Pirelli & C. S.p.A. – Summary data

Balance sheet and financial position

balance sheet (in millions of Euros)
12/31/2007		12/31/2006
Property, plant and equipment	97.2	103.4
Intangible assets	1.4	1.7
Financial assets
- Group	718.6	1,237.2
- Olimpia		3,474.9
- Third parties	540.5	641.1
Net working capital	(68.8)	(186.1)
Total	1,288.9	5,272.2

Equity	2,076.0	2,882.3
Provisions	59.2	221.4
Net financial (liquidity)/debt position	(846.3)	2,168.5
Total	1,288.9	5,272.2

The above statement presents the balance sheet and financial position of the company. The most significant changes during 2007 refer to the following:

financial assets, besides the entire investment held in Olimpia, register a decrease in both those of the Group (Euros 518.6 million) and third parties (Euros 100.6 million).

An analysis of the changes is presented in the following table:

GRoup (in millions of Euros)
Investments
Pirelli UK Ltd	145.6
Pirelli & C. Real Estate S.p.A.	54.3
Pirelli Broadband Solutions S.p.A.	15.0
Other companies	9.1

Reduction in share capital
Pirelli Holding N.V. (ex-Pirelli Tyre Holding N.V.)	(242.6)

Impairment losses
Pirelli Holding N.V. (ex-Pirelli Tyre Holding N.V.)	(385.7)
Pirelli Finance (Luxembourg) S.A.	(16.7)
Pirelli Broadband Solutions S.p.A.	(16.5)
Pirelli UK Ltd	29.0
Other companies	(4.3)

Reclassification of provision for impairment of investments	(105.8)
Total	(518.6)

Third parties (in millions of Euros)
Investments
RCS Mediagroup S.p.A.	10.9
Gruppo Banca Leonardo S.p.A.	3.6

Divestitures
Intek S.p.A.	(6.8)
KME Group S.p.A.	(1.8)
Consortium S.r.l.	(0.3)

Impairment losses
Telecom Italia S.p.A.	(23.7)
Euroqube S.A.	(0.9)

Changes in fair value recognized in equity	(81.6)
Total	(100.6)

the change in net working capital is mainly due to the payment of the liability contracted with Pirelli Holding N.V. for the purchase of the investment in Pirelli Tyre S.p.A. during the year 2006 (Euros 151.5 million);
equity decreased by Euros 806.3 million compared to December 31, 2006. The main changes in equity are presented in the following table:

changes in equity (in millions of Euros)
Equity at December 31, 2006	2,882.3
Effect of reduction in share capital	(826.3)
Gains (losses) recognized directly in equity:
- Change in fair value on available-for-sale financial assets	(94.8)
- Gains (losses) transferred to income upon disposal of available-for-sale financial assets or when there are impairment losses	13.2
- Actuarial gains (losses) on employees' leaving indemnity	0.9
Total income (expenses) recognized directly in equity	(80.7)
Income for the year	100.7
Equity at December 31, 2007	2,076.0

provisions decreased from the end of 2006 mainly as a result of the reclassification of the provision for impairment of financial investments (Euros 105.8 million), the payment of the price adjustment (Euros 39.9 million) and the settlement of some claims (Euros 25.5 million) as part of the sale of the Pirelli activities in the Energy and Telecom Cables and Systems sectors to Goldman Sachs Capital Partners in July 2005;
the net financial position went from a net debt position of Euros 2,168.5 million at December 31, 2006 to a net liquidity position of Euros 846.3 million at December 31, 2007. The analysis of the changes is detailed in the following table:

changes in debt position (in millions of Euros)
Net financial debt position at 12/31/2006	2,168.5
Financial investments	236.6
Price adjustment payment and claims settlement on sale of Energy and Telecom Cables and Systems businesses	49.9
Sale of investment in Olimpia S.p.A.	(3,329.0)
Sales of warrants to GSCP	(91.0)
Other financial divestitures	(259.2)
Dividends collected	(673.2)
Change in net working capital	117.3
Payable for reduction of share capital	826.3
Net financial expenses	63.6
Other changes	43.9
Net financial debt position at 12/31/2007	(846.3)

Income statement

income statement (in millions of Euros)
	2007	2006
Net financial expenses	(63.6)	(69.1)
Income from investments	263.8	312.7
Other operating income (expenses)	(30.4)	(47.3)
Income before income taxes	169.8	196.3
Income taxes	3.7	18.2
Income from continuing operations	173.5	214.5
Income (loss) from discontinued operations	(72.8)	(1,856.8)
Income for the year	100.7	(1,642.3)

The income for the year amounts to Euros 100.7 million compared to a loss of Euros 1,642.3 million in the prior year.
The most important items are described below:

net financial expenses are in line with those of 2006 and include:

(in millions of Euros)
	2007	2006
Interest expenses	(85.6)	(95.9)
Other financial expenses	(7.6)	(7.0)
Interest income	28.8	32.5
Other financial income	0.8	1.3
Total net financial expenses	(63.6)	(69.1)

Details of income from investments are as follows:

(in millions of Euros)
	2007	2006
Dividends
Pirelli Holding N.V.	557.4	100.0
Pirelli & C. Real Estate S.p.A.	44.1	40.7
Pirelli Tyre S.p.A.	42.7	-
Mediobanca S.p.A.	9.8	8.7
Telecom Italia S.p.A.	6.6	6.6
Capitalia S.p.A.	-	9.9
Other companies	15.4	26.9
676.0		192.8

Impairment losses
Pirelli Holding N.V.	(385.7)
Pirelli Finance (Luxembourg) S.A.	(16.7)	(15.7)
Pirelli Broadband Solutions S.p.A.	(16.5)
Pirelli SA		(12.2)
Pirelli Uk Ltd	29.0
Telecom Italia S.p.A.	(23.7)
Other companies	(5.2)	(10.0)
(418.8)		(37.9)

Gains from disposals
Capitalia S.p.A.		154.7
Other companies	6.6	3.1
6.6		157.8

263.8		312.7

other operating income (expenses) show an improvement of Euros 16.9 million compared to the prior year. Details are as follows:

(in millions of Euros)
	2007	2006
Operating income (excluding nonrecurring income)	119.3	128.4
Operating expenses (excluding nonrecurring expenses)	(152.4)	(172.5)
Nonrecurring income	2.8	0.0
Nonrecurring expenses	(0.1)	(3.2)
Total other operating income (expenses)	(30.4)	(47.3)

the reduction in income taxes compared to the prior year is principally due to the decrease in income on the national tax consolidation;
income (loss) from discontinued operations includes: the gain realized on the sale to Goldman Sachs International of 4,763 warrants that had been obtained as part of the sale of the Energy and Telecom Cables and Systems activities in July 2005 (Euros 91.0 million); the net loss, including transaction costs net of revenues for services rendered to Olimpia S.p.A., originating from the sale of the investment in Olimpia S.p.A. (Euros 159.7 million); the adjustment of the provision for future liabilities and charges on the guarantees provided to the buyer as part of the sale of the Energy and Telecom Cables and Systems activities (Euros 4.1 million). The comparative amount for income (loss) from discontinued operations in 2006 included: classification of the impairment loss on the investment in Olimpia S.p.A. net of the revenues for services rendered (Euros 1,826.8 million) and the accrual to the provision for future liabilities and charges for the sales price adjustment and the guarantees granted to the buyer as part of the sale of Pirelli’s activities in the Energy and Telecom Cables and Systems (Euros 30.0 million).

COMPENSATION PAID TO DIRECTORS, STATUTORY AUDITORS AND GENERAL MANAGERS (in thousands of Euros)

	Description of post		Compensation received in 2007				Compensetion for the year 2007 to be paid in 2008
	Post held	Term of office	Compensation for the post	Non monetary benefits	Bonuses and other incentives	Other compensation	Compensation for the post	Bonuses and other incentives
Tronchetti Provera Marco	Chairman	2008	2,546	1,7352			50	1,620
Pirelli Alberto	Deputy Chairman	2008	564	3543			50	1133
Puri Negri Carlo Alessandro	Deputy Chairman	2008	320	2,0894			50	3,4764
Acutis Carlo	Director	2008	50
Angelici Carlo	Director	2008	255				50
Benetton Gilberto	Director	2008	50
Bombassei Alberto	Director	2008	50
Bruni Franco	Director	2008	255				50
Cucchiani Enrico Tommaso 1	Director	from 07/26/07	22
Galateri di Genola Gabriele 1	Director	2008	50
Garraffo Mario	Director	2008	50
Giarda Dino Piero	Director	2008	50
Libonati Berardino	Director	2008	206				50
Ligresti Giulia Maria	Director	2008	50
Moratti Massimo	Director	2008	50
Perissinotto Giovanni	Director	2008	50
Pesenti Giampiero	Director	2008	206				50
Roth Luigi	Director	from 04/23/07	35
Roveri Aldo	Director	2008	206				50
Secchi Carlo	Director	2008	357				50
Vagnone Paolo 1	Director	up to 07/20/07	27
De Conto Claudio	General Manager	-	7		587	8428		850
Gobbi Luciano	General Manager	-	5		544	650		6,8109
Guatri Luigi	Chairman of the Board of Statutory Auditors	2009	62
Laghi Enrico	Standing members	2009	41
Lazzati Paolo	Standing members	2009	12210				41
1 Remuneration paid over to his company 2 Of which Euros 1.300 thousand from Pirelli Tyre S.p.A. and Euros 435 thousand from Pirelli & C Real Estate S.p.A. (PRE) 3 From Pirelli Tyre S.p.A. 4 From Pirelli Real Estate S.p.A. 5 As a member of the Internal Control and Corporate Governance Committee 6 As a member of Remuneration Committee 7 As a member of the Internal Control and Corporate Governance Committee (Euros 25 thousand) and the Supervisory Board (Euro 10 thousand) 8 Of which Euros 801 thousand from Pirelli & C and Euros 41 thousand from PRE 9 Of which Euros 6.360 thousand paid to employees’leaving indemnity due by law 10 For the post of Chairman of the Board of Satutory Auditors of Pirelli Tyre S.p.A. (Euros 22 thousand), for the post of Statutory Auditor in subsidiaries of PRE (Euros 90 thousand) and as a member of the Supervisory Board of Pirelli & C. S.p.A. (Euros 10 thousand)