5 years - trademarks: 10 to 20 years Amortization commences when the asset is available for use, that is, when it is in a position and in the necessary condition to operate in the manner intended by management. The book value of intangible assets is subjected to an impairment test whenever events or changes occurred indicate that the book value of the same can no longer be retrieved in line with the amortization schedule originally set. Whenever there exists such an indication and the book value of the asset exceeds its realizable value, the value of the asset is written-down to its expected realizable value. Financial assets Financial assets are initially recorded at cost, inclusive of accessory purchase costs, representing the fair value of the price paid. After the initial recording, fi nancial assets are valued in accordance with their fi nal purpose as described below. Financial assets valued at fair value, whose change is recorded in the Income Statement These are fi nancial assets held for trading purposes, acquired for the purpose of obtaining a profi t from short-term fl uctuations in price. Unless specifi cally designated as effective hedging instruments, derivatives are classifi ed as fi nancial assets held for trading purposes. Gains and losses on fi nancial assets held for trading purposes are recorded in the income statement. Financial assets held to maturity Financial assets other than derivatives that generate fi xed fi nancial fl ows or fl ows that may be determined and have a set maturity, are classifi ed as Financial assets held to maturity when the 43

44 R E P O R T A N D AC C O U N T S CO N S O L I D A T E D FI N A N C I A L ST AT E M E N T S Group intends to and is capable of holding them to maturity. Financial assets that the Group decides to hold for an indefi nite period of time do not fall under this category. After their initial recording, long-term fi nancial investments held to maturity, such as bonds, are accounted for at the amortized cost, using the effective rate of interest method, are discounted to their present value. The amortized cost is calculated keeping into account discounts and premiums, amortized over the term of the fi nancial asset. Loans extended and receivables Loans and receivables are non-derivative financial assets providing for fixed payments or payments that may be determined, not listed on an active market. Such assets are recorded at the amortized cost using the actual discount rate method. Gains and losses are recorded in the Income Statement whenever loans extended and receivables are eliminated from the accounts or they experience losses in value, in addition to the amortization process. Financial assets available for sale Financial assets available for sale include fi nancial assets that do not fall under the above categories. After the initial recording, these are accounted for at fair value, while gains and losses are recorded under a specifi c Shareholders Equity reserve until the assets are sold or a loss in value is ascertained. In such case, gains and losses accrued are charged to the income statement. In the case of securities widely traded on a regulated market, the fair value is determined with reference to the listed price at the closing of trading on the date of the fi nancial statements. In the case of fi nancial assets for which there does not exist an active market, the fair value is determined through valuation techniques based on the price recorded in recent transactions between unrelated parties or on the basis of the current market value of a similar instrument, or on discounted cash fl ows or option pricing models. Investments in other companies fall in this category. Loss in value of fi nancial assets The Group verifi es at least yearly the possible loss in value of individual fi nancial assets. These are recorded only at the time when there exists objective evidence, at the occurrence of one or more events, that the asset has experienced a loss of value with respect to its initial recorded value. Own shares Own shares are recorded as a reduction of Shareholders Equity in a specifi c reserve. The purchase, sale, issue or cancellation of own shares held does not determine the recording of any gain or loss in the Income Statement. Inventories Inventories are valued at the lower of cost and their expected realizable value, represented by their normal sale price, net of completion and selling costs. The cost of inventories includes the acquisition cost, the transformation cost and other costs incurred to take inventories to their current location and state. The cost of inventories is determined under the weighted-average method, inclusive of the cost of beginning inventories. 44

45 R E P O R T A N D AC C O U N T S CO N S O L I D A T E D FI N A N C I A L ST AT E M E N T S Provisions for slow-moving stock are accrued for fi nished products, materials and other supplies, keeping into account their expected useful life and retrievable value. Payables and receivables Receivables are recorded initially at fair value and subsequently carried at the amortized cost, writtendown in case of loss in value. Payables are normally valued at the amortized cost, adjusted under exceptional conditions for changes in value. Cash and cash equivalents Cash and cash equivalents are recorded at face value. Loans Loans are initially recorded at cost, corresponding to the fair value of the amount received, net of accessory costs. After the initial recording, loans are valued at the amortized cost, using the effective interest method. Translation of amounts denominated in currencies other than the euro Transactions denominated in currencies other than the euro are initially accounted for in euro at the exchange rate at the date of the transaction. Currency translation differences arising at the time at which foreign currency receivables are collected and payables are paid out, are recorded in the income statement. At the date of the fi nancial statements, monetary assets and liabilities denominated in currencies other than the euro consisting of cash on hand or assets and liabilities to be received or paid out, whose amount is set and may be determined are translated into euro at the exchange rate at the date of the fi nancial statements, recording in the income statement the currency translation difference. Non-monetary items denominated in currencies other than the euro are translated into euro at the exchange rate at the time of the transaction, representing the historical exchange rate. Functional currencies adopted by Group companies correspond to the currencies of the respective county in which subsidiaries are based. Provisions for risks and charges Provisions for risks and charges are accrued against known liabilities whose amount and expiration cannot however be determined at the date of the financial statements. Accruals are made when the existence of a current obligation, legal or implicit, deriving from a past event, the fulfillment of which is expected to require the use of resources whose amount can be reliably estimated, is probable. Provisions are valued at the fair value of liabilities. When the financial effect and the timing of the cash outflow can be estimated in a reliable manner, provisions include the interest component, recorded in the Income Statement among financial income (expense). Provisions accrued are reviewed at each accounting date and adjusted to bring them into line with the best estimate available at that date. 45

46 R E P O R T A N D AC C O U N T S CO N S O L I D A T E D FI N A N C I A L ST AT E M E N T S Employee benefits Under IAS 19, and before the reform introduced by the 2007 Budget Law, the Employee Severance Indemnity was classifi ed among defi ned benefi t plans and was therefore subject to actuarial adjustments. After the reform, the provisions of which were adopted by the Group from the 2007 Half-year Report, employee termination indemnities accrued up to December 31, 2006, continue to be accounted for as defi ned benefi t plans, while those accrued from January 1, 2007 are accounted for in two different ways: - where the individual employee has opted for complementary pension funds, employee termination indemnities accrued after January 1, 2007 and until the time at which the choice is made by the employee, are accounted for as a defi ned benefi t plan. Subsequently they are accounted for as a defi ned contribution plan; - where the individual employee has opted for accumulation with the treasury fund of the national social security agency (INPS), indemnities accrued after January 1, 2007 are accounted for as a defi ned contribution plan. Elimination of financial assets and liabilities Financial assets are eliminated when the Group ceases to hold rights to receive fi nancial fl ows deriving from the same or when such rights are transferred to another entity, that is when risks and benefi ts of the fi nancial instrument cease to have an effect on the fi nancial position and operating performance of the Group. A fi nancial liability is written-off exclusively when the related obligation is cancelled, fulfi lled or expired. Any material change in the contractual terms relating to the liability result in its cancellation and in the recording of a new liability. Any difference between the book value and the amount paid to extinguish the liability is recorded in the Income Statement. Revenues Revenues are valued at the current value of the amount received or receivable Disposal of assets The revenue is recognized when the Company has transferred the risks and benefits connected with the ownership of the good, and ceases to exercise the activity associated with ownership and the actual control over the asset sold. Services rendered Revenues are recorded based on the stage of completion of the operation at the date of the financial statements. When the result of the service rendered cannot be reliably estimated, revenues are recorded only to the extent of retrievable costs. The stage of completion is determined by valuing work carried out or by determining the proportion between costs incurred and total estimated costs to completion. Interest Interest is recorded in the period in which it accrues, using the effective interest method. Dividends Dividends are recorded when the right of shareholders to receive them arises. Grants Grants are recorded when there exists a reasonable certainty that that the same will actually be received and the company meets the conditions for the entitlement to the grant. 46

47 R E P O R T A N D AC C O U N T S CO N S O L I D A T E D FI N A N C I A L ST AT E M E N T S Grants linked to cost components (operating grants) are recorded under other revenues and amortized over several years so that revenues match the costs they are intended to compensate. The fair value of grants linked to assets (e.g. grants on the purchase of plant and equipment or grants for capitalized R&D costs), is suspended under long-term liabilities and released to the income statement under other revenues over the useful life of the asset to which it relates, thus in the period over which the depreciation expense relating to the asset is charged to the income statement. Financial charges Financial charges are recorded as a cost in the period in which they accrue. Cost of goods purchased and services received The cost of goods purchased and services received is recorded in the income statement based on the accrual method. Income taxes (current, prepaid and deferred) Current taxes are determined based on a realistic estimate of the tax expense for the period in accordance with applicable tax regulations in the respective countries. The Group records deferred and prepaid taxes arising from temporary differences between the book value of assets and liabilities and the related values reported for tax purposes, in addition to differences in the value of assets and liabilities generated by consolidation adjustments. Prepaid taxes are recorded only where there exists reasonable certainty of their retrieval through future profits within the term in which tax benefits are enjoyed. Deferred tax assets are recorded also where there exist deductible losses or tax credits, whenever it is deemed probable that sufficient future profits will be generated in the medium-term (3 to 5 years). Financial derivatives Derivative fi nancial instruments are valued at market value (fair value). A derivative fi nancial instrument can be acquired for trading or hedging purposes. Gains and losses on fi nancial instruments acquired for trading purposes are charged to the income statement. Derivatives acquired for hedging purposes may be accounted for under the hedge accounting method offsetting the recording of the derivative in the income statement with adjustments to the value of assets and liabilities hedged only when derivatives meet specifi c criteria. Hedge derivatives are classifi ed as fair value hedges when they are acquired to hedge against the risk of fl uctuations in the market value of the underlying asset or liability or fl uctuations in the fi nancial fl ows deriving from the same, both in the case of existing assets and liabilities or those deriving from a future transaction. In the case of fair value hedges, gains and losses on the restatement of the market value of a derivative instrument are taken to the income statement. With regard to the hedging of fi nancial fl ows, gains and losses on the hedge instrument are recorded under Shareholders Equity when they relate to the portion of the hedge considered effective, while the portion not hedged is recorded in the income statement. Earnings per share Earnings per share are calculated by dividing consolidated net profi t by the weighted average number of shares in circulation for the period. Fully diluted earnings per share (calculated by subtracting from consolidated net profi t the cost of converting all stock options into ordinary shares) are obtained by adjusting the number of shares in circulation assuming the exercise of stock options having a diluting effect. 47

48 R E P O R T A N D AC C O U N T S CO N S O L I D A T E D FI N A N C I A L ST AT E M E N T S Use of estimates In accordance with IAS/IFRS, the Group made use of estimates and assumptions based on prior experience and other factors deemed determinant, but not certain. Actual data could therefore differ from estimates and projections made. Estimated data is reviewed periodically and adjustments made to the same are taken to the Income Statement for the period in which the review takes place in case the review affect only one period, or, subsequent accounting periods in case it affects also the same. Below we describe review processes and key assumptions used by management in applying accounting principles. Provision for doubtful accounts The provision for doubtful accounts refl ects management estimates regarding losses on trade receivables. Losses on trade receivables expected by the Group are based on past experience on similar portfolios of receivables, current overdues vs. historical overdues, losses and collections, the close monitoring of credit risk and credit worthiness of customers, in addition to projections on economic and market conditions. Retrievable value of non-current assets Non-current assets include property, plant and equipment, intangible assets, investments and other fi nancial assets. Whenever circumstances so require, the management reviews periodically the book value of non-current assets held and used by the Group, in addition to assets to be disposed of. Such activity is carried out using estimates of expected cash fl ows from the sale of the asset and of adequate discount rates used in calculating the present value of the same. Whenever the book value of a non-current asset experiences a loss in value, the Company records a write-down equal to the difference between the book value of the asset and its retrievable value either through use or disposal of the same. Post-retirement benefi ts In the estimation of post-retirement benefi ts the Group makes use of traditional actuarial techniques based on stochastic simulations of the Montecarlo type. Assumptions made relate to the discount rate and the annual infl ation rate. Actuarial advisors of the Company make also use of demographic projections based on current mortality rates, employee disablement and resignation rates. Retrievability of deferred tax assets The Group evaluates the possibility to retrieve deferred tax assets on the basis of profi ts and expected future market conditions in view of current sale contracts and ability of expected future profi ts to offset tax credits, in addition to the expected variance of the same. Potential liabilities In carrying out its activity, management consults with its legal and tax advisors and experts. The Group ascertains a liability arising from litigation whenever it deems probable that a fi nancial outlay will be made in the future and when the amount of resulting losses can be reasonably estimated. In case a fi nancial outlay becomes possible but its amount cannot be determined, such occurrence is reported in the notes. 48

49 R E P O R T A N D AC C O U N T S CO N S O L I D A T E D FI N A N C I A L ST AT E M E N T S IV. INFORMATION BY SECTOR Cembre adopted as its primary reporting focus information by geographical area based on the location in which the operations of the company are based or the production process takes place. Information by sector of activity is not provided as the Cembre Group operates in a single sector denominated Electric connectors and related tools. As required under IAS 14, sector information by geographical area, based on the location in which the operations of the company are based or the production process takes place is provided below Italy Rest of Europe Rest of World Elimination of intragroup transactions Total Revenues Sales to customers 52,348 35,733 5,336 93,417 Sales to other Group companies 23,713 1, (25,365) - Revenues by sector 76,061 37,368 5,353 (25,365) 93,417 Operating profit by sector 13,426 4, ,420 Overhead costs not assigned Operating profit 18,420 Financial income (expense) (302) Income taxes (6,222) Net profit 11, Italy Rest of Europe Rest of World Elimination of intragroup transactions Total Revenues Sales to customers 47,048 32,891 3,931 83,870 Sales to other Group companies 20,438 1, (21,731) - Revenues by sector 67,486 34,041 4,074 (21,731) 83,870 Operating profi t by sector 11,667 3, ,941 Overhead costs not assigned Operating profit 15,941 Financial income (expense) (80) Income taxes (6,534) Net profit 9,327 As the breakdown of sales by geographical area is different from that of the related Group activities, a breakdown of sales by geographical area of customers is shown below Italy 39,286 37,098 Europe 43,316 38,365 Rest of World 10,815 8,407 93,417 83,

50 R E P O R T A N D AC C O U N T S CO N S O L I D A T E D FI N A N C I A L ST AT E M E N T S The breakdown of assets and liabilities is shown below: Dec. 31, 2007 Italy Rest of Europe Rest of World Total Assets and Liabilities Assets of the sector 66,956 30,319 3, ,306 Unassigned assets (2,576) Total assets 97,730 Liabilities of the sector 24,903 6, ,035 Unassigned liabilities (17) Total liabilities 31,018 Other information by sector Capital expenditure: - Property, plant and equipment 2,943 3, ,404 - Intangible assets ,904 Depreciation and amortization: - Property, plant and equipment (2,440) (624) (49) (3,113) - Intangible assets (174) (3) - (177) Write-downs Accruals to provision for employee benefits Average no. of employees Dec. 31, 2006 Italy Rest of Europe Rest of World Total Assets and Liabilities Assets of the sector 63,218 25,791 2,472 91,481 Unassigned assets (1,925) Total assets 89,556 Liabilities of the sector 25,531 4, ,137 Unassigned liabilities (16) Total liabilities 30,121 Other information by sector Capital expenditure: - Property, plant and equipment 4, ,607 - Intangible assets ,694 Depreciation and amortization: - Property, plant and equipment 2, ,092 - Intangible assets Write-downs Accruals to provision for employee benefits Average no. of employees

51 R E P O R T A N D AC C O U N T S CO N S O L I D A T E D FI N A N C I A L ST AT E M E N T S V. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. PROPERTY, PLANT AND EQUIPMENT Land and buildings Plant and machinery Other assets Leased assets Work in progress Total Historical cost 26,227 28,682 6,741 5, ,940 Accumulated depreciation (4,948) (22,433) (5,429) (4,488) (114) - (37,412) Bal. at Dec. 31, ,279 6,249 1,312 1, ,528 Increases 3,216 1, ,404 Currency translation differences (320) (57) (3) (20) - - (400) Depreciation (454) (1,597) (443) (553) (66) - (3,113) Net divestments (1,005) (10) - (13) - (42) (1,070) Reclassifications (203) - Bal. at Dec. 31, ,716 6,503 1,166 1, ,349 Land and buildings Plant and machinery Equipment Equipment Other assets Leased assets Work in progress Total Historical cost 23,836 26,609 6,331 5, ,985 Accumulated depreciation (4,524) (20,872) (4,972) (4,325) (88) - (34,781) Bal. at Dec. 31, ,312 5,737 1,359 1, ,204 Increases 2,313 2, ,607 Currency translation differences 78 9 (1) (6) Depreciation (433) (1,577) (467) (544) (71) - (3,092) Net divestments - (4) - (13) - (254) (271) Reclassifications (8) (1) - - Bal. at Dec. 31, ,279 6,249 1,312 1, ,528 Capital expenditure in 2007 consists primarily of purchases made by the parent company and the German subsidiary. Relevant investments in 2007 included the purchase of a building in Munich to host the offices of the German subsidiary for 2.6 million, and the construction of three enclosed passages between the various production and warehousing units of the Brescia plant, resulting in an expense of 0.5 million. The industrial building owned in San Giuliano Milanese was instead sold, resulting in an overall decline in land and buildings owned by the Group, net of accumulated depreciation, of 1 million. The sale generated a 0.4 million capital gain, recorded in the income statement under Other revenues. Purchases of plant and machinery included a work station worth 0.5 million, and three automatic machines costing 0.4 million. Increases in other assets consist prevalently in the acquisition of hardware for the parent company s new information system. 51

52 R E P O R T A N D AC C O U N T S CO N S O L I D A T E D FI N A N C I A L ST AT E M E N T S 2. INTANGIBLE ASSETS Development costs Software Work in progress Total Historical cost 181 2,301-2,482 Accumulated amortization (76) (2,263) - (2,339) Balance at Dec. 31, Increases Amortization (48) (129) - (177) Balance at Dec. 31, The increase in software and work in progress are due to the implementation of the new information system by the parent company. 3. OTHER NON-CURRENT ASSETS The item includes exclusively security deposits. 4. INVENTORIES Dec. 31, 2007 Dec. 31, 2006 Change Raw materials 7,752 6,377 1,375 Work in progress and semi-finished goods 7,842 6,617 1,225 Finished goods 16,131 13,053 3,078 Total 31,725 26,047 5,678 The value of finished goods inventories is adjusted to its expected realizable value through a provision for slow-moving stock amounting to 1,543 thousand. Changes in the provision in 2007 are shown below Balance at January 1 1,648 1,499 Accruals Uses (150) 0 Foreign-exchange differences (36) (5) Balance at January 31 1,543 1,648 52

53 R E P O R T A N D AC C O U N T S CO N S O L I D A T E D FI N A N C I A L ST AT E M E N T S 5. TRADE RECEIVABLES Dec. 31, 2007 Dec. 31, 2006 Change Gross trade receivables 27,003 27,072 (69) Provision for doubtful accounts (648) (568) (80) Total 26,355 26,504 (149) Trade receivables by geographical area. Dec. 31, 2007 Dec. 31, 2006 Change Italy 14,509 14,527 (18) Europe 10,821 10, North America (19) Oceania (68) Middle East Rest of the world (272) Total 27,003 27,072 (69) As shown in the table above, despite the growth trade receivables were in line with the previous year. Average collection time declined in fact from 115 days in 2006 to 106 days in Changes in the provision for doubtful accounts, accrued in part for overall bad debt and in part for individual accounts, is shown in the table that follows: Balance at January Accruals Uses (72) (62) Foreign-exchange differences (1) (1) Balance at January Trade receivables by maturity: Not expired 0-90 days days days Over 1 year Under litigation ,329 4, ,604 4,

54 R E P O R T A N D AC C O U N T S CO N S O L I D A T E D FI N A N C I A L ST AT E M E N T S 6. TAX RECEIVABLES Dec. 31, 2007 Dec. 31, 2006 Change Tax credits 1 7 (6) Total 1 7 (6) The amount relates to tax receivables of the French subsidiary. 7. TAX RECEIVABLES Dec. 31, 2007 Dec. 31, 2006 Change Receivables from employees VAT receivable (201) Other Total (142) Item Other includes mainly advances to suppliers and bills receivable. 8. SHAREHOLDERS EQUITY At December 31, 2007, the capital stock of the parent company amounted to 8,840 thousand, and was made up of 17 million ordinary shares of par value 0.52 each, fully underwritten and paid-up. At December 31, 2007 the Company did not hold treasury shares. A reconciliation between the Shareholders Equity and net profit of the parent company and the Consolidated Shareholders Equity and net profit is provided in the Management Report. Changes in individual components of the Consolidated Shareholders Equity are shown in the Statement of Changes in the Consolidated Shareholders Equity included in the Consolidated Financial Statements. The consolidation reserve is made up as follows: Dec. 31, 2007 Dec. 31, 2006 Elimination of investments in subsidiaries 9,429 6,861 Elimination of unrealized intra-group gains included in the value of inventories (1,925) (1,660) German subsidiary product warranty provision reversal Dividends Currency translation differences on intra-group payables and receivables 12-7,961 5,213 54

55 R E P O R T A N D AC C O U N T S CO N S O L I D A T E D FI N A N C I A L ST AT E M E N T S 9. FINANCIAL LIABILITIES Effective interest rate (%) Maturity Dec. 31, 2007 Dec. 31, 2006 Bank overdrafts of the parent on demand 3,915 2,567 Bank overdrafts of Cembre Ltd. 6 (rate+1.5 spread) on demand Bank overdrafts of Cembre GmbH 8.5 Dec General Marking loan 3.9 July Cembre GmbH loan Euribor Sept ,150-2, Leasing Spanish subsidiary (short-term portion) CURRENT FINANCIAL LIABILITIES 6,183 2,822 Leasing Spanish subsidiary (long-term portion) NON-CURRENT FINANCIAL LIABILITIES The present value of minimum future lease payments, discounted at the average rate paid on current lease contracts, is shown in the table that follows: Year Cash flow No. of days Current value , , Total Long-term portion of financial leases by maturity Difference 14 Avg. discounting rate 5.44% Total Minimum amounts Discounted amounts The parent company granted guarantees against a loan extended to subsidiary Cembre GmbH and the opening of credit in favor of General Marking. 55

56 R E P O R T A N D AC C O U N T S CO N S O L I D A T E D FI N A N C I A L ST AT E M E N T S 10. EMPLOYEE SEVERANCE INDEMNITY AND OTHER RETIREMENT BENEFITS The item includes the Employee Severance Indemnity accrued for employees of Italian companies. Special retirement benefi ts, due in accordance with French regulations to persons employed in France at the time of retirement, are also included in the provision. With the reform of employee termination indemnities, starting with January 1, 2007 Cembre SpA will no longer be required to accrue retirement benefi ts in favor of its employees in a provision, but will pay out benefi ts accrued after such date to the INPS treasury account, unless such benefi ts have been destined to other pension funds by individual employees. Employee termination indemnities accrued at December 31, 2006 must therefore be discounted to their present value without keeping into account expected future pay increases of employees, while amounts accruing from January 1, 2007 are treated for accounting purposes as a defi ned benefi t plan. In application of the reform of employee termination indemnities, a valuation of employee termination indemnities accrued at December 31, 2007 was carried out by a registered actuary, and the value of employee termination indemnities accrued at December 31, 2006 was restated. The latter calculation resulted in a 1,026 thousand reduction (curtailment) in the value of the provision, recorded in full in the income statement. The table that follows shows the effect of the reform on the initial value of employee termination indemnities and on the value of the same at December 31, Former treatment New treatment Initial effect Employee termination indemnities at December 31, ,658 3,632 1,026 Employee termination indemnities at December 31, ,352 Change accrued in 2007 (280) of which: - accruals uses (424) - INPS treasury account (524) - actuarial effect at Dec. 31, 2007 (21) 11. PROVISIONS FOR RISKS AND CHARGES Social Security (INAIL) litigation Customer indemnities Total At December 31, Accruals Uses - (3) (3) At December 31,

57 R E P O R T A N D AC C O U N T S CO N S O L I D A T E D FI N A N C I A L ST AT E M E N T S 12. DEFERRED TAX ASSETS AND LIABILITIES Dec. 31, 2007 Dec. 31, 2006 Deferred tax liabilities Average cost valuation of inventories by the parent (462) (562) Accelerated depreciation (1,048) (1,371) Elimination of Cembre GmbH product warranty provision (12) (10) Reversal of land depreciation (27) (32) Revaluation of land (1,859) (2,255) Discounting of employee termination indemnity (149) 166 Capital gain on sale of industrial building (96) - Gross deferred tax liabilities (3,653) (4,064) Deferred tax assets Elimination of unrealized intra-group profits included in the 1,179 1,143 Write-down of inventories Goodwill amortization Write-down of investment - 7 Accumulated losses of General Marking Risk provision 5 6 Other Gross deferred tax assets 1,886 1,641 Net deferred tax liabilities (1,767) (2,423) Positive results achieved by subsidiary General Marking in the last two years led to the recording of deferred tax assets on losses accumulated by the same in previous years. Such amounts had previously not been recorded as their retrieval was deemed improbable. To allow a meaningful comparison between deferred taxes at the end of 2007 and at the end of the previous year, in the table above, deferred tax assets for 2006 arising on the restatement of employee termination indemnities, were reclassifi ed under deferred tax assets. Total amounts shown in the table therefore differ by this amount from the corresponding items reported in the balance sheet. The 2008 Budget Law introduced changes in tax rates payable by Italian companies. Starting in 2008, the IRES (corporate tax) rate was reduced from 33% to 27.5%, while IRAP (regional tax on productive activities) was reduced from 4.25% to 3.9%. In application of IAS 12, deferred tax assets and liabilities were restated to refl ect the reduced tax rates. The effect of such restatement, recorded in the income statement and included in the above table, is detailed in note TRADE PAYABLES Dec. 31, 2007 Dec. 31, 2006 Change Payable to suppliers 10,864 11,394 (530) Advances Total 11,013 11,464 (451) 57

58 R E P O R T A N D AC C O U N T S CO N S O L I D A T E D FI N A N C I A L ST AT E M E N T S Trade payables by geographical area Dec. 31, Dec. 31, Change Italy 8,145 8,155 (10) Europe 2,659 3,089 (430) America 8 61 (53) Oceania (40) Other Total 10,864 11,394 (530) 14. TAX PAYABLES Dec. 31, Dec. 31, Change Current taxes payable 1,033 1,816 (783) 15. OTHER PAYABLES Dec. 31, Dec. 31, Change Payables to employees 1, Employee withholding taxes payable Bonuses owed to customers VAT and similar foreign taxes payable Commissions payable (1) Payable to Statutory Auditors and similar foreign boards (8) Payable to Directors Social security payables 1,694 1, Payable on sundry taxes (19) Other (31) Total 5,403 4, REVENUES FROM SALES AND SERVICES PROVIDED In 2007, revenues grew by 11.4% on the previous year. Domestic sales represented 42% of total sales, up 5.9% on 2006, while sales in the rest of Europe represented 46.4% of the total, up 12.9% on the previous year. Sales in the rest of the world grew sharply by 28.7% and represented 11.6% of total sales. 58

59 R E P O R T A N D AC C O U N T S CO N S O L I D A T E D FI N A N C I A L ST AT E M E N T S 17. OTHER REVENUES Dec. 31, 2007 Dec. 31, 2006 Change Capital gains Insurance damages Reimbursements (11) Other Total Insurance damages relate to damages received in the year. The sale of the industrial building in San Giuliano Milanese resulted in the recording in a 380 thousand capital gain. 18. COST OF SERVICES Dec. 31, 2007 Dec. 31, 2006 Change Subcontracted work 3,687 3, Electricity, heating and water 1,149 1, Transport of goods sold 2,242 2, Fuel Travelling expenses Maintenance and repair 1,265 1, Consulting Advertising and promotion (41) Insurance Boards compensation Postage and telephone (19) Commissions Security and cleaning Bank charges (1) Other Total 13,645 12,177 1,468 The increase in the cost of services is closely connected with the growth in sales. 19. LEASES AND RENTALS Dec. 31, 2007 Dec. 31, 2006 Change Rent and related costs Vehicle leasing Total 1,084 1,

60 R E P O R T A N D AC C O U N T S CO N S O L I D A T E D FI N A N C I A L ST AT E M E N T S 20. PERSONNEL COSTS Dec. 31, 2007 Dec. 31, 2006 Change Wages and salaries 18,764 16,999 1,765 Social security contributions 4,885 4, Employee termination indemnity Retirement benefits Other costs Total 24,975 22,512 2,463 Wages and salaries include 688 thousand relating to outsourced personnel, mainly of the parent company. Average number of employees by category Dec. 31, 2007 Dec. 31, 2006 Change Managers (1) Administrative and commercial staff Workers Outsourced personnel Total Average number of employees by Group company Managers Administrative Outsourced and commercial Workers personnel staff Total Cembre S.p.A General Marking S.r.l Cembre Ltd Cembre Sarl Cembre Espana SL Cembre AS Cembre Inc Cembre GmbH Total NON-RECURRENT OPERATIONS Following the reform of employee termination indemnities that became effective in 2007, employee termination indemnities accrued at December 31, 2006 were restated to reflect new actuaries. This non-recurrent event resulted in a 1,026 thousand reduction (curtailment) in the provision, recorded in full in the 2007 income statement. 60

61 R E P O R T A N D AC C O U N T S CO N S O L I D A T E D FI N A N C I A L ST AT E M E N T S 22. OTHER OPERATING COSTS Other operating costs are made up as follows: Dec. 31, 2007 Dec. 31, 2006 Change Sundry taxes Losses on receivables Capital losses Donations (2) Other (64) Total Item Other includes prevalently property taxes paid by the UK subsidiary. 23. FINANCIAL INCOME (EXPENSE) Dec. 31, 2007 Dec. 31, 2006 Change Loans and bank overdrafts (200) (70) (130) Other financial charges (10) (6) (4) (210) (76) (134) Interest earned on bank account balances Other financial income 1 9 (8) Financial income (expense) (101) (6) (95) 24. INCOME TAXES Dec. 31, 2007 Dec. 31, 2006 Change Current taxes (6,866) (6,562) (304) Deferred taxes Total (6,222) (6,534) 312 The table that follows shows a reconciliation between the theoretical tax expense, calculated at the normal tax rate of the parent company (Corporate (IRES) + Regional Tax on Productive Activities (IRAP) = 37.25%), and the actual tax expense recorded in the consolidated accounts. Deferred tax assets and liabilities originated in the year were calculated at the reduced tax rates applicable from 2008 (IRES+IRAP = 31.40%). 61

62 R E P O R T A N D AC C O U N T S CO N S O L I D A T E D FI N A N C I A L ST AT E M E N T S amount % tax rate amount % tax rate Profit before taxes 18,118 15,861 Theoretical tax expense 6, % 5, % Effect of non-deductible costs 1, % % Effect of tax-exempt income and deductions (1,790) -9.88% (604) -3.81% Effect of tax-deductible losses of subsidiaries (2) -0.01% (76) -0.48% Effect of different IRAP taxable income % % Effect of new tax rates on deferred taxes % % Effect of decline in domestic tax rates (345) -1.90% % Effect of different foreign tax rates (137) -0.76% (145) -0.91% Actual tax expense recorded 6, % 6, % At December 31, 2007, there do not exist temporary differences and accrued losses on which deferred tax assets have not been recorded. Deferred tax assets and liabilities Dec. 31, 2007 Dec. 31, 2006 Deferred tax liabilities Average cost valuation of inventories 100 (303) Accelerated depreciation Reversal of German subsidiary s product warranty (2) (2) Reversal of land depreciation 5 - Land revaluation Discounting of employee termination indemnity (315) 2 Capital gain on sale of industrial building (96) (174) Deferred tax assets Elimination of unrealized intra-group gains included in the value Write-down of inventories (99) - Amortization of goodwill (15) (6) Write-down of investment (7) (6) Accumulated losses of General Marking Risk provision (1) - Other Previous years taxes - 26 Foreign-exchange translation differences (11) 4 Deferred tax assets accrued in the period

63 R E P O R T A N D AC C O U N T S CO N S O L I D A T E D FI N A N C I A L ST AT E M E N T S The effect of the reduction in tax rates on deferred tax assets and liabilities, included in the above table, is shown separately in the table that follows: Effect of reduction in domestic tax rates Deferred tax liabilities Average cost valuation of inventories of the parent 86 Accelerated depreciation 177 Reversal of land depreciation 5 Land revaluation 346 Discounting of employee termination indemnity Deferred tax assets Elimination of unrealized intra-group gains included in the value of inventories (179) Write-down of inventories (44) Amortization of goodwill (9) Accumulated losses of General Marking (58) Risk provision (6) Other (3) (299) Total effect of reduction in domestic tax rates EARNINGS PER SHARE Earnings per share are calculated by dividing net profi t by the weighted average number of shares in circulation for the period, excluding own shares held at the end of the year. Dec. 31, 2007 Dec. 31, 2006 Consolidated net profit ( 000) 11,896 9,327 No. of ordinary shares ( 000) 17,000 17,000 Earnings per share ( ) DIVIDENDS On May 31, 2007 the company distributed (with ex-dividend date May 28) a dividend on net profit for the year ended December 31, 2006, amounting to 3,740 thousand, equivalent to 0.22 for each share entitled to dividends Resolved and paid in the year Balance due for 2006 dividend: 0.22 (2005: 0.15) 3,740 2,550 Proposal submitted to the Shareholders Meeting (not recorded as liability at December 31) Balance due for 2007 dividend: 0.26 (2006: 0.22) 4,420 3,740 Proposed dividends submitted for approval to the Shareholders Meeting (not recorded as a liability at December 31) amount to 4,420 thousand. 63

64 R E P O R T A N D AC C O U N T S CO N S O L I D A T E D FI N A N C I A L ST AT E M E N T S 27. COMMITMENTS AND RISKS At December 31, 2007, guarantees granted by the Cembre Group were: Dec. 31, 2007 Dec. 31, 2006 Change Guarantees granted NET FINANCIAL POSITION At December 31, 2007, the net financial position of the Group amounted to an indebtedness of 1,720 thousand, declining on the end of the previous year due primarily to capital expenditure, both on tangible and intangible assets, made in 2007 and the payment of tax advances and dividends, resulting in a higher recourse of the parent company to short-term loans. At December 31, 2007, the Company did not have outstanding loans containing covenants or negative pledges. The table that follows provides a detail of the consolidated net financial position as provided by Consob Regulation DEM/ dated July 28, 2006: Dec. 31, 2007 Dec. 31, 2006 A Cash B Bank deposits 4,530 3,946 C Cash and equivalents (A+B) 4,549 3,964 D Financial receivables - - E Current bank debt (6,122) (2,766) F Payables on derivatives - - G Other current financial payables (61) (56) H Current financial debt (E+F+G) (6,183) (2,822) I Net current financial position (C+D+H) (1,634) 1,142 J Non-current bank debt - - K Other non-current financial debt (86) (71) L Non-current financial debt (J+K) (86) (71) M Net financial position (I+L) (1,720) 1, RELATED PARTIES The table that follows shows transactions between Cembre Spa and its subsidiaries at December 31, Receivables Payables Revenues Expenses Cembre Ltd. 2, , Cembre S.a.r.l , Cembre España S.L. 2, ,852 - Cembre AS Cembre GmbH 1, , Cembre Inc. 1,025-3,391 1 General Marking srl ,833 Total 7, ,863 2,112 64

65 R E P O R T A N D AC C O U N T S CO N S O L I D A T E D FI N A N C I A L ST AT E M E N T S Cembre S.p.A. leased an industrial building to subsidiary General Marking. Rent for the building for 2007 amounts to 96 thousand. With reference to assets and liabilities relating to subsidiaries shown above, we confirm that transactions with the same and with related parties fall within the scope of normal operating activities. Guarantees granted by the parent company include a letter of patronage for 0.5 million issued in favor of General Marking Srl against contractual obligations of the same, and a guarantee of 2.5 million against obligations of subsidiary Cembre GmbH. In 2008, the guarantee in favor of General Marking Srl was increased to 2 million. Among assets leased to Cembre by third parties are an industrial building adjacent to the Company s registered office measuring a total of 5,960 square meters on three floors, in addition to the Milan, Padua and Bologna sales offices, all of which are owned by company Tha Immobiliare SpA, with registered office in Brescia, controlled by Anna Maria Onofri, Giovanni Rosani and Sara Rosani, directors of Cembre SpA. Lease payments for 2007 amounted to 494 thousand. Rent for 2007 is in line with market conditions. It is in the Company s interest to benefit from the continuity of office space reducing the risk of early termination of leases. At the end of 2007, all amounts due to Tha Immobiliare had been settled. Cembre S.p.A. does not have direct relationships with its parent company Lysne S.p.A. of any other nature than that of the exercise of shareholders rights on the part of the parent. Lysne S.p.A. does not carry out any management or coordination activity with respect to Cembre S.p.A. Boards compensation In 2007, compensation for the Board of Directors and the Board of Statutory Auditors amounted to: Statutory Auditors Directors Emoluments as directors and auditors of Cembre SpA Emoluments as directors of subsidiaries - 18 Retribution as employees Non-monetary benefits - 19 Non-monetary benefi ts relate to the use of a company car and insurance policies underwritten on their behalf. 30. RISK MANAGEMENT AND FINANCIAL INSTRUMENTS The Group does not make significant use of derivative instruments to hedge against interest risk and currency exposure. At December 31, 2007, the sole hedging contract was a currency ( ) forward purchase agreements stipulated by UK subsidiary Cembre Ltd. on December 17, 2007, amounting to 300 thousand each, expired and reimbursed on January 4, The short-term maturity of a large portion of financial instruments held is such that their carrying value is in line with the fair value of the same. Interest risk The Group normally stipulates short-term floating rate loan contracts. At December 31, 2007, all loans had been repaid with the exception of a loan extended to subsidiary Cembre GmbH against the purchase of its new main office. Pursuant to the loan contract the subsidiary is extended a further line of credit of 2.5 million, expiring on September 16, 2008, to be used for transaction of fixed amount at set rates. Interest payable is set at the time the line of credit is used, and is equal to the 65

66 R E P O R T A N D AC C O U N T S CO N S O L I D A T E D FI N A N C I A L ST AT E M E N T S Euribor rate plus a spread of 0.375%. At December 31, 2007, uses of said credit line amounted to 2.2 million. Interest is payable at maturity. The Group makes also use of bank overdrafts to face ordinary liquidity needs. Currency risk Despite a strong international presence, the Group does not have a significant exposure to currency risk (on an operating or equity basis), as it operates mainly in the euro area, the currency in which its trade transactions are mainly denominated. Exposure to currency risk is determined mainly by sales in US dollars, British pounds and Norwegian kroners. The size of these transactions is not significant in influencing the overall performance of the Group. To hedge part of the risk deriving from purchases of supplies in euro from the parent company, UK subsidiary Cembre Ltd. entered into forward currency purchase agreements to acquire euro, as described in the table that follows. Date of contract Amount in euro Forward exchangerate ( / ) amount Expiration Actual exchange-rate ( / ) Forward amount Effect ( ) Dec. 17, , ,454 Jan. 4, ,480 9,026 As apparent, the hedge resulted in a 9 thousand gain at the expiration date, equivalent to 12 thousand. As described in the consolidation principles section, financial statements of consolidated companies prepared in currencies other than the euro are translated into euro at the exchange rate published on the Internet site of the Ufficio Italiano Cambi. In the table that follows we report the economic effect of possible fluctuations in exchange rates for main financial figures of consolidated companies operating outside the euro area. Currency Exchange rate fluctuation Effect on Shareholders Equity Effect on sales Effect on pre-tax profit Cembre Ltd GBP +5% / -5% 392 / (392) 690 / (690) 57 / (57) Cembre AS NOK +5% / -5% 19 / (19) 39 / (39) 8 / (8) Cembre Inc USD +5% / -5% 94 / (94) 268 / (268) 46 / (46) In 2007, the effect of foreign-exchange transactions was negative by 201 thousand, of which 38 thousand relating to elisions among consolidated companies. The balance is due almost exclusively by transactions carried out by the parent company and in particular trade transactions denominated in US dollars with the US subsidiary. Liquidity risk The exposure of the Group to liquidity risk is not material. Credit risk Exposure to credit risk relates exclusively to trade receivables. None of the areas in which the Group operates poses relevant credit risks. Operating procedures limit the sale of products or services to customers who do not possess an adequate credit profile or provide guarantees. 66

67 R E P O R T A N D AC C O U N T S CO N S O L I D A T E D FI N A N C I A L ST AT E M E N T S 31. SUBSEQUENT EVENTS No event having signifi cant effects on the Group s fi nancial position or operating performance occurred after the closing of the fi nancial year. 32. CONSOLIDATED COMPANIES The consolidation area is unchanged from December 31, Companies consolidated line-by-line are: Company Registered office Share capital Cembre Ltd Sutton Coldfield (Birmingham) Share held at Dec. 31, 2007 Share held at Dec. 31, ,700, % 100% Cembre Sarl Morangis (Paris) 1,071, % (*) 100% (*) Cembre España SL Coslada (Madrid) 1,902, % (*) 100% (*) Cembre AS Stokke (Norway) NOK 2,400, % 100% Cembre GmbH Monaco (Germany) 512, % (*) 100% (*) Cembre Inc Edison (New Jersey - Usa) US$ 840, %(**) 100%(**) General Marking srl Brescia (Italy) 99, % 100% (*) of which 5% held through Cembre Ltd. (**) of which 29% held through Cembre Ltd. Brescia, March 25, 2008 THE CHAIRMAN OF THE BOARD OF DIRECTORS OF PARENT COMPANY CEMBRE S.P.A. CARLO ROSANI 67

68 R E P O R T A N D AC C O U N T S CO N S O L I D A T E D FI N A N C I A L ST AT E M E N T S Report of the Board of Statutory Auditors on Consolidated Financial Statements of the Cembre Group at December 31, 2007 To our Shareholders: the Consolidated Financial Statements for the 2007 financial year delivered to the Board of Statutory Auditors within the term provided, consisting of Balance Sheet, Income Statement, Notes to the accounts, Statement of Cash Flows and Statement of Changes in the Shareholders Equity, close reporting a consolidated net profit of 11,896 thousand, as compared with 9,327 thousand in the previous year. The above Consolidated Financial Statements were prepared under International Financial Reporting Standard (IFRS) adopted by the European Union and in compliance with regulations issued to implement article 9 of Legislative Decree 38/2005. Checks carried out by Independent Auditors Reconta Ernst & Young, appointed for the auditing of the accounts, ascertained, as stated in paragraph 4 of the Auditing Report, the Consolidated Financial Statements of the Cembre Group at December 31, 2007 are consistent with IFRS adopted by the European Union and are in compliance with regulations issued to implement article 9 of Legislative Decree 38/2005. They are therefore clear and represent in a truthful and correct manner the operating and financial situation, the net profit, changes in the consolidated Shareholders Equity and the cash flows of the Cembre Group for the financial year closed December 31, The Auditing Report does not contain comments or exceptions to the information reported in the financial statements. In compliance with article 41, par. 3 of Legislative Decree no. 127, dated April 9, 1991, with the exception of the issues specified below, the Consolidated Financial Statements, were therefore not audited by the Board of Statutory Auditors. The Notes to the consolidated accounts provide a detail of Balance Sheet and Income Statement items and illustrate accounting principles, consolidation principles and valuation criteria applied in the preparation of the same. The consolidation area, unchanged from the previous year, the choice of consolidation principles in application of the line-by-line method, of subsidiaries to be consolidated and of procedures for the consolidation, are consistent with IFRS. The structure of the Consolidated Financial Statements and information contained in the same can therefore be deemed as technically correct and overall in compliance with current norms and regulations. Information provided in the Report on Operations illustrates adequately the operating and financial situation of the Group, its operating performance in 2007 and the outlook for 2008 of the parent company and the Group as a whole, and the review performed shows its consistency with the Consolidated Financial Statements Brescia, April 1, 2008 The Board of Statutory Auditors Guido Astori Andrea Boreatti Leone Scutti Chairman Permanent Auditor Permanent Auditor 68

69 R E P O R T A N D AC C O U N T S CO N S O L I D A T E D FI N A N C I A L ST AT E M E N T S 69

70 R E P O R T A N D AC C O U N T S CO N S O L I D A T E D FI N A N C I A L ST AT E M E N T S 70

71 Financial Statements at December 31, 2007

72 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S Balance Sheet (in euro) Notes Dec. 31, 2007 Dec. 31, 2006 ASSETS A) NON CURRENT ASSETS of which: related parties Tangible assets 1 21,819,941 22,347,764 Intangible assets 2 460, ,227 Investments in subsidiaries 3 8,057,883 8,115,406 Financial assets available for sale 4 5,224 5,224 Other non-current assets 5 9,762 10,160 Deferred tax assets , ,253 TOTAL NON-CURRENT ASSETS 30,724,123 31,242,034 B) CURRENT ASSETS Inventories 6 23,927,378 19,147,506 Trade receivables 7 16,508,934 16,823,315 of which: related parties Trade receivables from subsidiaries 8 7,538,172 7,538,172 6,077,021 6,077,021 Financial receivables from subsidiaries 9 2,055,562 2,055,562 2,046,438 2,046,438 Other assets , ,484 Cash and cash equivalents ,275 1,199,796 TOTAL CURRENT ASSETS 50,998,274 45,700,560 C) NON-CURRENT ASSETS AVAILABLE FOR SALE - - TOTAL ASSETS(A+B+C) 81,722,397 76,942,594 LIABILITIES AND SHAREHOLDERS EQUITY A) SHAREHOLDERS EQUITY Capital stock 12 8,840,000 8,840,000 Reserves 12 38,993,166 36,067,821 Net profi t 12 8,987,113 6,665,345 TOTAL SHAREHOLDERS EQUITY 56,820,279 51,573,166 B) NON-CURRENT LIABILITIES Employee Severance Indemnity and other personnel benefi ts 13 3,208, ,762 4,511, ,808 Provisions for risks and charges , ,154 Deferred tax liabilities 15 3,542,600 4,059,331 TOTAL NON-CURRENT LIABILITIES 7,045,888 8,859,057 C) CURRENT LIABILITIES Current fi nancial liabilities 16 3,914,810 2,567,102 Trade payables 17 9,724,517 9,669,634 Trade payables to subsidiaries , , , ,003 Tax payables , ,873 Other Payables 20 3,364,805 2,863,759 TOTAL CURRENT LIABILITIES 17,856,230 16,510,371 D) LIABILITIES ON ASSETS HELD FOR DISPOSAL - - TOTAL LIABILITIES (B+C+D) 24,902,118 25,369,428 TOTAL LIABILITIES AND SHAREHOLDERS EQUITY (A+B+C+D) 81,722,397 76,942,594 72

73 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S Income Statement (in euro) Notes Dec. 31, 2007 Dec. 31, 2006 of which: related parties of which: related parties Revenues from sales and services provided 21 73,622,957 21,805,769 65,470,671 18,810,371 Other revenues , , ,086 94,513 TOTAL REVENUES 74,305,646 65,719,757 Cost of goods and merchandise 23 (36,260,151) (2,091,091) (31,773,332) (1,328,334) Cost of services received 24 (9,818,500) (726,039) (8,761,042) (651,754) Lease and rental costs 25 (765,364) (493,503) (746,094) (483,149) Personnel costs 26 (17,318,638) (185,044) (15,358,098) (205,545) Non recurring opeartions 27 1,026,143 - Other operating costs 28 (214,013) (169,522) Change in inventories 4,779,871 4,870,842 Increase in assets due to internal construction 439, ,986 Write-down of receivables (123,256) (115,673) Accruals to provisions for risks and charges 29 (9,514) (7,941) GROSS OPERATING PROFIT 16,042,056 14,265,883 Tangible asset depreciation (2,202,256) (2,239,102) Intangible asset amortization (173,785) (89,823) OPERATING PROFIT 13,666,015 11,936,958 Financial income (expense) ,035 59,123 62,939 46,438 Foreign exchange gains (losses) 31 (165,791) (80,131) PROFIT BEFORE TAXES 13,900,259 11,919,766 Income taxes 32 (4,574,519) (5,254,421) Deferred taxes from non recurring operations 32 (338,627) - NET PROFIT FROM ORDINARY ACTIVITIES 8,987,113 6,665,345 NET PROFIT FROM ASSETS HELD FOR DISPOSAL - - NET PROFIT 8,987,113 6,665,345 73

74 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S Statement of Cash Flows (in euro) Dec. 31, 2007 Dec. 31, 2006 A) CASH FLOW FROM OPERATING ACTIVITIES Net profi t for the period 8,987,113 6,665,345 Depreciation, amortization and write-downs 2,376,041 2,328,925 (Gains)/Losses on disposal of assets (388,246) (4,518) Net change in Employee Termination Indemnity (1,303,308) 159,271 Net change in provisions for risks and charges 6,870 7,552 Operating profit (loss) before changes in working capital 9,678,470 9,156,575 (Increase) Decrease in trade receivables (1,146,770) (3,436,386) (Increase) Decrease in inventories (4,779,872) (4,870,841) (Increase) Decrease in other receivables and deferred tax assets 422,767 (313,414) Increase (Decrease) of trade payables (47,026) 3,995,753 Increase (Decrease) of other payables and deferred tax liabilities (599,727) 397,615 Change in working capital (6,150,628) (4,227,273) NET CASH FLOW (USED IN)/FROM OPERATING ACTIVITIES 3,527,842 4,929,302 B) CASH FLOW FROM INVESTING ACTIVITIES Capital expenditure on fi xed assets: - intangible (498,854) (80,438) - tangible (2,723,815) (4,467,968) Proceeds from disposal of tangible, intangible, fi nancial assets - tangible 1,437,628 13,738 - fi nancial 57,523 - Increase (Decrease) of trade payables for assets 128,173 37,514 NET CASH FLOW (USED IN)/FROM INVESTING ACTIVITIES (1,599,345) (4,497,154) C) CASH FLOW FROM FINANCING ACTIVITIES (Increase) Decrease in other non current assets 398 (54) (Increase) Decrease of fi nancial receivables (9,124) (2,046,492) Increase (Decrease) in bank loans and borrowings 1,347,708 2,275,403 Increase (Decrease) in derivative instruments - (21,024) Dividends distributed (3,740,000) (2,550,000) NET CASH FLOW (USED IN)/FROM FINANCING ACTIVITIES (2,401,018) (2,342,167) D) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (A+B+C) (472,521) (1,910,019) E) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,199,796 3,109,815 F) CASH AND CASH EQUIVALENTS AT END OF PERIOD (D+E) 727,275 1,199,796 74

75 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S CASH AND CASH EQUIVALENTS AT END OF PERIOD 727,275 1,199,796 Financial receivables from subsidiaries 2,055,562 2,046,438 Current fi nancial liabilities (3,914,810) (2,567,102) NET FINANCIAL POSITION (1,131,973) 679,132 INTEREST PAID IN THE PERIOD (172,189) (37,689) BREAKDOWN OF CASH AND CASH EQUIVALENTS AT END OF PERIOD Cash 9,817 7,189 Banks 717,458 1,192, ,275 1,199,796 75

76 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S Statement of Changes in the Shareholders' Equity for Year 2007 Capital stock Share premium reserve Legal reserve Suspendedtax reserves Extraordinary reserve Foreign exchange gains reserve Urealized gains reserve Retained earnings Net profit Total Shareholders' Equity Balance at December 31, ,840,000 12,244,869 1,663,013 68,412 16,000,423-3,902,133-4,738,971 47,457,821 Allocation of previous year net profi t (1) 104,987 2,069,480 14,504 (4,738,971) (2,550,000) Other changes 14,504 (14,504) - Net profi t for ,665,345 6,665,345 Balance at December 31, ,840,000 12,244,869 1,768,000 68,412 18,084,407-3,902,133-6,665,345 51,573,166 Allocation of previous year net profi t (1) 2,925,345 (6,665,345) (3,740,000) Other changes (232,596) 149,071 83,525 - Net profi t for ,987,113 8,987,113 Balance at December 31, ,840,000 12,244,869 1,768,000 68,412 20,777,156-4,051,204 83,525 8,987,113 56,820,279 (1) Dividends resolved by the Shareholders' Meeting are included in the Total Shareholders' Equity column under Allocation of previous year net profi t. 76

77 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S Notes to the Financial Statements of Cembre S.p.A. at December 31, 2007 I. CORPORATE INFORMATION Cembre S.p.A. is a joint-stock company with registered offi ce in Brescia, Via Serenissima 9. Cembre S.p.A. (hereinafter referred to as the Company ) is active primarily in the manufacturing and sale of electrical connectors and related tools. The publication of the Financial Statements of Cembre S.p.A. for the year ended December 31, 2007 was authorized by a resolution of the Board of Directors dated March 25, Cembre S.p.A. is controlled by Lysne S.p.A., a holding company based in Brescia, that does not direct or coordinate its subsidiary. II. FORM AND CONTENT OF THE FINANCIAL STATEMENTS The present Financial Statements at December 31, 2007 were prepared under the International Financial Reporting Standards (IFRS) adopted by the European Union and the related implementation regulations issued in application of article 9 of Legislative Decree no. 38/2005. Principles adopted in the preparation of the Financial Statements are those formally approved by the European Union as at December 31, The table that follows contains a list of international accounting principles and interpretations approved by the IASB that became effective starting in 2007, which were taken into account, where applicable, in the preparation of the present Financial Statements. Effective IFRS 7: Financial Instruments: Disclosures Jan. 1, 2007 IFRIC 8: Scope of application of IFRS 2 Jan. 1, 2007 IFRIC 9: Subsequent valuation of implicit derivatives Jan. 1, 2007 IFRIC 10: Interim reports and durable loss in value Jan. 1, 2007 Items in the Balance Sheet were recorded at the historical cost. Unless otherwise indicated, fi gures reported in the fi nancial statements and the related notes are expressed in euro. Future changes in accounting principles Starting with the 2008 fi nancial year, the following accounting principles will become effective: IFRS 2 Share based compensation Exercise terms and cancellations This change in IFRS 2 Share based compensation was published in 2008 and will come into effect on the fi rst fi nancial year subsequent to January 1, The principle restricts the defi nition of exercise terms to a condition that includes an explicit or implicit obligation to provide a service. Any other condition is considered a non-vesting condition and must be taken into account to determine the fair value of the instrument representing the capital assigned. In case the prize does not mature as a consequence of the fact that it does not satisfy a non-vesting condition that falls under the control of the entity or counterparty, this must be accounted for as a cancellation. The Company has not granted share-based benefi ts subject to non-vesting conditions and as a consequence does not expect material effects in the recording of share-based compensation plans. IFRS 3R Business combinations and IAS 27/R Consolidated and statutory accounts The two revised accounting principles were approved in January 2008 and will come into effect on the fi rst fi nancial year subsequent to July 1, IFRS 3R introduces certain changes in the accounting of business combinations that will have an effect on the amount of goodwill recorded on 77

78 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S the profi t for the year in which the acquisition takes place and on profi ts for subsequent years. IAS 27R requires that an adjustment to the ownership share held in a subsidiary be recorded as an equity transaction. As a result, such change has no impact on goodwill and does not generate either gains or losses. Revised principles also introduce changes in the accounting of losses reported by subsidiaries as well as in the case of the loss of control in a subsidiary. Changes introduced by principles IFRS 3R and IAS 27R must be applied prospectively and will have an impact on future acquisitions and transactions with minority shareholders. IAS 1 Revised Presentation of fi nancial statements Principle IAS 1 Revised Presentation of fi nancial statements was approved in September 2007 and will come into effect on the fi rst fi nancial year subsequent to January 1, The principle separates changes in the Shareholders Equity between shareholders and non-shareholders. The Statement of Changes in the Shareholders Equity will include only the detail of transactions affecting shareholders, while all other changes relating to transactions with non-shareholders will be reported under a single caption. The principle introduces also a comprehensive income table that contains all revenue and cost items for the period that are recorded in the income statement, in addition to all other revenue and cost items recorded. The comprehensive income table can be reported a single table or two related tables. The Company is still reviewing the possibility of reporting one or two tables. Changes to IAS 32 and IAS 1 Financial instruments held for sale Changes to IAS 32 and IAS 1 were approved in February 2008 and will come into effect in the fi rst fi nancial year subsequent to January 1, The revision of IAS 32 requires the classifi cation of certain fi nancial instruments held for sale and of certain bonds as equity instruments, in case certain conditions apply. The revision of IAS 1 requires that the notes to the accounts include certain information relating to options held for sale classifi ed as equity. The Company does not expect such changes to have a material effect on its fi nancial statements. III. ACCOUNTING PRINCIPLES AND VALUATION CRITERIA Form of the Financial Statements The fi nancial statements are prepared as follows: - current and non-current assets and liabilities are reported separately in the Balance Sheet; - the analysis of costs in the Income Statement is carried out based on the nature of the same; - the Statement of Cash Flows is prepared by applying the indirect method. Finally, with reference to Consob Regulation no dated July 27, 2006, the Financial Statements include a separate reporting of amounts pertaining to related parties, where significant. Property, plant and equipment Property, plant and equipment is recorded at the historical cost and reported net of accumulated depreciation and losses in value. Ordinary maintenance and repair costs are not capitalized, and are charged to the income statement in the year in which they are incurred. Depreciation commences when the asset is available for use and is calculated on a straight line basis over the estimated residual useful life of the asset, taking into account its residual value. Depreciation rates applied refl ect the useful life generally attributed to the various classes of assets and are unchanged from the previous year. These are: - Buildings and light installations: 3% 10% - Plant and machinery: 10% 15.5% - Industrial and commercial equipment: 25% - Other assets: 12% 25% 78

79 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S The book value of property, plant and equipment is subjected to an impairment test whenever events or changes occurred indicate that the book value of the same can no longer be retrieved in line with the depreciation schedule originally set. Whenever there exists such an indication, the assets or cash generating units are written down to refl ect their expected realizable value. Land has an undetermined useful life and is therefore not subject to depreciation. The book value of property, plant and equipment is subjected to an impairment test whenever events or changes occurred indicate that the book value of the same can no longer be retrieved in line with the depreciation schedule originally set. Whenever there exists such an indication and in case the book value exceeds the expected retrievable value, the assets or cash generating units are written down to refl ect their expected realizable value. The residual value of assets, their useful life and methods applied are reviewed annually and adjusted, where necessary, at the end of each year. Tangible assets are eliminated from the Balance Sheet at the time of their sale or when there no longer exists the expectation of future economic benefi ts from its use or disposal. Losses and gains (calculated as the difference between net revenues from the disposal and the book value of the asset) are recorded in the Income Statement in the year in which they are disposed of. Leased assets Assets held under a financial lease, through which all risks and benefits relating to ownership are transferred to the Company, are recorded under assets at the lower of their current value and the present value of minimum lease payments due according to the contract, including the bullet payment due at the end of the lease to exercise the repurchase option. The liability corresponding to the lease contract is recorded under financial liabilities. Leased asset are classified under the respective category among property, plant and equipment, and depreciated over the shorter period between the term of the lease and the expected residual useful life of the asset. Lease contracts in which the lessor holds all risks and enjoys all benefits deriving from the leased asset are classified as operating leases and recorded as costs in the Income Statement over the term of the contract. Intangible assets Intangible assets are recorded under assets, as provided by IAS 38 (Intangible assets), whenever it is probable that future economic benefi ts are generated through use and when the cost of the intangible asset can be determined in a reliable manner. Intangible assets acquired separately are initially capitalized at cost, while those acquired through mergers are capitalized at their fair value at the time of acquisition. With the exception of development costs, assets generated internally cannot be recorded as intangible assets. After the initial recording, intangible assets are carried in the balance sheet at cost, net of accumulated amortization calculated on a straight-line basis over their expected useful economic life, and of write-downs carried out as a result of durable losses in value. Intangible assets having an indefi nite useful life are not amortized and subjected periodically to an impairment test to assess possible loss in value. The useful life generally attributed to the various classes of assets is the following: - concessions and licenses: 5 to 10 years - software licenses 3 years - development costs: 5 years - trademarks: 10 to 20 years Amortization commences when the asset is available for use, that is, when it is in a position and in the necessary condition to operate in the manner intended by management. 79

80 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S The book value of intangible assets is subjected to an impairment test whenever events or changes occurred indicate that the book value of the same can no longer be retrieved in line with the amortization schedule originally set. Whenever there exists such an indication and the book value of the asset exceeds its realizable value, the value of the asset is written-down to its expected realizable value. Investments in subsidiaries Investments in subsidiaries are recorded at cost, adjusted where necessary for losses in value. Any positive difference that emerges upon acquisition between the acquisition cost and the portion of the Shareholders Equity acquired, is therefore included in the book value of the investment. Investments in subsidiaries are subjected to an impairment test whenever indicators of a loss in value are detected. Whenever it appears that an investment in a subsidiary has experienced a loss in value, the same is recorded in the Income Statement as a write-down. Whenever losses of a subsidiary exceed the book value of the investment, the value of the same is written-down to zero and losses exceeding such value are recorded in a specific liability provision. In case the loss is subsequently reversed or reduced, the related amount is written-up in the Income Statement to the original cost of the investment. Financial assets Financial assets are initially recorded at cost, inclusive of accessory purchase costs, representing the fair value of the price paid. After the initial recording, fi nancial assets are valued in accordance with their fi nal purpose as described below. Financial assets valued at fair value, whose change is recorded in the Income Statement These are fi nancial assets held for trading purposes, acquired for the purpose of obtaining a profi t from short-term fl uctuations in price. Unless specifi cally designated as effective hedging instruments, derivatives are classifi ed as fi nancial assets held for trading purposes. Gains and losses on fi nancial assets held for trading purposes are recorded in the income statement. Financial assets held to maturity Financial assets other than derivatives that generate fi xed fi nancial fl ows or fl ows that may be determined and have a set maturity, are classifi ed as Financial assets held to maturity when the Company intends to and is capable of holding them to maturity. Financial assets that the Company decides to hold for an indefi nite period of time do not fall under this category. After their initial recording, long-term fi nancial investments held to maturity, such as bonds, are accounted for at the amortized cost, using the effective rate of interest method, representing the rate at which estimated future payments or collections over the expected useful life of the asset are discounted to their present value. The amortized cost is calculated keeping into account discounts and premiums, amortized over the term of the fi nancial asset. Loans extended and receivables Loans and receivables are non-derivative financial assets providing for fixed payments or payments that may be determined, not listed on an active market. Such assets are recorded at the amortized cost using the actual discount rate method. Gains and losses are recorded in the Income Statement whenever loans extended and receivables are eliminated from the accounts or they experience losses in value, in addition to the amortization process. Financial assets available for sale Financial assets available for sale include fi nancial assets that do not fall under the above categories. After the initial recording, these are accounted for at fair value, while gains and losses are recorded 80

81 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S under a specifi c Shareholders Equity reserve until the assets are sold or a loss in value is ascertained. In such case, gains and losses accrued are charged to the income statement. In the case of securities widely traded on a regulated market, the fair value is determined with reference to the listed price at the closing of trading on the date of the fi nancial statements. In the case of fi nancial assets for which there does not exist an active market, the fair value is determined through valuation techniques based on the price recorded in recent transactions between unrelated parties or on the basis of the current market value of a similar instrument, or on discounted cash fl ows or option pricing models. Investments in other companies fall in this category. Loss in value of fi nancial assets The Company verifi es at least yearly the possible loss in value of individual fi nancial assets. These are recorded only at the time when there exists objective evidence, at the occurrence of one or more events, that the asset has experienced a loss of value with respect to its initial recorded value. Own shares Own shares are recorded as a reduction of Shareholders Equity in a specifi c reserve. The purchase, sale, issue or cancellation of own shares held does not determine the recording of any gain or loss in the Income Statement. Inventories Inventories are valued at the lower of cost and their expected realizable value, represented by their normal sale price, net of completion and selling costs. The cost of inventories includes the acquisition cost, the transformation cost and other costs incurred to take inventories to their current location and state. The cost of inventories is determined under the weighted-average method, inclusive of the cost of beginning inventories. Provisions for slow-moving stock are accrued for finished products, materials and other supplies, keeping into account their expected useful life and retrievable value. Payables and receivables Receivables are recorded initially at fair value and subsequently carried at the amortized cost, writtendown in case of loss in value. Payables are normally valued at the amortized cost, adjusted under exceptional conditions for changes in value. Cash and cash equivalents Cash and cash equivalents are recorded at face value. Loans Loans are initially recorded at cost, corresponding to the fair value of the amount received, net of accessory costs. After the initial recording, loans are valued at the amortized cost, using the effective interest method. Translation of amounts denominated in currencies other than the euro Transactions denominated in currencies other than the euro are initially accounted for in euro at the exchange rate at the date of the transaction. Currency translation differences arising at the time at which foreign currency receivables are collected and payables are paid out, are recorded in the income statement. At the date of the fi nancial statements, monetary assets and liabilities denominated in currencies other than the euro consisting of cash on hand or assets and liabilities to be received or paid out, whose amount is set and may be determined are translated into euro at the exchange rate at the date 81

82 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S of the fi nancial statements, recording in the income statement the currency translation difference. Non-monetary items denominated in currencies other than the euro are translated into euro at the exchange rate at the time of the transaction, representing the historical exchange rate. Provisions for risks and charges Provisions for risks and charges are accrued against known liabilities whose amount and expiration cannot however be determined at the date of the financial statements. Accruals are made when the existence of a current obligation, legal or implicit, deriving from a past event, the fulfillment of which is expected to require the use of resources whose amount can be reliably estimated, is probable. Provisions are valued at the fair value of liabilities. When the financial effect and the timing of the cash outflow can be estimated in a reliable manner, provisions include the interest component, recorded in the Income Statement under financial income (expense). Provisions accrued are reviewed at each accounting date and adjusted to bring them into line with the best estimate available at that date. Employee benefits Under IAS 19, and before the reform introduced by the 2007 Budget Law, the Employee Severance Indemnity was classifi ed among defi ned benefi t plans and was therefore subject to actuarial adjustments. After the reform, employee termination indemnities accrued up to December 31, 2006, continue to be accounted for as defi ned benefi t plans, while those accrued from January 1, 2007 are accounted for in two different ways: - where the individual employee has opted for complementary pension funds, employee termination indemnities accrued after January 1, 2007 and until the time at which the choice is made by the employee, are accounted for as a defi ned benefi t plan. Subsequently they are accounted for as a defi ned contribution plan; - where the individual employee has opted for accumulation with the treasury fund of the national social security agency (INPS), indemnities accrued after January 1, 2007 are accounted for as a defi ned contribution plan. Elimination of financial assets and liabilities Financial assets are eliminated when the Company ceases to hold rights to receive financial flows deriving from the same or when such rights are transferred to another entity, that is when risks and benefits of the financial instrument cease to have an effect on the financial position and operating performance of the Company. A financial liability is written-off exclusively when the related obligation is cancelled, fulfilled or expired. Any material change in the contractual terms relating to the liability result in its cancellation and in the recording of a new liability. Any difference between the book value and the amount paid to extinguish the liability is recorded in the Income Statement. Revenues Revenues are valued at the current value of the amount received or receivable. Disposal of assets The revenue is recognized when the Company has transferred the risks and benefits connected with the ownership of the good, and ceases to exercise the activity associated with ownership and the actual control over the asset sold. Services rendered Revenues are recorded based on the stage of completion of the operation at the date of the financial statements. When the result of the service rendered cannot be reliably estimated, revenues are recorded only to the extent of retrievable costs. 82

83 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S The stage of completion is determined by valuing work carried out or by determining the proportion between costs incurred and total estimated costs to completion. Interest Interest is recorded in the period in which it accrues, using the effective interest method. Dividends Dividends are recorded when the right of shareholders to receive them arises. Grants Grants are recorded when there exists a reasonable certainty that that the same will actually be received and the company meets the conditions for the entitlement to the grant. Grants linked to cost components (operating grants) are recorded under other revenues and amortized over several years so that revenues match the costs they are intended to compensate. The fair value of grants linked to assets (e.g. grants on the purchase of plant and equipment or grants for capitalized R&D costs), is suspended under long-term liabilities and released to the income statement under other revenues over the useful life of the asset to which it relates, thus in the period over which the depreciation expense relating to the asset is charged to the income statement. Financial charges Financial charges are recorded as a cost in the period in which they accrue. Cost of goods purchased and services received The cost of goods purchased and services received is recorded in the income statement based on the accrual method. Income taxes (current, prepaid and deferred) Current taxes are determined based on a realistic estimate of the tax expense for the period in accordance with applicable tax regulations. The Company records deferred and prepaid taxes arising from temporary differences between the book value of assets and liabilities and the related values reported for tax purposes, in addition to differences in the value of assets and liabilities generated by consolidation adjustments. Prepaid taxes are recorded only where there exists reasonable certainty of their retrieval through future profits within the term in which tax benefits are enjoyed. Deferred tax assets are recorded also where there exist deductible losses or tax credits, whenever it is deemed probable that sufficient future profits will be generated in the medium-term (3 to 5 years). Financial derivatives Derivative fi nancial instruments are valued at market value (fair value). A derivative fi nancial instrument can be acquired for trading or hedging purposes. Gains and losses on fi nancial instruments acquired for trading purposes are charged to the income statement. Derivatives acquired for hedging purposes may be accounted for under the hedge accounting method offsetting the recording of the derivative in the income statement with adjustments to the value of assets and liabilities hedged only when derivatives meet specifi c criteria. Hedge derivatives are classifi ed as fair value hedges when they are acquired to hedge against the risk of fl uctuations in the market value of the underlying asset or liability or fl uctuations in the fi nancial fl ows deriving from the same, both in the case of existing assets and liabilities or those deriving from a future transaction. In the case of fair value hedges, gains and losses on the restatement of the market value of a derivative 83

84 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S instrument are taken to the income statement. With regard to the hedging of fi nancial fl ows, gains and losses on the hedge instrument are recorded under Shareholders Equity when they relate to the portion of the hedge considered effective, while the portion not hedged is recorded in the income statement. Use of estimates In accordance with IAS/IFRS, the Company made use of estimates and assumptions based on prior experience and other factors deemed determinant, but not certain. Actual data could therefore differ from estimates and projections made. Estimated data is reviewed periodically and adjustments made to the same are taken to the Income Statement for the period in which the review takes place in case the review affect only one period, or, subsequent accounting periods in case it affects also the same. Below we describe review processes and key assumptions used by management in applying accounting principles. Provision for doubtful accounts The provision for doubtful accounts reflects management estimates regarding losses on trade receivables. Losses on trade receivables expected by the Company are based on past experience on similar portfolios of receivables, current overdues vs. historical overdues, losses and collections, the close monitoring of credit risk and credit worthiness of customers, in addition to projections on economic and market conditions. Retrievable value of non-current assets Non-current assets include property, plant and equipment, intangible assets, investments and other financial assets. Whenever circumstances so require, the management reviews periodically the book value of non-current assets held and used by the Company, in addition to assets to be disposed of. Such activity is carried out using estimates of expected cash flows from the sale of the asset and of adequate discount rates used in calculating the present value of the same. Whenever the book value of a non-current asset experiences a loss in value, the Company records a write-down equal to the difference between the book value of the asset and its retrievable value either through use or disposal of the same. Post-retirement benefits In the estimation of post-retirement benefits the Company makes use of traditional actuarial techniques based on stochastic simulations of the Montecarlo type. Assumptions made relate to the discount rate and the annual inflation rate. Actuarial advisors of the Company make also use of demographic projections based on current mortality rates, employee disablement and resignation rates. Retrievability of deferred tax assets Cembre S.p.A. evaluates the possibility to retrieve deferred tax assets on the basis of profits and expected future market conditions in view of current sale contracts and ability of expected future profits to offset tax credits, in addition to the expected variance of the same. Potential liabilities In carrying out its activity, management consults with its legal and tax advisors and experts. The Company ascertains a liability arising from litigation whenever it deems probable that a financial outlay will be made in the future and when the amount of resulting losses can be reasonably estimated. In case a financial outlay becomes possible but its amount cannot be determined, such occurrence is reported in the notes. 84

85 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S NOTES TO THE FINANCIAL STATEMENTS OF CEMBRE S.P.A. 1. TANGIBLE ASSETS Land and buildings Plant and machinery Equipment Other assets Work in progress Total Historical cost 20,688,258 25,562,985 5,027,971 3,507, ,743 55,078,407 Accumulated depreciation (4,323,583) (21,031,959) (4,504,823) (2,870,278) - (32,730,643) Bal. at Dec. 31, ,364,675 4,531, , , ,743 22,347,764 Increases 564,370 1,356, , , ,307 2,723,815 Depreciation (347,379) (1,349,219) (234,865) (270,793) - (2,202,256) Net divestments (1,005,252) (2,709) - (2,782) (38,639) (1,049,382) Reclassifications - 151,510 51,346 - (202,856) - Bal. at Dec. 31, ,576,414 4,687, , , ,555 21,819,941 Land and buildings Plant and machinery Equipment Other assets Work in progress Total Historical cost 18,433,415 23,994,725 4,661,845 3,529, ,399 50,872,910 Accumulated depreciation (3,995,977) (19,713,695) (4,238,395) (2,796,725) - (30,744,792) Bal. at Dec. 31, ,437,438 4,281, , , ,399 20,128,118 Increases 2,259,930 1,608, , , ,743 4,721,367 Depreciation (332,693) (1,357,651) (266,428) (282,330) - (2,239,102) Net divestments - (558) - (8,662) (253,399) (262,619) Bal. at Dec. 31, ,364,675 4,531, , , ,743 22,347,764 The streamlining of production and logistics led to the closing of the San Giuliano Milanese plant and the consequent sale of the industrial building hosting the plant, with a net divestment of 1,005 thousand and a capital gain of 380 thousand, recorded in the income statement under other revenues. Enclosed passages were built between the various production and warehousing units of the Brescia plant, resulting in an expense of 464 thousand. The renewal and upgrade of plant and machinery continued. Main purchases included a work station worth 450 thousand, and three pieces of machinery costing 387 thousand, while internal construction of machinery generated costs amounting to 271 thousand. Expenditure on equipment in the year consists almost exclusively in the manufacturing and acquisition of casts, of which 95 thousand were built internally. Increases in other assets consist prevalently in the acquisition of office electronic equipment and hardware ( 208 thousand) and the acquisition of motor vehicles ( 159 thousand). 85

86 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S 2. INTANGIBLE ASSETS Development costs Software Work in progress Total Historical cost 226,688 2,089,017-2,315,705 Accumulated amortization (121,814) (2,058,664) - (2,180,478) Balance at Dec. 31, ,874 30, ,227 Increases 57, , , ,854 Amortization (47,730) (126,055) - (173,785) Balance at Dec. 31, ,594 95, , ,296 Development costs relate to the widening of the product range with the introduction of a number of new products. The increase in software and work in progress are due to the implementation of the new information system. Work in progress relates mainly to advances paid on software. 3. INVESTMENTS IN SUBSIDIARIES Subsidiary Dec. 31, 2006 Changes Write-downs Dec. 31, 2007 Cembre Ltd 3,437, ,437,433 Cembre Sarl 1,048, ,048,197 Cembre España SL 1,810, ,810,004 Cembre AS 293, ,070 Cembre GmbH 481, ,508 Cembre Inc. 888, ,671 General Marking S.r.l. 156,523 (57,523) - 99,000 Total 8,115,406 (57,523) - 8,057,883 At the end of the 3rd Quarter of 2005, Cembre S.p.A. paid to its subsidiary General Marking 498 thousand to cover losses accumulated. At the end of the same year, 431 thousand had been drawndown from the reserve, while the residual 58 thousand were recorded as an increase in the value of the investment in the subsidiary. In view of the good results achieved by General Marking in 2006, in 2007 the subsidiary decided to release the reserve and to repay the amount to its parent, which has consequently reduced the value of the investment accordingly. The table below shows financial highlights of subsidiaries, all of which are directly owned. 86

87 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S Subsidiary Share capital Sh. Equity Net profit % ( ) ( ) ( ) held Cembre Ltd (Sutton Coldfield - Birmingham) 2,318,129 7,846, , Cembre Sarl (Morangis - Paris, France) 1,071,000 3,281, ,172 95(a) Cembre España SL (Coslada - Madrid, Spain) 1,902,000 5,214,000 1,141,599 95(a) Cembre AS (Stokke - Norway) 301, , , Cembre GmbH (Munich - Germany) 512,000 1,718, ,407 95(a) Cembre Inc. (Edison - New Jersey-USA) 978,195 1,888, ,468 71(b) General Marking S.r.l. (Brescia - Italy) 99, , , (a) the remaining 5% held through Cembre Ltd. (b) the remaining 29% held through Cembre Ltd. Share Capital, Shareholders' Equity and Net Profit figures above relate to the respective Financial Statements at December 31, 2007 approved by the boards of the above subsidiaries. Share Capital and Reserves originally not expressed in euro were translated at the year-end exchange rates, while Net Profit figures were translated into euro at the average exchange rate for the year. 4. OTHER INVESTMENTS Dec. 31, 2007 Dec. 31, 2006 Inn.tec. srl 5,165 5,165 Conai Total 5,224 5,224 Other investments consist in the equity investments in Consorzio Nazionale Imballaggi and that in Inn.tec. S.r.l., technology innovation consortium, both with registered office at the Brescia Province head office. 5. OTHER NON-CURRENT ASSETS The item includes exclusively security deposits. 6. INVENTORIES Dec. 31, 2007 Dec. 31, 2006 Change Raw materials 6,828,863 5,515,645 1,313,218 Work in progress and semi-finished goods 7,716,710 6,509,493 1,207,217 Finished goods 9,381,805 7,122,368 2,259,437 Total 23,927,378 19,147,506 4,779,872 87

88 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S The provision for slow-moving stock amounts to 750,235. Uses in the year amount to 149,765 due to the disposal of obsolete products in stock. The provision was charged directly to the value of finished products to bring their value into line with their expected realizable value. 7. TRADE RECEIVABLES FROM CUSTOMERS Dec. 31, 2007 Dec. 31, 2006 Change Gross trade receivables 17,078,317 17,328,080 (249,763) Provision for doubtful accounts (569,383) (504,765) (64,618) Total 16,508,934 16,823,315 (314,381) Trade receivables by geographical area Dec. 31, 2007 Dec. 31, 2006 Change Italy 14,492 14,487 5 Europe 1,522 1, North America Oceania (65) Middle East Rest of the world (296) Total 17,078 17,328 (250) The provision for doubtful accounts is reviewed periodically on the basis of the retrievability of individual exposures. Whenever bankruptcy procedures are opened, the amount receivable from the related customer is written-off. To provide further protection, a provision for overall bad debt is accrued. Changes in the provision for doubtful accounts in the year are shown below: Dec. 31, 2007 Dec. 31, 2006 Balance at January 1 504, ,314 Accruals 123, ,672 Uses (58,914) (60,221) Balance at December , ,765 Trade receivables by maturity: Not expired 0-90 days days days days Over 2 years Under litigation ,725 2, ,080 3,

89 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S 8. TRADE RECEIVABLES FROM SUBSIDIARIES Dec. 31, 2007 Dec. 31, 2006 Change Cembre Ltd (UK) 2,226,283 1,786, ,435 Cembre Sarl (France) 750, , ,795 Cembre España SL (Spain) 2,271,666 2,204,077 67,589 Cembre AS (Norway) 124,051 86,130 37,921 Cembre GmbH (Germany) 1,125, , ,809 Cembre Inc. (US) 1,024, , ,666 General Marking S.r.l. (Italy) 15,442 88,505 (73,063) Total 7,538,172 6,077,021 1,461, LOANS EXTENDED TO SUBSIDIARIES In 2006, Cembre SpA extended to subsidiary General Marking a 2,000,000 one-year loan expiring January 27, The loan was renewed for one year at a fixed rate of 3%. At December 31, 2007, interest accrued on the loan amounted to 56 thousand. The loan was repaid at maturity. 10. OTHER ASSETS Dec. 31, 2007 Dec. 31, 2006 Change Receivable from employees 19,754 15,723 4,031 VAT receivable 125, ,497 (222,787) Other 95,489 42,264 53,225 Total 240, ,484 (165,531) Item Other consists mainly of advances to suppliers. 11. CASH AND CASH EQUIVALENTS The balance represents cash on hand and liquid assets at the date of the fi nancial statements. 12. SHAREHOLDERS EQUITY At December 31, 2007, the capital stock of Cembre SpA amounted to 8,840,000, and was made up of 17 million ordinary shares of par value 0.52 each, fully underwritten and paid-up. The legal reserve amounts to 20% of the share capital. The sale of the industrial building in San Giuliano resulted in the reclassification of 84 thousand 89

90 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S relating to the write-up in the value of the related plot of land, net of deferred taxes, from the Reserve for the transition to IAS/IFRS to Retained earnings. The effect of changes in the accounting of employee termination indemnities resulted in the reversal of the negative reserve for the conversion to IAS, generated upon the first-time application of the same and amounting to 233 thousand, reclassified as a reduction of the extraordinary reserve. The table that follows shows the origin, possible uses and availability for distribution of equity reserves: Nature/description Amount Uses Portion available Share capital 8,840,000 Equity reserves: Share premium reserve 12,244,869 A B C 12,244,869 Revaluation reserve 585,159 A B --- Suspended-tax reserves 68,412 B --- Reserves accrued from earnings: Legal reserve 1,768,000 B --- Reserve for transition to IAS/IFRS 4,051,204 B --- Extraordinary reserve 20,191,996 A B C 20,191,996 Retained earnings 83,526 A B C 83,526 Total 47,833,166 32,520,391 Portion not available for distribution 2,236,988 Portion available for distribution 30,283,403 Legend: A= capital increases; B= coverage of losses; C= distribution to Shareholders. 13. EMPLOYEE TERMINATION INDEMNITY AND OTHER PERSONNEL PROVISIONS Changes in the provision are shown below. ( ) Dec. 31, 2007 Dec. 31, 2006 Beginning balance 4,511,572 4,352,301 Accruals 671, ,916 Uses (408,373) (511,567) Reduction (Curtailment) (1,026,143) - Discounting effect (15,753) 74,922 Social Security (INPS) pension fund (524,423) - Closing balance 3,208,264 4,511,572 With the reform of employee termination indemnities, starting with January 1, 2007 Cembre SpA will no longer be required to accrue retirement benefi ts in favor of its employees in a provision, but will pay out benefi ts accrued after such date to the INPS treasury account, unless such benefi ts have been destined to other pension funds by individual employees. Employee termination indemnities accrued at December 31, 2006 must therefore be discounted to their present value without keeping into account expected future pay increases of employees, while amounts accruing from January 1, 2007 are treated for accounting purposes as a defi ned benefi t plan. 90

91 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S In application of the reform of employee termination indemnities, a valuation of employee termination indemnities accrued at December 31, 2007 was carried out on behalf of Cembre by a registered actuary, and the value of employee termination indemnities accrued at December 31, 2006 was restated. The latter calculation resulted in a 1,026 thousand reduction (curtailment) in the value of the provision, recorded in full in the income statement. The table that follows shows the effect of the reform on the initial value of employee termination indemnities and on the value of the same at December 31, Former treatment New treatment Initial effect Employee termination indemnities at December 31, ,511 3,485 1,026 Employee termination indemnities at December 31, ,208 Change accrued in 2007 (277) of which: - accruals uses (408) - INPS treasury account (524) - actuarial effect at December 31, 2007 (16) 14. PROVISIONS FOR RISKS AND CHARGES Social Security (INAIL) litigation Customer indemnities Total At December 31, ,698 57, ,154 Accruals - 9,514 9,514 Uses - (2,644) (2,644) At December 31, ,698 64, ,024 The provision for risks on Social Security (INAIL) litigation was accrued to cover possible liabilities arising from retroactive changes in the classification of risks contested by the institution, against which Cembre SpA filed an analytical and motivated appeal. The competent first-degree Court ruled in favor of the Company. While other degrees of appeal are pending it was deemed appropriate to leave the provision unchanged. 15. DEFERRED TAX ASSETS AND LIABILITIES Deferred tax assets are recorded prevalently against the provision for slow moving stock described above, and against the discounting of employee termination indemnities, limited to the portion of the accrual that may not be deducted for tax purposes. Deferred tax liabilities are instead recorded prevalently against the revaluation of land carried out upon the fi rst-time application of IFRS, against the valuation of inventories at the average cost (as for tax purposes these are valued at LIFO), in addition to the reversal of accelerated depreciation. To allow a meaningful comparison between deferred taxes at the end of 2007 and at the end of the previous year, deferred tax assets generated in 2006 by the discounting employee termination 91

92 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S indemnities accrued were subtracted in the table below from deferred tax liabilities. Such item, which in past years had generated deferred tax assets, as a result of the different accounting of employee termination indemnities introduced by the reform, generated in fact deferred tax liabilities. Total amounts shown in the table therefore differ by this amount from the corresponding items reported in the balance sheet. Finally, as a result of the tax reform introduced with the 2008 Budget Law, deferred taxes were adjusted to refl ect the reduced tax rates applicable from January 1, 2008 (IRES corporate tax: 27.5%; IRAP regional tax on productive activities: 3.9%). Further detail is provided in the note on Income taxes. No receivable matures beyond fi ve years. Dec. 31, 2007 Dec. 31, 2006 Deferred tax liabilities Average cost valuation of inventories by the parent (462,018) (561,791) Accelerated depreciation (950,056) (1,210,353) Reversal of land depreciation (27,030) (32,066) Revaluation of land (1,859,165) (2,255,121) Discounting of employee termination indemnity (148,217) 165,965 Capital gain on sale of industrial building (96,114) - Gross deferred tax liabilities (3,542,600) (3,893,366) Deferred tax assets Write-down of inventories 235, ,250 Goodwill amortization 47,903 62,739 Write-down of investment - 6,534 Risk provision 5,308 6,297 Provision for doubtful accounts 27,500 33,000 Other 54,732 18,468 Gross deferred tax assets 371, ,288 Net deferred tax liabilities (3,171,583) (3,431,078) There do not exist other temporary differences or accruals that can generate deferred taxes not accounted for. 16. CURRENT FINANCIAL LIABILITIES The item includes exclusively bank overdrafts generated in the ordinary management of collections and payments. 17. TRADE PAYABLES TO SUPPLIERS Dec. 31, 2007 Dec. 31, 2006 Change Payable to suppliers 9,575,663 9,599,174 (23,511) Advances 148,854 70,460 78,394 Total 9,724,517 9,669,634 54,883 92

93 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S Trade payables to suppliers are recorded net of trade discounts. Cash discounts are instead recorded at the time of payment. The nominal value of trade payables is adjusted for returns and trade discounts (invoicing adjustments) agreed upon with the counterpart. Trade payables by geographical area Dec. 31, 2007 Dec. 31, 2006 Change Italy 7,927 7, Europe 1,594 1,616 (22) North America Oceania (40) Other Total 9,576 9,599 (23) 18. TRADE PAYABLES TO SUBSIDIARIES Dec. 31, 2007 Dec. 31, 2006 Change Cembre Ltd (UK) 26,447 29,579 (3,132) General Marking S.r.l. (Italy) 373, ,842 63,299 Cembre GmbH (Germany) 3, ,245 Cembre España (Spain) 39,885-39,885 Cembre Sarl (France) 253 2,199 (1,946) Cembre AS (Norway) 6,106-6,106 Cembre Inc. (US) - 81,193 (81,193) Total 449, ,003 26, TAX PAYABLES Dec. 31, 2007 Dec. 31, 2006 Change Current taxes payable 402, ,873 (584,042) Further detail is provided in the note on income taxes. 93

94 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S 20. OTHER PAYABLES Dec. 31, 2007 Dec. 31, 2006 Change Payables to employees 802, ,237 91,164 Employee withholding taxes payable 785, , ,128 Bonuses owed to customers 214, ,077 (588) Commissions payable 214, ,524 (18,231) Payable to Statutory Auditors 11,270 25,233 (13,963) Social security payables 1,302, , ,064 Payable on other taxes and withholding taxes 13,889 16,847 (2,958) Other 20,313 20,883 (570) Total 3,364,805 2,863, , REVENUES FROM SALES AND SERVICES PROVIDED Revenues by geographical area Area Dec. 31, 2007 Dec. 31, 2006 Change Italy 39,296 37,152 2,144 Rest of Europe 25,843 21,930 3,913 Rest of the world 8,484 6,389 2,095 Total 73,623 65,471 8,152 Changes are commented upon in the Management Report. 22. OTHER REVENUES Dec. 31, 2007 Dec. 31, 2006 Change Capital gains on disposal of assets 389,463 6, ,887 Rent 95,681 94,512 1,169 Insurance damages 35,809-35,809 Other reimbursements 126, ,155 17,315 Other 35,266 38,843 (3,577) Total 682, , ,603 Capital gains consist primarily of the sale of the industrial building located in San Giuliano (Milan), generating a 380 thousand capital gain. 23. COST OF RAW MATERIALS AND GOODS Dec. 31, 2007 Dec. 31, 2006 Change Raw materials and goods 33,379,386 28,835,227 4,544,159 Consumables and auxiliary materials 2,804,906 2,850,334 (45,428) Transport and customs 75,859 87,771 (11,912) Total 36,260,151 31,773,332 4,486,819 94

95 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S 24. COST OF SERVICES Dec. 31, 2007 Dec. 31, 2006 Change Subcontracted work 3,584,293 3,071, ,082 Transport 1,333,688 1,187, ,352 Maintenance and repair 1,000, , ,018 Electricity, heating and water 993, ,949 47,050 Consulting 613, ,650 86,138 Directors compensation 684, , ,666 Statutory Auditors compensation 59,626 57,079 2,547 Commissions 317, ,777 4,119 Postage and telephone 164, ,135 (9,471) Fuel 135, ,437 (630) Traveling expenses 201, ,368 38,000 Insurance 217, ,476 18,435 Bank expenses 82,186 79,275 2,911 Personnel training 32,567 25,159 7,408 Advertising and promotion 40,252 34,672 5,580 Security and cleaning 254, ,652 3,146 Other 100, ,583 (59,893) Total 9,818,500 8,761,042 1,057, LEASES AND RENTALS Dec. 31, 2007 Dec. 31, 2006 Change Rent and related costs 568, ,280 35,366 Vehicle leasing 196, ,814 (16,096) Total 765, ,094 19,270 Lease and rental costs are made up by rent paid on buildings leased from others and related parties, as described in the Management Report, and by motor vehicles lease costs. 26. PERSONNEL COSTS The item includes the cost of employees, inclusive of paid holidays and accruals made pursuant to current regulations and collective labor contracts. Employee termination indemnities include the accrual for the year inclusive of the revaluation of the provision, the amount accrued by employees terminating employment in the year, and the share borne by employees of contributions to the COMETA integrative pension fund. 95

96 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S Dec. 31, 2007 Dec. 31, 2006 Change Wages and salaries 12,440,734 11,129,850 1,310,884 Social security contributions 3,717,535 3,221, ,722 Employee termination indemnities 838, ,105 94,670 Retirement benefits 15,100 7,408 7,692 Other costs 306, ,922 51,572 Total 17,318,638 15,358,098 1,960,540 Average number of employees by category Dec. 31, 2007 Dec. 31, 2006 Change Managers 6 7 (1) Administrative and commercial staff Workers Outsourced personnel Total In 2006 Cembre SpA employed 21 persons outsourced from others for a total cost of 664 thousand. The amount was classified under wages and salaries. 27. NON-RECURRENT OPERATIONS Following the reform of employee termination indemnities that became effective in 2007, employee termination indemnities accrued at December 31, 2006 were restated to reflect new actuaries. This non-recurrent event resulted in a 1,026 thousand reduction (curtailment) in the provision, recorded in full in the 2007 income statement. 28. OTHER OPERATING COSTS Other operating costs are made up as follows: Dec. 31, 2007 Dec. 31, 2006 Change Sundry taxes 122, ,544 4,706 Donations 36,000 37,950 (1,950) Other 55,763 14,028 41,735 Total 214, ,522 44, RISK PROVISIONS Dec. 31, 2007 Dec. 31, 2006 Change Customer indemnities 9,514 7,941 1,573 The customer indemnities provision amounts to 9,514 thousand and was accrued against possible charges in the case of the termination of agency mandates. 96

97 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S 30. FINANCIAL INCOME (EXPENSE) Dec. 31, 2007 Dec. 31, 2006 Change Loans and bank overdrafts (172,190) (37,689) (134,501) (172,190) (37,689) (134,501) Dividends from subsidiaries 461, ,008 Interest from subsidiaries 59,123 46,438 12,685 Interest earned on bank account balances 50,712 46,158 4,554 Other financial income 1,382 8,032 (6,650) 111, ,628 10,589 Financial income (expense) 400,035 62, ,096 In 2007, Cembre Ltd. paid out to the parent company 315 thousand in dividends, corresponding to 461 thousand reported in the table above. Interest from subsidiaries consist of interest accrued on the loan extended to subsidiary General Marking Srl described in the note on Related parties. 31. FOREIGN-EXCHANGE GAINS (LOSSES) Dec. 31, 2007 Dec. 31, 2006 Change Realized foreign exchange gains 6,435 17,652 (11,217) Realized foreign exchange losses (144,914) (76,273) (68,641) Gains on foreign exchange translation 648 3,605 (2,957) Losses on foreign exchange translation (27,960) (25,115) (2,845) Total (165,791) (80,131) (85,660) 32. INCOME TAXES The accrual to the tax provision is made in accordance with expected taxable income, taking into account adjustments made to income reported in the statutory accounts. The table that follows shows a reconciliation between the theoretical tax expense, calculated at the normal tax rate, and the actual tax expense IRES IRAP TOTAL Profit before taxes 13,900,260 (*) 13,900,260 Theoretical tax expense 4,587,086 1,106,087 5,693,173 Tax effect on increases 957,651 19, ,808 Tax effect on decreases (1,157,097) (17,605) (1,174,702) Effect of decline in tax rates (548,707) (33,426) (582,133) Actual tax expense recorded 3,838,933 1,074,213 4,913,146 (*) Taxable income for the purposes of IRAP (regional tax on productive activities) amounts to 25,921,

98 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S Deferred tax assets and liabilities Dec. 31, 2007 Dec. 31, 2006 Average cost valuation of inventories 99,773 (302,714) Accelerated depreciation 260, ,911 Reversal of land depreciation 5,036 - Land revaluation 395,956 - Discounting of employee termination indemnity (314,182) 2,120 Capital gain on sale of industrial building (96,114) - Write-down of inventories (99,676) - Goodwill amortization (14,836) (5,912) Write-down of investment (6,534) (6,534) Risk provision (989) - Provision for doubtful accounts (5,500) - Other 36,264 (9,266) Total deferred and prepaid taxes 259,495 (180,395) The change in deferred tax assets was affected signifi cantly by adjustments made to refl ect the reduction of tax rates introduced from In the table that follows we illustrate separately the effect of the tax reform and of ordinary changes in the period. Change Effect of new tax rates Average cost valuation of inventories 13,696 86,077 Accelerated depreciation 83, ,001 Reversal of land depreciation - 5,036 Land revaluation 49, ,373 Discounting of employee termination indemnity (343,825) 29,643 Capital gain on sale of industrial building (96,114) - Write-down of inventories (55,787) (43,889) Goodwill amortization (5,911) (8,925) Write-down of investment (6,534) - Risk provision - (989) Provision for doubtful accounts - (5,500) Other 38,958 (2,694) Total deferred and prepaid taxes (322,638) 582,133 The restatement of employee termination indemnities accrued at December 31, 2006 as a result of the change in accounting, resulted in the recording of 339 thousand in deferred tax liabilities, reported under a separate caption in the income statement and included in the table above among taxes on the discounting of employee termination indemnities. 33. DIVIDENDS On May 31, 2007 the company distributed (with ex-dividend date May 28) a dividend on net profit for the year ended December 31, 2006, amounting to 3,740 thousand, equivalent to 0.22 for each share entitled to dividends Resolved and paid in the year Balance due for 2006 dividend: 0.22 (2005: 0.15) 3,740 2,550 Proposal submitted to the Shareholders Meeting (not recorded as liability at December 31) Balance due for 2007 dividend: 0.26 (2006: 0.22) 4,420 3,740 Proposed dividends submitted for approval to the Shareholders Meeting (not recorded as a liability at December 31) amount to 4,420 thousand. 98

99 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S 34. COMMITMENTS AND RISKS At December 31, 2006, guarantees granted by Cembre SpA to third parties amounted to 3,282,983, as compared with 636,318 at December 31, Guarantees granted include a letter of patronage for 0.5 million issued in favor of General Marking Srl against contractual obligations of the same, and a guarantee of 2.5 million against obligations of subsidiary Cembre GmbH. In 2008, the guarantee in favor of General Marking Srl was increased to 2 million. 35. NET FINANCIAL POSITION At December 31, 2007, the net financial position of Cembre SpA amounted to an indebtedness of 1,131,973, declining on the end of the previous year due primarily to capital expenditure, both on tangible and intangible assets, made in The cash flow was affected by the payment of 4,770 thousand in tax advances, and the payment of 3,740 thousand in dividends. At December 31, 2007, the Company did not have outstanding loans containing covenants or negative pledges. The table that follows provides a detail of the net financial position as provided by Consob Regulation DEM/ dated July 28, 2006: Dec. 31, 2007 Dec. 31, 2006 A Cash 9,817 7,189 B Bank deposits 717,458 1,192,607 C Cash and equivalents (A+B) 727,275 1,199,796 D Financial receivables from subsidiaries 2,055,562 2,046,438 E Financial receivables 2,055,562 2,046,438 D Current bank debt (3,914,810) (2,567,102) E Payables on derivatives - - G Current financial debt (D+E) (3,914,810) (2,567,102) H Net current financial position (C+E+G) (1,131,973) 679,132 M Non-current financial debt - - N Net financial position (H+M) (1,131,973) 679, RELATED PARTIES The table that follows shows transactions between Cembre Spa and its subsidiaries at December 31, 2007, limited to sales and purchases. Debit and credit balances are shown in the related paragraphs of the present notes. Subsidiary Sales Purchases Cembre Ltd. 6,202, ,282 Cembre S.a.r.l. 2,993,500 42,624 Cembre España S.L. 5,852, Cembre AS 369,443 - Cembre GmbH 2,795,919 34,161 Cembre Inc. 3,391, General Marking S.r.l. 259,430 1,833,362 Total 21,864,245 2,112,580 As required by CONSOB, Cembre S.p.A. s shareholdings over 10% held in limited liability publicly traded companies and unlisted joint-stock companies at December 31, 2007, are shown in the table below. The Company holds full title to the investments listed below. 99

100 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S Si precisa che tutte le partecipazioni sotto indicate sono detenute a titolo di proprietà. Share % held % of Company Head office Capital voting directly indirectly through total rights Cembre Ltd Sutton Coldfield Gbp 1,700, % 100% 100% (Birmingham - UK) Cembre Sarl Morangis 1,071,000 95% 5% Cembre Ltd 100% 100% (Paris - France) Cembre España SL Coslada (Madrid-Spain) 1,902,000 95% 5% Cembre Ltd 100% 100% Cembre AS Stokke (Norway) Nok 2,400, % 100% 100% Cembre GmbH Monaco (Germany) 512,000 95% 5% Cembre Ltd 100% 100% Cembre Inc. Edison (New Jersey - USA) US $ 1,440,000 71% 29% Cembre Ltd 100% 100% General Brescia 99, % 100% 100% Marking S.r.l. (Italy) Cembre S.p.A. leased an industrial building to subsidiary General Marking. Rent for the building for 2007 amounts to 96 thousand. Among assets leased to Cembre by third parties are an industrial building adjacent to the Company s registered office measuring a total of 5,960 square meters on three floors, in addition to the Milan, Padua and Bologna sales offices, all of which are owned by company Tha Immobiliare SpA, with registered office in Brescia, controlled by Anna Maria Onofri, Giovanni Rosani and Sara Rosani, directors of Cembre SpA. Lease payments for 2007 amounted to 494 thousand. Rent for 2007 is in line with market conditions. It is in the Company s interest to benefit from the continuity of office space reducing the risk of early termination of leases. At the end of 2007, all amounts due to Tha Immobiliare had been settled. With reference to assets and liabilities relating to subsidiaries shown above, we confirm that transactions with the same and with related parties fall within the scope of normal operating activities. Cembre S.p.A. does not have direct relationships with its parent company Lysne S.p.A. of any other nature than that of the exercise of shareholders rights on the part of the parent. Lysne S.p.A. does not carry out any management or coordination activity with respect to Cembre S.p.A. 37. RISK MANAGEMENT AND FINANCIAL INSTRUMENTS Due to its minimal exposure, Cembre S.p.A. does not make signifi cant use of derivative instruments to hedge against interest risk and currency exposure. Interest risk Cembre S.p.A. normally stipulates fl oating rate loan contracts. At December 31, 2007, no loan remained outstanding. Bank debt consists exclusively of overdrafts. The short-term maturity of a large portion of fi nancial instruments held is such that their carrying value is in line with the fair value of the same. Currency risk Despite a strong international presence, Cembre S.p.A. does not have a signifi cant exposure to currency risk (on an operating or equity basis), as it operates mainly in the euro area, the currency in which its trade transactions are mainly denominated. At December 31, 2007, the following foreign exchange positions were held: 100

101 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S currency 2007 equivalent currency 2006 equivalent Receivables in US$ 1,508,484 1,024, , ,049 Receivables in AUS$ 31,067 18, ,466 85,954 Receivables in YEN 9, Payables in US$ 1,645 1, ,631 87,039 Payables in AUS$ 64,963 38, ,914 83,227 Payables in CHF 128,795 77, , ,091 Payables in GBP Current accounts in US$ 469, , , ,550 Amounts were translated into euro at the exchange rate applicable at December 31, The translation generated a negative difference with the book value of foreign currency amounts of 31 thousand, recorded in the income statement. In the table that follows we report the economic effect of possible fl uctuations in exchange rates of the said amounts. Exchange rate change Receivables Payables Current accounts % (50) 6 (15) -5% 55 (12) % (38) 14 (25) -5% 42 (16) 28 As illustrated above, the size of these transactions and the resulting balances are not signifi cant in infl uencing the overall performance of the Company. Liquidity risk The exposure of the Company to liquidity risk is not material. Credit risk Exposure to credit risk relates exclusively to trade receivables. None of the areas in which Cembre S.p.A. operates poses relevant credit risks. Operating procedures limit the sale of products or services to customers who do not possess an adequate credit profi le or provide guarantees. 38. SUBSEQUENT EVENTS No event having signifi cant effects on the Company s fi nancial position or operating performance occurred after the closing of the fi nancial year. Attachments The present document contains the following attachments: Attachment 1: Directors and Auditors Compensation; Attachment 2: Summary of last approved financial statements of consolidated companies; Attachment 3: Auditing certification. Brescia, March 25, 2008 THE CHAIRMAN OF THE BOARD OF DIRECTORS CARLO ROSANI 101

102 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S Attachment 1 Notes to the Financial Statements of Cembre S.p.A. DIRECTORS AND STATUTORY AUDITORS COMPENSATION POSITION COMPENSATION ( ) Position Term (1) Emoluments for position Non-monetary benefits (2) CARLO ROSANI Chairman & Chief Executive Officer ,700 3,543 Bonuses and other incentives Other compensation ANNA MARIA ONOFRI Vice Chairman & Managing Director ,600 2,841 GIOVANNI ROSANI Managing Director ,700 3,344 6,000 (3) SARA ROSANI Director ,200 2,853 11,500 (4) GIOVANNI DE VECCHI Director ,700 3,086 12,000 (3) ALDO BOTTINI BONGRANI Director ,700 3, ,544 (4) MARIO COMANA Director ,624 PAOLO LECHI Director ,700 GUIDO ASTORI Chairman of the Board of Statutory Auditors ,418 ANDREA BOREATTI Statutory Auditor ,231 LEONE SCUTTI Statutory Auditor ,977 (1) The expiration of the term coincides with the approval of the 2008 Financial Statements for both Board of Directors and Board of Statutory Auditors. (2) Made up by fringe benefits represented by the use of a company car and insurance coverage. (3) Retribution for positions held in subsidiaries. (4) Gross retribution for employment. 102

103 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S Attachment 2 Notes to the Financial Statements of Cembre S.p.A. SUMMARY FINANCIAL DATA OF CONSOLIDATED SUBSIDIARIES (EX ARTICLE 2429 OF THE ITALIAN CIVIL CODE) (in euro) Non-current Current Total assets Shareholders' Total liabilities Total liabilities and assets assets Equity Shareholders' Equity Cembre Ltd 5,209,577 6,074,228 11,283,804 7,846,404 3,437,400 11,283,804 Cembre Sarl 487,102 4,459,271 4,946,373 3,281,077 1,665,295 4,946,373 Cembre España SL 935,294 7,903,390 8,838,684 5,214,000 3,624,684 8,838,684 Cembre AS 2, , , , , ,069 Cembre GmbH 2,704,041 2,751,693 5,455,734 1,718,486 3,737,248 5,455,734 Cembre Inc 245,067 2,786,079 3,031,146 1,888,962 1,142,184 3,031,146 General Marking S.r.l. 1,903,457 1,355,633 3,259, ,628 2,522,463 3,259,091 Total Gross operating Operating Profit Income Net profit revenues profit profit before taxes taxes (loss) Cembre Ltd 13,868,849 1,551,996 1,125,278 1,135,009 (281,185) 853,824 Cembre Sarl 6,450, , , ,554 (218,382) 495,172 Cembre España SL 11,580,950 1,795,296 1,659,708 1,691,999 (550,400) 1,141,599 Cembre AS 780, , , ,419 (38,207) 117,212 Cembre GmbH 4,961, , , ,920 (163,513) 236,407 Cembre Inc 5,407, , , ,023 (358,555) 564,468 General Marking S.r.l. 2,369, , , , , ,228 Figures above relate to the respective Financial Statements at December 31, The translation of amounts expressed in currencies other than the euro was carried out as described in the notes to the Financial Statements at December 31,

104 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S Attachment 3 Notes to the Financial Statements of Cembre S.p.A. COMPENSATIO FOR AUDITING SERVICES AND SERVICES OTHER THAN AUDITING (pursuant to article 149-duodecies of Listed Companies Code (CONSOB) Service Independent auditors Service received by Compensation ( 000) Auditing Reconta Ernst & Young Cembre S.p.A. 82 Auditing Reconta Ernst & Young Subsidiaries 105 Tax advisory Reconta Ernst & Young Subsidiaries 7 104

105 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S Report of the Board of Statutory Auditors on the Financial Statements of Cembre S.p.A. at December 31, 2007 To our Shareholders: pursuant to article 153 of legislative decree no. 58, dated February 24, 1998, of the Italian Civil Code, and subsequent amendments, the Board of Statutory Auditors reports to the Shareholders Meeting called to approve the 2007 Financial Statements on the monitoring activity carried out and on omissions and censurable facts observed, in addition to expressing a recommendation on the Financial Statements, their approval and other pertinent issues. In compliance with responsibilities assigned by article 149 of legislative decree no. 58, dated February 24, 1998, and subsequent amendments, the Board of Statutory Auditors reports the following: In 2007 the Board: - attended two Shareholders Meetings; - attended five meetings of the Board of Directors in which Directors informed the Board of Statutory Auditors on main operations of economic and financial relevance carried out by the Company and its subsidiaries. In this regard, we can reasonably state that operations resolved and/or carried out, complied with the Law and the provisions of the By-laws, were not in potential conflict of interest or in contrast with Shareholders resolutions taken, were carried out in compliance with correct management principles, were not manifestly imprudent, did not involve an excessive amount of risk, constitute a potential conflict of interest or were such as to compromise the integrity of the company s assets; - in the person of its Chairman, attended four meetings of the Internal Audit Committee, carried out pursuant to provisions of the By-laws, Laws and norms that regulate their functioning; - met three times with the Company s independent auditors and had a number of contacts by telephone. The Board of Statutory Auditors met nine times, in addition to verifying through an appointed Permanent Auditor the decommissioning of plant and equipment, and carrying out two other verifications through its Chairman to attest expenditure on R&D projects and verifying costs relating to IRAP (regional tax on productive activities) tax facilitations. We have acquired direct knowledge and monitored, to the extent required by our task, the adequacy of the organizational structure of the Company and of its administrative and managerial organization in relation to its size, gathering information from persons in charge of the organization of the Company and through meetings with the independent auditors involving exchange of data and relevant information, to verify the respect of diligent and correct administration principles. We have also monitored the adequacy of the internal auditing system, also at the consolidated level, to verify the respect of internal procedures, both operating and administrative, and their ability to 105

106 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S ensure a correct and efficient management, aiming to identify, prevent and manage, wherever possible, financial and operating risks, in addition to possible frauds that could damage the company. The Company adopted an organizational, managerial and control model pursuant to Legislative Decree 231/01 and subsequent amendments, on the Administrative Responsibilities of Entities, as resolved by the Board of Directors on March 25, 2008, creating a Monitoring Board that will issue periodical reports. The model aims at preventing and identifying possible infringements of the Law through the mapping of risks incurred by the company in its operating activities. Instructions imparted to subsidiaries pursuant to article 114, paragraph 2, of Legislative Decree no. 58/1998 appear adequate. Information pursuant to article 150, comma 2 of Legislative Decree no. 58/98 was supplied and sought independently by the Board of Statutory Auditors, from which no data or relevant information, omissions, censurable facts, irregularities or in any case significant events worth reporting to relevant Authorities or of mention in the present report have emerged. The Board of Statutory Auditors did not receive any report pursuant to article 2408 of the Italian Civil Code or has any knowledge of any other denunciation pursuant to the same received by others. The Board of Directors transmitted to us, within the term set by law, the Report on the first six months of 2007, publishing it pursuant to rules set by Consob, complying with publishing requirements of quarterly reports. Likewise, the Board of Directors transmitted to us the Balance Sheet, Income Statement, Statement of Cash Flows and Statement of Changes in the Shareholders Equity, together with the Notes to the accounts. The Report on Operations for the 2007 financial year illustrates events occurred after the date of the financial statements and the outlook for With regard to Consob communications, we can attest that: - information provided by Directors in the Report on Operations can be deemed exhaustive and complete. The notes to the accounts provide detailed information on the form and content of the Financial Statements, accounting principles and valuation criteria adopted; - in compliance with Consob communication dated July 28, 2006, the Report on Operations includes performance indicators (significant results, contribution margins, aggregate data); - in the verifications and checks we performed on the Company, we did not encounter any atypical or unusual transaction; - with regard to transactions between Group companies and those with related parties, the Report on Operations and the Notes to the accounts describe and explain exchanges of goods and services between the Company and its subsidiaries or other related parties, attesting that the same were carried out at market conditions, keeping into account the quality of goods and services exchanges; - in the field of risk management and financial instruments, the nature and amount of risks were reported; - The Audit Report does not contain reference to lack of disclosure or related observations and proposals; 106

107 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S - in the year we delivered the opinions requested to the Board of Statutory Auditors pursuant to the law; - in compliance with article 149 n.1 lett.c) bis of Legislative Decree no. 58, February 24, 1998, we acknowledge that, as it appears in the Report on Corporate Governance, the Cembre Group participates and complies with the Self-conduct code issued by the Committee for Corporate Governance of listed companies, as integrated and implemented, through its adoption and compliance with Regulations for STAR segment listed companies; - the adoption of the said Code was verified by the Board of Statutory Auditors and represented the subject, in its various aspects, of the Report on Corporate Governance that the Board of Directors made available and to which we refer for a more complete and adequate information. We enclose in the present report a full description of positions held as directors or statutory auditors in other joint-stock companies by permanent auditors and substitute auditors. In addition to the auditing of the statutory accounts and consolidated financial statements, Cembre S.p.A. appointed Reconta Ernst & Young to carry out a limited audit of its Consolidated Half-year Reports and Quarterly Reports, including the review, verification and auditing of tax returns and Forms 770, together with the tax audit of its subsidiaries (tax services), for a total compensation of 7,000. We have verified the correct application of criteria and procedures adopted by the Board of Directors in the year to evaluate the independence of Independent Directors and that of the Board of Statutory Auditors, as required by the Code of Conduct. The statutory accounts for which we verified compliance with laws regulating its format and preparation through checks carried out by us within the limits of our task as provided by article 149 of Legislative Decree no. 58, February 24, 1998, and subsequent amendments, and information provided by the Independent Auditors, report a net income of 8,987,113, as compared with a net income of 6,665,345 in the previous year. The Board of Statutory Auditors therefore deems the Financial Statements at December 31, 2007 and the proposed allocation of net profit for the year submitted by the Board of Directors to be suitable to receive your approval. Brescia, April 1, 2008 The Board of Statutory Auditors Guido Astori Andrea Boreatti Leone Scutti Chairman Permanent Auditor Permanent Auditor 107

108 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S S T U D I O Dott. Rag. Guido Astori DOTTORE COMMERCIALISTA REVISORE CONTABILE BRESCIA, 01 APRILE 2008 P IAZ ZA CRE M O N A N. 11 /A TEL FAX SEGRETERIA@STUDIOASTORI.IT BOARD POSITIONS HELD (ART. 148 BIS C.I. LGS. DEC. 58/98) IN JOINT-STOCK COMPANIES TO BE DISCLOSED TO SHAREHOLDERS MEETINGS (EX ART COMMA 4, EX ART.2 LAW 28/12/2005 No.262) BOARD POSITIONS HELD IN JOINT-STOCK COMPANIES COMPANY REGISTERED OFFICE TAX ID POSITION JOINT-STOCK COMPANY: Cembre Spa Brescia, via Serenissima, LARGE (CONSOLIDATED) Lysne Spa Via Diaz, 9 Brescia (BS) c/o Dott. Luca Rossi MEDIUM COMPANY WITH AUDITING RESPONSIBILITIES: Cantine Soldo Spa Via Roccafranca, 14 Chiari (BS) MEDIUM COMPANY WITHOUT AUDITING RESPONSIBILITIES: Pè Pietro Legnami Spa Via Veneto, 13 Brescia (BS) Chairman of Board of Statutory Auditors without accounting audit responsibilities Permanent Auditor without accounting audit responsibilities Chairman of Board of Statutory Auditors with accounting audit responsibilities Permanent Auditor without accounting audit responsibilities SMALL COMPANY: Al-fin Spa Via Brescia, 129 Montichiari (BS) Chairman of Board of Statutory Auditors with accounting audit responsibilities Casa dei Colli Srl Via Foina, 1 Monticelli Brusati (BS) Permanent Auditor with accounting audit responsibilities Edimet Spa Via Brescia, 129 Montichiari (BS) Permanent Auditor without accounting audit responsibilities Gardagolf Srl Via Omodeo, 2 Soiano del Lago (BS) Chairman of Board of Statutory Auditors with accounting audit responsibilities Mineraria Baritina Spa Via Tosio, 15 Brescia (BS) Permanent Auditor with accounting audit responsibilities Tha Immobiliare Spa Via Diaz, 9 Brescia (BS) c/o Dott. Luca Rossi Permanent Auditor with accounting audit responsibilities BOARD POSITIONS WITH MANAGING POWERS COMPANY REGISTERED OFFICE TAX ID POSITION EXPIRATION approval of financial statements POINTS EXPIRATION approval of financial statements POINTS Zinnia Srl (Società immobiliare statica) Brescia, piazza Cremona, Sole Director Until revoked Exempt 1 position held in joint stock company and 11 overall positions held (including exempt) Dott. Guido Astori 108

109 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S BOREATTI DOTT. ANDREA Dottore commercialista Revisore contabile Via Angelo Maj, 14/D BERGAMO Tel Fax andrea.boreatti@boreattipilenga.it BOARD POSITIONS HELD (ART. 148 BIS C.I. LGS. DEC. 58/98) IN JOINT-STOCK COMPANIES TO BE DISCLOSED TO SHAREHOLDERS MEETINGS (EX ART COMMA 4, EX ART.2 LAW 28/12/2005 No.262) BOARD POSITIONS HELD IN JOINT-STOCK COMPANIES COMPANY REGISTERED OFFICE TAX ID POSITION JOINT-STOCK COMPANY: Cembre Spa Brescia, via Serenissima, Permanent Auditor without accounting audit responsibilities LARGE COMPANY (CONSOLIDATED): Lysne Spa Brescia - Via Diaz Chairman of Board of Statutory Auditors without accounting audit responsibilities LARGE COMPANY WITHOUT AUDITING RESPONSIBILITIES: Arti Grafiche Johnson Spa Seriate (Bg) - Via Grinetta 9/A Permanent Auditor without accounting audit responsibilities MEDIUM COMPANY WITH AUDITING RESPONSIBILITIES: Coge Srl Bergamo - Via Quinto Alpini Chairman of Board of Statutory Auditors with accounting audit responsibilities Edilferri Spa Castel Rozzone (Bg) - Via Monte Rosa Permanent Auditor with accounting audit responsibilities Filca Cooperative Soc. a rlpa Lecco - Piazza Manzoni Permanent Auditor with accounting audit responsibilities Sile Srl Barzana (Bg) - Via San Pietro Chairman of Board of Statutory Auditors with accounting audit responsibilities MEDIUM COMPANY WITHOUT AUDITING RESPONSIBILITIES: Permanent Auditor without accounting Crb Srl Costruzioni Residenziali Brianza Castelcovati (Bs) - Via Degli Artigiani audit responsibilities Permanent Auditor without accounting Gamba Bruno Spa Bergamo - Via Baioni 31/C audit responsibilities SMALL COMPANY: Benatti Holding Srl Lecco - Via Cavour Permanent Auditor without accounting audit responsibilities Ciceri Spa Curno (Bg) - Via Dell'Aeronautica Chairman of Board of Statutory Auditors with accounting audit responsibilities EXPIRATION approval of financial statements POINTS , , , , , , , , , ,00 SMALL COMPANY: COMPANY REGISTERED OFFICE TAX ID POSITION Helga Immobiliare Srl Bergamo - Via Dei Partigiani Iniziative Editoriali Srl Lecco - Via Fiume Kilily Spa Bergamo - Via Angelo Maj 14/D M & P Capital Srl Bergamo - Via Angelo Maj 14/D Modulo Zeta Srl Lecco - Via Fabio Filzi Monitor Tv Spa Lecco - Piazza Manzoni Tha Immobiliare Spa Brescia - Via Diaz Chairman of Board of Statutory Auditors with accounting audit responsibilities Permanent Auditor with accounting audit responsibilities Chairman of Board of Statutory Auditors with accounting audit responsibilities Permanent Auditor without accounting audit responsibilities Permanent Auditor with accounting audit responsibilities Permanent Auditor with accounting audit responsibilities Chairman of Board of Statutory Auditors with accounting audit responsibilities EXPIRATION approval of financial statements POINTS , , , , , , ,00 BOARD POSITIONS Banca Popolare Lecchese Lecco - P.zza Manzoni Ang. Via Visconti Director ,75 Ars Net Srl Bergamo - Via Angelo Maj 14/D Sole director Not defined 0,00 1 position held in joint stock company and 20 overall positions held (including exempt). Bergamo, April 01, 2008 Boreatti Dott. Andrea 109

110 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S Via Pontida n.1 P.za Martiri di Belfiore n B R E S C I A Tel r.a. Fax Cod.Fisc. SCTLNE36S16D086B Partita Iva E.mail: leonescutti@ .it LEONE SCUTTI Ragioniere Commercialista Revisore Contabile BOARD POSITIONS HELD (ART. 148 BIS C.I. LGS. DEC. 58/98) IN JOINT-STOCK COMPANIES TO BE DISCLOSED TO SHAREHOLDERS MEETINGS (EX ART COMMA 4, EX ART.2 LAW 28/12/2005 No.262) JOINT-STOCK COMPANY Name Registered office Tax ID and Position EXPIRATION Approval of financial Points Reg. No. statements CEMBRE SpA Brescia, Via Serenissima n Permanent Auditor without accounting audit responsibilities LARGE COMPANY WITH AUDITING RESPONSIBILITIES Eural Gnutti SpA Rovato (BS), Via S. Andrea n Permanent Auditor Industrie Pasotti SpA Brescia, Via della Musia n Permanent Auditor Trafilerie Carlo Gnutti SpA Chiari (BS), Via S.Bernardino n.23a Permanent Auditor June 30, MEDIUM COMPANY WITH AUDITING RESPONSIBILITIES Atib Srl Dello (BS), Via Quinzanese n Permanent Auditor Cremaschini F.lli SpA Brescia, Via Pontida n Permanent Auditor Euromec Srl Isorella (BS), Via Visano n.78/ Permanent Auditor Os.al.mec Srl Maclodio (BS), Via Roma n Permanent Auditor Sei SpA Ghedi (BS), Via Industriale n.8/d Permanent Auditor Socar SpA Brescia (BS), Via Cesare Deretti n Permanent Auditor MEDIUM COMPANY WITHOUT AUDITING RESPONSIBILITIES Alumec SpA Rudiano (BS), Via Lavoro e Industria Trav Chairman Eco-Zinder Srl Brescia, Via Pontida n Permanent Auditor Gambari International Srl Lumezzane (BS), Via Mainone n Permanent Auditor G.C.E. Srl Brescia, Via Pontida n Permanent Auditor SMALL COMPANIES Fimo SpA Brescia, Via Pontida n Permanent Auditor 2009 / Gruppo Beni Immobili SpA Brescia, Piazza Martiri di Belfiore n Chairman 2008 / Isomec Srl Isorella (BS), Via Visano n.72/a Permanent Auditor 2007 / La Tesa SpA San Zeno Naviglio (BS), Via Iv Novembre n Permanent Auditor 2009 / L.M.V. SpA Brescia, Via Stretta n Chairman 2007 / Omec Serrature SpA Lumezzane (BS), Via Caselli n Permanent Auditor 2007 / Orizio Paolo SpA in liquidazione Rodengo Saino (BS), Via Stacca n Permanent Auditor 2007 / Projecta Engineering SpA Brescia, Via Rodi n Permanent Auditor 2007 / Sarda SpA Domusnovas (CA), Loc. Matt' e' Conti Permanent Auditor 2007 / The Four Company Srl Villa Carcina (BS), Via Marconi n.118b Permanent Auditor 2007 / 1 position held in joint stock company and 24 overall positions held (including exempt) Brescia Rag. Leone Scutti 110

111 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S S T U D I O RAG.MARIA GRAZIA LIZZINI BRESCIA, 25/03/2008 ECONOMISTA D IMPRESA PIAZZA CREMONA, N.11/A - TEL REVISORE CONTABILE BOARD POSITIONS HELD (ART. 148 BIS C.I. LGS. DEC. 58/98) IN JOINT-STOCK COMPANIES TO BE DISCLOSED TO SHAREHOLDERS MEETINGS (EX ART COMMA 4, EX ART.2 LAW 28/12/2005 No.262) COMPANY BOARD POSITIONS HELD IN JOINT-STOCK COMPANIES REGISTERED OFFICE TAX ID POSITION EXPIRATION approval of financial statements POINTS MEDIUM COMPANY WITH AUDITING RESPONSIBILITIES: Cantine Soldo Spa Via Roccafranca, 14 Chiari (BS) Permanent Auditor without accounting audit responsibilities SMALL COMPANY WITH AUDITING RESPONSIBILITIES: Holz Albertani Spa Forno d Allione Berzo Demo (Bs) Chairman of Board of Statutory Auditors with accounting audit responsibilities 2008 EXEMPT 0 position held in joint stock company (1 as alternate auditor) and 2 overall positions held (3 including alternate auditor position and exempt) Rag.Maria Grazia Lizzinii 111

112 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S giorgio astori architetto ingegnere BOARD POSITIONS HELD (ART. 148 BIS C.I. LGS. DEC. 58/98) IN JOINT-STOCK COMPANIES TO BE DISCLOSED TO SHAREHOLDERS MEETINGS (EX ART COMMA 4, EX ART.2 LAW 28/12/2005 No.262) BOARD POSITIONS HELD IN JOINT-STOCK COMPANIES COMPANY REGISTERED OFFICE TAX ID POSITION EXPIRATION approval of financial statements POINTS SMALL COMPANY WITH AUDITING RESPONSIBILITIES: Holz Albertani Spa Forno d Allione Berzo Demo (Bs) Permanent Auditor without accounting audit responsibilities 2008 EXEMPT 0 position held in joint stock company (1 as alternate auditor) and 1 overall position held (2 including alternate auditor position and exempt) Ing.Giorgio Astori via piero calamandrei brescia italia tel fax STR GRG 52M19B157H

113 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S 113

114 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S 114

115 Abstract of 29 April 2008 Shareholders General Meeting resolutions regarding the Financial Statements for the year ending 31 December 2007

116 R E P O R T A N D AC C O U N T S FI N A N C I A L ST AT E M E N T S Abstract of 29 April 2008 Shareholders General Meeting resolutions regarding the Financial Statements for the year ending 31 December 2007 Shareholders General Meeting approved Cembre S.p.A. Financial Statements for the financial year ending 31 December 2007 and the documents annexed. Stating that the legal reserve had already reached an amount of 20% of Capital Stock, Shareholders General Meeting approved the allocation of the Company s 2007 financial year net profit of 8,987,113,37 (rounded of to 8,987,113 in Financial Statements) as follows:: - dividend payments to shareholders, in the amount of 0.26 for each of the Company s 17,000,000 outstanding shares 4,420,000 - to the extraordinary reserve 4,567,113 The dividend is payable from 22 May 2008 with a date of record of 19 May The consolidated financial statement for the financial year ending 31 December 2007 and documents annexed have been presented to Shareholders General Meeting. 116

117 Via Serenissima, Brescia (Italy) Phone: Telefax: