Pirelli

14. Other receivables

Other receivables can be analyzed as follows:

The carrying amount of current and non-current other receivables is regarded as approximating fair value. Particularly with regard to non-performing loans (included under “other receivables”) that, as described under the accounting policies, are accounted for at amortized cost using the effective interest method, the amount recognized is equal to the present value of future cash flows according to the most recent business plan available discounted at the original effective interest rate.

It is regarded that the carrying amount of such receivables, calculated as described above, approximates their fair value at the date of December 31, 2008 since the ordinary effective interest rate used to compute the present value is today still representative of a market rate that would be applied by third parties to measure the portfolio. Such rate is determined by considering the characteristics (such as risk, markets, etc.) of this portfolio, which are elements that company management responsible for these valuations still now consider to be essentially valid.

Non-current financial receivables from associates and joint ventures, equal to Euros 564,492 thousand, mainly refer to the Real Estate group and are classified as non-current since the collection times, connected with the plans for the disposal of the properties held directly and indirectly by the companies, will be concluded on average over a period of between two and six years. These loans are made at rates in line with those applied by the major market operators except for non-interest bearing loans made to certain non-operating companies or companies in a stage of transition. At December 31, 2008, the present value of non-interest bearing shareholder loans, net of the effect of accrued interest, resulted in a reduction of the receivable for Euros 14,264 thousand.

Non-current financial receivables from third parties principally include amounts deposited as a guarantee for tax and legal disputes relating to the subsidiary Pirelli Pneus S.A. (Brazil), remunerated at the market rate.

Receivables for junior notes relate to the Real Estate sector. The increase from the end of 2007 can be ascribed to Class B junior notes from the securitization of a non-performing loan portfolio of the associate Vesta Finance S.r.l. taken over by Pirelli & C. Real Estate S.p.A..

Other current receivables refer to the non-performing loan portfolios of the Real Estate sector (Euros 18,575 thousand) from the acquisition of mortgages and unsecured debts in previous years mainly from Banca Popolare di Intra and Banca Antonveneta, and regional grants that will be made by the Campania Region to aid buyers of property units owned by the company Geolidro S.p.A. (Euros 8,479 thousand).

The gross amount of other receivables written down is Euros 26,884 thousand at December 31, 2008 (Euros 21,756 thousand at December 31, 2007).

The movements in the provision for writedowns of other receivables are as follows:

15. Tax receivables

Tax receivables amount to Euros 56,510 thousand (of which Euros 10,264 thousand is non-current) compared to Euros 55,559 thousand at December 31, 2007 (of which Euros 12,278 thousand is non-current).

16. Inventories

Inventories can be analyzed as follows:

Inventories include capitalized borrowing costs of Euros 1,598 thousand at December 31, 2008 (Euros 679 thousand at December 31, 2007).

The writedowns of inventories recorded in 2008 amount to Euros 27,321 thousand (Euros 1,337 thousand at December 31, 2007).

Inventories are not used as collateral.

17. Securities held for trading

Securities held for trading amount to Euros 115,800 thousand (Euros 114,039 thousand at December 31, 2007) and include the following:

• Euros 35,907 thousand of floating rate bonds issued and guaranteed by banking institutions;
• Euros 63,501 thousand of fixed rate bonds issued and guaranteed by banking institutions;
• Euros 4,410 thousand of listed fixed rate bonds;
• Euros 11,850 of equity shares, of which Euros 7,371 thousand relates to listed shares;
• Euros 132 thousand of other securities.

For listed securities, the fair value corresponds to the stock market price at December 31, 2008.

For unlisted securities, the fair value was determined by reference to estimates based on the best information available.

Changes in fair value are recognized in the income statement under “gains (losses) from changes in fair value of financial assets” (Note 38).

18. Cash and cash equivalents

Cash and cash equivalents are concentrated in the financial companies, the holding companies and the subholding companies of the group. They are mainly invested in short-term deposits at leading banking counterparts primarily at interest rates reflecting market rates.

For purposes of the statement of cash flows, the balance of cash and cash equivalents is shown net of bank overdrafts, equal to Euros 26,828 thousand at December 31, 2008 and Euros 47,207 thousand at December 31, 2007.

19. Equity

19.1 EQUITY ATTRIBUTABLE TO THE EQUITY HOLDERS OF THE COMPANY

Share capital amounts to Euros 1,554,269 thousand, and consists of 5,233,142,003 ordinary shares and 134,764,429 savings shares, all with a par value of Euros 0.29 each and normal dividend rights.

The changes in share capital are detailed below:

The number of ordinary treasury shares in portfolio increased from 2,617,500 last year to 3,867,500 and represent 0.07 percent of ordinary shares only. Furthermore, following the withdrawal rights exercised by the savings shareholders, envisaged in the case of a reduction in share capital, pursuant to the law, 4,491,769 savings treasury shares were purchased, representing 3.33 percent of savings shares only. Total treasury shares in portfolio represent 0.16 percent of share capital.

Changes in equity are as follows:

19.2 Equity attributable to the minority interest

The minority interest in equity went from Euros 823,840 thousand at December 31, 2007 to Euros 202,825 thousand at December 31, 2008. The change is mainly due to the repurchase of the 38.9 percent interest in Pirelli Tyre S.p.A. in addition to the payment of dividends and the exchange effect of the translation of foreign currency financial statements to Euros.

The major percentages of investments held by minority interests are as follows: