1H 2010 financial report

C I R

Semi-Annual Interim Financial Report as of June 30 2010

The Board of Directors Milan, July 30 2010

C O N T E N T S

ADMINISTRATIVE BODIES................................................................................................................................. 2

SEMI-ANNUAL INTERIM FINANCIAL REPORT INTERIM REPORT ON OPERATIONS .............................................................................................................. 3

1. PERFORMANCE OF THE GROUP...........................................................................................................................7 2. PERFORMANCE OF THE PARENT COMPANY............................................................................................10 3. CHART RECONCILING THE BALANCE SHEET FIGURES OF THE PARENT COMPANY WITH THOSE OF THE CONSOLIDATED FINANCIAL STATEMENTS.............................................................................................11 4. PERFORMANCE OF THE BUSINESS SECTORS.................................................................................13 5. OTHER ACTIVITIES ..............................................................................................................................................19 6. SIGNIFICANT EVENTS WHICH OCCURRED AFTER JUNE 30 2010 AND OUTLOOK FOR THE YEAR.......................20 7. PRINCIPAL RISKS AND UNCERTAINTIES AFFECTING THE GROUP ......................................................................20 8. OTHER INFORMATION .........................................................................................................................................20

CONDENSED CONSOLIDATED SEMI-ANNUAL FINANCIAL STATEMENTS 1. STATEMENT OF FINANCIAL POSITION ................................................................................................................24

2. INCOME STATEMENT ..........................................................................................................................................25 3. STATEMENT OF COMPREHENSIVE INCOME ........................................................................................................26 4. STATEMENT OF CASH FLOW ..............................................................................................................................27 5. STATEMENT OF CHANGES IN EQUITY .................................................................................................................28 6. EXPLANATORY NOTES ........................................................................................................................................29

CERTIFICATION OF THE SEMI-ANNUAL INTERIM FINANCIAL REPORT AS OF JUNE 30 2009 AS PER ART. 154-BIS OF D.LGS. 58/98 .......................................................................................................................87 LIST OF EQUITY INVESTMENTS AT JUNE 30 2010................................................................................................89 FINANCIAL STATEMENTS OF THE PARENT COMPANY AS OF JUNE 30 2010 ............................................ 99 INDEPENDENT AUDITORS REVIEW REPORT ...........................................................................................................105 This Semi-annual Interim Financial Report as of June 30 2010 was prepared in accordance with Art. 154 ter of D. Lgs. 58/1998 and in conformity with applicable international accounting standards recognized in the European Union as per EU Regulation no. 1606/2002 of the European Parliament and the Council of July 19 2002, and specifically with IAS 34 Interim Financial Reporting, and also with the measures issued in implementation of Art. 9 of D. Lgs no. 38/2005.

COMPAGNIE INDUSTRIALI RIUNITE

Limited-liability corporation - Share capital 396,058,633.50 - Registered Office: Via Valeggio, 41 - 10129 Turin - www.cirgroup.it

R.E.A. n. 3933 Turin Company Register / Fiscal Code / VAT no. 00519120018 Company subject to the management and coordination action of COFIDE S.p.A.

Head Office: Via Ciovassino, 1 20121 Milan Tel. +39 02 72270.1

Office in Rome: Via del Tritone, 169 00187 Rome Tel. +39 06 692055.1

BOARD OF DIRECTORS

Honorary Chairman CARLO DE BENEDETTI (3) and Director Chairman STEFANO MICOSSI (1) Chief Executive Officer RODOLFO DE BENEDETTI (2) and General Manager Directors GIAMPIO BRACCHI (4) FRANCO DEBENEDETTI PIERLUIGI FERRERO GIOVANNI GERMANO (3) (4) FRANCO GIRARD (5) PAOLO MANCINELLI (5) LUCA PARAVICINI CRESPI (4) CLAUDIO RECCHI MASSIMO SEGRE GUIDO TABELLINI (3) (5) (6) UMBERTO ZANNI (3) Secretary to the Board FRANCA SEGRE

BOARD OF STATUTORY AUDITORS Chairman PIETRO MANZONETTO Statutory Auditors LUIGI NANI RICCARDO ZINGALES Alternate Auditors MARCO REBOA GIANLUCA PONZELLINI LUIGI MACCHIORLATTI VIGNAT

INDEPENDENT AUDITORS

DELOITTE & TOUCHE S.p.A.

Notice in accordance with the recommendations of Consob contained in its Communiqu no. DAC/RM/97001574 of February 20 1997: (1) Legal Representative (2) Power to sign with single signature all documents relating to ordinary and extraordinary administration except for those reserved by law to the Board of Directors (3) Member of the Compensation Committee (4) Member of the Internal Control Committee (5) Member of the Appointments Committee (6) Lead Independent Director

Interim Report on Operations 3

INTERIM REPORT ON OPERATIONS In the first six months of 2010 the CIR Group reported consolidated net income of 42.2 million compared to 120.8 million in the same period of last year, which had benefited from non-recurring income and capital gains for a total of approximately 110 million (of which 76.7 million resulting from the subscription of a capital increase in Sorgenia by Verbund and 33.4 million from the partial disinvestment of shares in hedge funds held by the Group). The overall contribution of the operating companies rose substantially from 6.4 million in the first half of 2009 to 50.4 million in the first six months of 2010, thanks to the significant im-provement in the results of the Espresso and Sogefi groups due to the partial recovery of the mar-kets and to the cost savings in overheads resulting from the reorganization processes still in pro-gress. The rise in the contribution of the Sorgenia group, whose profitability was negatively af-fected by lower gas margins and events of an extraordinary nature, came from a tax credit for in-vestments in new production capacity. The result of CIR and the financial holding companies was negative for 6.6 million compared to a positive figure of 4.3 million in the first half of 2009. The positive result of 2009 came mainly from net gains from trading and valuing securities. In the first half of 2010 the CIR Group reported revenues of 2,343.1 million, up by 6.4% ( 2,202.8 million in the same period of 2009) and EBITDA of 193.8 million which was up by 30.8% from 148.2 million in the first six months of last year. The Group includes five business sectors: utilities (electricity and gas), media (publishing, radio and television), automotive compo-nents (filters and suspension components), healthcare (nursing homes, rehabilitation and hospi-tals) and financial services (non-performing loans and loans secured on workers salaries).

4 Interim Report on Operations

In the utilities sector the Sorgenia group reported revenues of 1,281.2 million, up slightly from 1,244.2 million in first half 2009 and EBITDA of 65.3 million (-20.9%) which was affected by the reduction in gas margins and a breakdown at the Termoli power plant which remained in-active until March. Net income came in at 55.9 million, which was higher (+109.4%) thanks to a tax credit for investments made in new production capacity. Sorgenia has continued to roll out its business plan, confirming the start-up of operations at the Lodi CCGT in the second half of 2010 and the construction of wind farms and photovoltaic plants for over 50 MW. In the media sector, in an economic environment characterized by a very weak and still uncertain recovery, in first half 2010 the Espresso group reported revenues of 445.1 million, substantially in line (-0.9%) with the first six months of 2009, thanks to the rise in advertising revenues. How-ever, the gross operating margin improved significantly to 74.7 million (+84%) due to the dras-tic reduction in costs following the restructuring plans, which have not yet been entirely com-pleted. The net result came in at 28.6 million compared to 0.1 million in the first half of 2009. The Sogefi group posted a rise in all its economic indicators in first half 2010 thanks to the recov-ery of the market and to the cost-cutting action put in place in the past 18 months, returning to profit with net income of 9.9 million compared to a net loss of 10.6 million in the first six months of last year. Revenues came to 457.6 million (+22.2% from 374.5 million in the first six months of 2009) and EBITDA was 45.3 million, up from 14.2 million in the first half of 2009. In the first half of 2010 the KOS group continued to strengthen its operating activities in order to consolidate its position in the Italian private healthcare market. During the period the group post-ed consolidated revenues of 159 million (+17.9%) and EBITDA of 20.2 million, up from 16.6 million in first half 2009 (+21.7%) but weighed upon by acquisition and IPO costs of 2.2 million. Net income came in at 2.4 million compared to 1 million in the same period of 2009. In the financial services sector, the company Jupiter Finance operates in the non-performing loan segment. At June 30 2010 the portfolio of loans under management amounted to 2.2 billion of gross book value, of which some 60% acquired through securitization vehicles and the remaining 40% managed on behalf of other investors. The charts on the following pages show a breakdown by business sector of the economic results and financial positions of the Group, a breakdown of the contribution of the main subsidiaries and the aggregate results of the CIR holding and its financial holding company subsidiaries (CIR In-ternational, CIGA Luxembourg, CIR Investment Affiliate and Dry Products).

INCOME STATEMENT BY BUSINESS SECTOR AND CONTRIBUTIONS TO THE RESULT OF THE GROUP

(in millions of euro) 1st Half 2009

CONSOLIDATED Revenues Costs of Other net Adjustments Amortization Net Dividends, Income Result of Net result Net resultproduction operating to the value depreciation financial gains & taxes Minority of the of the

income & of investments & writedowns income & losses from Shareholders Group Groupexpense measured expense trading

at equity securities

AGGREGATE (1) (2) (3) (4)Sorgenia Group 1,281.2 (1,226.4) (23.4) 31.3 (36.9) (24.0) (0.5) 61.4 (33.8) 28.9 12.6 Espresso Group 445.1 (365.3) (5.6) 0.5 (18.0) (9.3) 4.0 (22.9) (12.8) 15.7 0.1 Sogefi Group 457.6 (404.7) (7.8) -- (22.8) (4.7) 0.1 (7.0) (5.0) 5.7 (6.1)Kos Group 159.0 (133.5) (6.1) -- (7.4) (4.9) -- (4.7) (1.1) 1.3 0.6 Other subsidiaries 0.2 (10.9) 12.8 -- (0.2) (3.0) -- (0.2) 0.1 (1.2) (0.8)

Total operating subsidiaries 2,343.1 (2,140.8) (30.1) 31.8 (85.3) (45.9) 3.6 26.6 (52.6) 50.4 6.4

Financial subsidiaries -- (0.1) -- -- -- -- (1.9) -- 0.4 (1.6) 33.4

Total subsidiaries 2,343.1 (2,140.9) (30.1) 31.8 (85.3) (45.9) 1.7 26.6 (52.2) 48.8 39.8

CIR & financial holdings

Revenues -- -- -- -- Operating costs (12.5) -- (12.5) (9.3)Other net operating income & expense 2.4 -- 2.4 2.4

Adjustments to the value of investmentsmeasured at equity -- -- -- -- Amortization, depreciation & writedowns (0.4) -- (0.4) (0.4)Net financial income & expense (6.5) -- (6.5) (10.0)Dividends, gains & losses from trading securities 7.9 -- 7.9 20.1 Income taxes 2.5 -- 2.5 1.5

Total CIR & financial holdingsbefore non-recurring items -- (12.5) 2.4 -- (0.4) (6.5) 7.9 2.5 -- (6.6) 4.3

Non-recurring items -- -- -- -- -- -- -- -- -- 76.7

Totale consolidated of Group 2,343.1 (2,153.4) (27.7) 31.8 (85.7) (52.4) 9.6 29.1 (52.2) 42.2 120.8

(1) This item is the sum of "change in inventories", "costs for purchase of goods, "costs for services", "personnel costs" of the consolidated income statement. This item does not consider the effect of (6.9) million of intercompany elimination.(2) This item is the sum of "other operating income" and "other operating costs" in the consolidated income statement. It does not consider the effect of intercompany elimination of 6.9 million.(3) This item is the sum of "financial income" and "financial expense" in the consolidated income statement.(4) This item is the sum of "dividends", "gains from trading securities", "losses from trading securities" and "adjustments to financial assets" in the consolidated income statement.

1st Half 2010

CONSOLIDATED BALANCE SHEET BY BUSINESS SECTOR

(in millions of euro)31.12.2009

CONSOLIDATED Fixed assets Other net Net Net financial Total equity Minority Equity of Equity of thenon-current working position of which: Shareholders' the Group Group

assets/liabilities capital equityAGGREGATE (1) (2) (3) (4)Sorgenia Group 2,381.9 178.5 286.9 (1,659.9) (*) 1,187.4 604.5 582.9 557.8

Espresso Group 870.1 (185.9) 24.9 (183.9) 525.2 240.6 284.6 266.9

Sogefi Group 367.4 (33.9) 55.8 (182.5) 206.8 96.7 110.1 96.0

Kos Group 363.4 (27.0) 25.7 (215.7) 146.4 55.4 91.0 90.0

Other subsidiaries 4.5 71.9 (4.2) (55.5) 16.7 -- 16.7 16.0

Total subsidiaries 3,987.3 3.6 389.1 (2,297.5) 2,082.5 997.2 1,085.3 1,026.7

CIR & financial holdings

Fixed assets 128.0 128.0 -- 128.0 128.6

Other net non-current assets & liabilities 148.7 148.7 (1.4) 150.1 139.1

Net working capital (10.5) (10.5) -- (10.5) (19.3)

Net financial position 101.8 101.8 -- 101.8 121.6

Total consolidated of Group 4,115.3 152.3 378.6 (2,195.7) 2,450.5 995.8 1,454.7 1,396.7

(*)The financial position includes the free cashflow of Sorgenia Holding S.p.A.

(1) This item is the algebraic sum of "intangible assets", "tangible assets", "investment property", "investments in companies valued at equity" & "other equity investments" in the consolidated balance sheet.(2) This item is the algebraic sum of "other receivables", "securities" & "deferred taxes" in non-current assets and of "other payables", "deferred taxes", "personnel provisions" & "provisions for risks & losses" in non-current liabilities of the consolidated balance sheet. It also includes "Assets held for disposal" in the consolidated balance sheet.(3) This item is the algebraic sum of "inventories", "contracted work in progress", "trade receivables", "other receivables" in current assets and of "trade payables", "other payables" & "provisions for risks and losses" in current liabilities of the consolidated balance sheet. (4) This item is the algebraic sum of "financial receivables", "securities", "available-for-sale financial assets" & "cash & cash equivalents" in current assets, of "bonds & notes" & "other borrowings" in non-current liabilities and of "bank overdrafts", "bonds & notes" & "other borrowings" in current liabilities of the consolidated balance sheet.

30.06.2010


1. PERFORMANCE OF THE GROUP Consolidated revenues for the first half of 2010 came in at 2,343.1 million, up from 2,202.8 million in the corresponding period of 2009, posting a rise of 140.3 million (+6.4%). Consolidated revenues can be broken down by business sector as follows: (in millions of euro) 1st Half 1st Half Change 2010 % 2009 % Absolute %

Utilities

Sorgenia Group 1,281.2 54.7 1,244.2 56.5 37.0 3.0 Media Espresso Group 445.1 19.0 449.2 20.4 (4.1) (0.9)

Automotive components

Sogefi Group 457.6 19.5 374.5 17.0 83.1 22.2

Healthcare

Kos Group 159.0 6.8 134.9 6.1 24.1 17.9

Other sectors 0.2 0.0 - - 0.2

Total consolidated revenues 2,343.1 100.0 2,202.8 100.0 140.3 6.4

of which: ITALY 1,889.2 80.6 1,846.6 83.8 42.6 2.3

FOREIGN COUNTRIES 453.9 19.4 356.2 16.2 97.7 27.4

The key figures of the consolidated income statement are as follows: (in millions of euro)

1st Half 2010

% 1st Half 2009

%

Revenues 2,343.1 100.0 2,202.8 100.0

Consolidated gross operating margin (EBITDA) (1) 193.8 8.3 148.2 6.7

Consolidated operating income (EBIT) 108.1 4.6 81.4 3.7

Financial management result (2) (42.8) (1.8) 78.2 3.5

Income taxes 29.1 1.2 (23.1) (1.0)

Net income including minority interests 94.4 4.0 136.5 6.2

Net income attributable to minority interests (52.2) (2.2) (15.7) (0.7)

Net income of the Group 42.2 1.8 120.8 5.5 1) This balance is the sum of the items earnings before interest and taxes (EBIT) and amortization, depreciation and write-downs in the consolidated

income statement 2) This balance is the sum of the items financial income, financial expense, dividends, gains from trading securities, losses from trading securities

and adjustments to the value of financial assets in the consolidated income statement

The consolidated gross operating margin (EBITDA) in the first half of 2010 was 193.8 million (8.3% of revenues) up from 148.2 million in the first half of 2009 (6.7% of revenues), with a rise of 45.6 million (+30.8%). This change was the result of the improvement in the prof-itability of the Espresso, Sogefi and Kos which more than compensated for the lower margins of the Sorgenia group, due as explained above to the reduction in gas margins and the extraordinary factors that occurred in the early months of this year (breakdown that affected Termoli power plant).


The consolidated operating margin (EBIT) for the first half of 2010 was 108.1 million (4.6% of revenues) compared to 81.4 million (3.7% of revenues) in the same period of 2009, posting a rise of 26.7 million (+32.8%).

The net result of financial management was a negative figure of 42.8 million, which was the re-sult of net financial expense of 52.4 million, dividends and net gains from trading securities of 10.7 million and adjustments to the value of financial assets for a negative 1.1 million. This result compares with net income of 78.2 million in the first six months of 2009. The lower re-sult was due for approximately 110 million to the non-recurring gains and capital gains that were present in the first half of last year. The key figures of the consolidated balance sheet of the CIR Group at June 30 2010, com-pared with the same figures at December 31 2009, are as follows: (in millions of euro) (1) 30.06.2010 31.12.2009

Fixed assets 4,115.3 3,807.9

Other net non-current assets and liabilities 152.3 83.7

Net working capital 378.6 241.8

Net invested capital 4,646.2 4,133.4

Net financial debt (2,195.7) (1,801.1)

Total shareholders equity 2,450.5 2,332.3

Group equity 1,454.7 1,396.7

Minority Shareholders equity 995.8 935.6

(1) These figures are the result of a different organization of the balance sheet items. For a definition of the same, reference should be made to the notes to

the chart Consolidated balance sheet by business sector shown earlier.

Net invested capital stood at 4,646.2 million at June 30 2010, up from 4,133.4 million at De-cember 31 2009, with a rise of 512.8 million, due mainly to investments in fixed assets made by the Sorgenia group and to changes in working capital. The net financial position at June 30 2010 showed net debt of 2,195.7 million (up from 1,801.1 million at December 31 2009) caused by: - a financial surplus for CIR and its financial holding subsidiaries of 101.8 million which

compares with 121.6 million at December 31 2009. The reduction of 19.8 million was due to the negative adjustment to the fair value of securities in the portfolio and to disbursements made in payment of facilities overheads;

- total debt in the operating groups of 2,297.5 million, up from 1,922.7 million at December

31 2009. The rise of 374.8 million was due mainly to the investments in new production ca-pacity made by the Sorgenia group.

The net financial position includes shares in hedge funds which amounted to 91.2 million at June 30 2010. The accounting treatment of these investments involves recognizing changes in the fair value of the funds directly to shareholders equity and the fair value reserve relating to these funds at June 30 2010 stood at 9.2 million ( 13.2 million at December 31 2009). In the first


half of 2010 the sale of shares in hedge funds led to realized gains, net of write-downs, of 0.3 million ( 18 million in first half 2009). The performance of these investments since inception (April 1994) up to and including 2009 has given a weighted average return on the portfolio in dollar terms of 7.8%. In the first six months of 2010 performance was a negative 4.3%. Total equity stood at 2,450.5 million at June 30 2010, up from 2,332.3 million at December 31 2009, with a rise of 118.2 million. The equity of the Group stood at 1,454.7 million at June 30 2010, up from 1,396.7 million at December 31 2009, with a net rise of 58 million. Minority shareholders equity stood at 995.8 million at June 30 2010, up from 935.6 million at December 31 2009, with a net rise of 60.2 million. The evolution of consolidated shareholders equity is given in the explanatory Notes to the Finan-cial Statements. The consolidated cash flow statement for the first half of 2010, prepared according to a mana-gerial format which, unlike the format used in the statements attached, shows the changes in net financial position instead of the changes in cash and cash equivalents, can be broken down as fol-lows:

(in millions of euro) 1st Half

2010 1st Half

2009

SOURCES OF FUNDS Net income for the period including minority interests 94.4 136.5

Amortization, depreciation and write-downs and other non-monetary changes (12.2) (21.3)

Self-financing 82.2 115.2

Change in working capital (116.7) (7.4)

CASH FLOW GENERATED BY CURRENT OPERATIONS (34.5) 107.8

Capital increases 3.2 184.2

TOTAL SOURCES OF FUNDS (31.3) 292.0

APPLICATIONS

Net investment in fixed assets (379.3) (269.6)

Buy-back of own shares (0.1) (1.2)

Payment of dividends (6.9) (9.9)

Other changes 23.0 (4.0)

TOTAL APPLICATIONS OF FUNDS (363.3) (284.7)

FINANCIAL SURPLUS (DEFICIT) (394.6) 7.3

NET FINANCIAL POSITION AT THE START OF THE PERIOD (1,801.1) (1,685.4)

NET FINANCIAL POSITION AT THE END OF THE PERIOD (2,195.7) (1,678.1)


The composition of the net financial position is given in the explanatory Notes to the Financial Statements. The cash flow for this year shows absorption of liquidity of 34.5 million; self-financing for the period of 82.2 million offset a rise in net working capital of 116.7 million which was mainly due to the rise in revenues of the operating groups especially the Sogefi group. Net investments in fixed assets amounted to 379.3 million and referred mainly to the Sorgenia group. At June 30 2010 the Group had 12,962 employees, up from 12,746 at December 31 2009. 2. PERFORMANCE OF THE PARENT COMPANY OF THE GROUP The parent company CIR S.p.A. closed the first half of 2010 with a net loss of 3.8 million com-pared to net income of 2.9 million in the first half of 2009. Shareholders equity stood at 977.3 million at June 30 2010 versus 978.9 million at December 31 2009. The key income statement figures of CIR for the first half of 2010, with a comparison with those of the first six months of 2009, are as follows: (in millions of euro)

1st Half 2010

1st Half 2009

Net operating costs (1) (8.3) (4.6)

Other operating costs and amortization (2) (1.4) (1.6)

Financial management result (3) 3.4 7.6

Income before taxes (6.3) 1.4

Income taxes 2.5 1.5

Net income (3.8) 2.9

(1)This item is the algebraic sum of sundry revenues and income, costs for services and personnel costs in the income statement of the Parent Com-pany CIR S.p.A.

2) This item is the sum of other operating costs and amortization, depreciation and write-downs in the income statement of the Parent Company CIR S.p.A.

3) This item is the algebraic sum of financial income, financial expense, dividends, gains from trading securities, losses from trading securities and adjustments to the value of financial assets in the income statement of the Parent Company CIR S.p.A.

Net operating costs for the first half of 2010, which totalled 8.3 million (compared to 4.6 mil-lion in the first six months of 2009), include costs for stock option plans of 2.2 million, which compare with 1.9 million in the first half of 2009, and legal consulting costs of 3.4 million. The financial management result includes the dividends of subsidiaries, which totalled 5.3 mil-lion in the first half of the year 2010, down from 9.3 million in the same period of 2009, net fi-nancial expense of 3.9 million ( 5.3 million in the first six months of 2009) and gains from trading and valuing securities of 1.9 million (losses of 3.6 million in the first six months of 2009). Lastly, the first half of 2010 benefited from a positive tax position of 2.5 million, compared to 1.5 million in the same period of 2009.


The key balance sheet figures of CIR at June 30 2010, compared with the position at December 31 2009, are as follows: (in millions of euro) 30.06.2010 31.12.2009

Fixed assets (1) 877.7 878.0

Other net non-current assets and liabilities (2) 134.0 132.2

Net working capital (3) 1.4 (10.7)

Net invested capital 1,013.1 999.5

Net financial position (4) (35.8) (20.6)

Shareholders equity 977.3 978.9

1) This item is the sum of intangible assets, tangible assets, investment property and equity investments in the balance sheet of the Parent Com-pany CIR S.p.A..

2) This item is the algebraic sum of sundry receivables and deferred taxes in the non-current assets and personnel provisions in the non-current liabili-ties of the balance sheet of the Parent Company CIR S.p.A..

3) This item is the algebraic sum of sundry receivables in current assets and other payables and provisions for risks and losses in the current liabilities of the balance sheet of the Parent Company CIR S.p.A.

4) This item is the algebraic sum of securities, available for sale financial assets and cash and cash equivalents in the current assets and bonds and notes in the non-current liabilities of the Parent Company CIR S.p.A..

The item Other net non-current assets and liabilities at June 30 2010 refers to a loan made last year to the subsidiary CIR International. The net financial position at June 30 2010 was one of net debt of 35.8 million, up from 20.6 million at December 31 2009. The change was mainly the result of rises caused by disbursements totalling 20.5 million for financial expense and facility overheads and of a decrease relating to the receipt of dividends of 5.3 million. The reduction in equity from 978.9 million at December 31 2009 to 977.3 million at June 30 2010, was mainly due to the earnings for the period and to the positive effects of the IAS/IFRS treatment of stock options. At June 30 2010 there were 43,074,000 own shares in the portfolio, equal to 5.44% of capital, for a total value of 98.6 million, unchanged from December 31 2009. 3. CHART RECONCILING THE BALANCE SHEET FIGURES OF THE PARENT COM-

PANY WITH THOSE OF THE CONSOLIDATED FINANCIAL STATEMENTS The following chart shows the reconciliation of the results for the period and the shareholders equity of the Group with the figures of the parent company. (in thousands of euro) 30.06.2010

Shareholders equity

Result of 1st Half 2010

Financial statements of CIR S.p.A. 977,335 (3,787) - Dividends from companies included in the consolidation (5,313) (5,313) - Net contribution of consolidated companies 525,022 51,123 - Difference between carrying value of investees and share of their consolidated eq-uity (42,538) - - Other consolidation adjustments 150 150

Consolidated financial statements. Groups share 1,454,656 42,179

MAIN EQUITY INVESTMENTS OF THE GROUP (*)AT JUNE 30 2010

Media

Utilities

Healthcare

SORGENIASORGENIA

CIRCIR

51.9% (**)

57.4% (*)

65.4%

ESPRESSOESPRESSO55% (*)

AutomotiveComponentsSOGEFISOGEFI

HSSHSS

(*) The percentage is calculated net of own shares held as treasury stock(**) Percentage of indirect control through Sorgenia Holding

JUPITERJUPITER

KTPKTP

FinancialServices

47.1%

98.8%


4. PERFORMANCE OF THE BUSINESS SECTORS UTILITIES SECTOR In the first half of 2010 the Sorgenia group reported consolidated revenues of 1,281.2 million, which were slightly up (+3%) on the figure of 1,244.2 million for first half 2009, with a rise in volumes which offset the reduction in unit prices of energy products. For first half 2010 the Sorgenia group posted consolidated net income of 55.9 million, which was up by 110.9% compared to the figure of 26.5 million in the corresponding period of last year, thank to a tax break on investments in new production capacity made by the company. Consolidated revenues can be broken down as follows: (in millions of euro) 1st Half 2010 1st Half 2009 Change Values % Values % %Electricity 876.6 68.4 856.5 68.8 2.3

Natural gas 310.4 24.2 334.2 26.9 (7.1)

Other revenues 94.2 7.4 53.5 4.3 76.1

TOTAL 1,281.2 100.0 1,244.2 100.0 3.0

The consolidated gross operating margin (EBITDA) came to 65.3 million, down from 82.5 million in the first half of 2009. Despite the significant recovery recorded in the second quarter ( 50,9 million +9% on the second quarter of 2009), the result was lower than that of the first six months of last year because of the following factors: the breakdown that affected the Termoli power plant at the end of 2009. The plant was only fully up and running again at the end of March. The plant has an insurance policy covering direct and indirect damage. The company has submitted a claim for damages both for the fault in the plant and for the lost earnings; the narrower sales margins on natural gas, mainly due to sourcing costs under outstanding contracts, the terms of which have been under renegotiation since 2009. The new prices agreed on will be retrospective as per the provisions of the contracts; the higher provisions set aside against client receivables because of the deterioration in the economic situation which became evident in the last year; the lack of contribution in the first quarter by the new Modugno power plant, still at the com-missioning stage and affected by high levels of congestion on the electricity grid. Of the positive elements contributing to EBITDA was the contribution of generation from renew-able sources, which was higher than that of first half 2009. The consolidated operating income figure (EBIT) for first half 2010 was 28.3 million, down from 64.8 million in the corresponding period of last year and, apart from the decline in EBIT-DA, was also affected by the higher amortization, depreciation and write-downs in the period. Consolidated net financial debt stood at 1,675.8 million at June 30 2010, up from 1,341 mil-lion at December 31 2009. The change was due mainly to the investments made in new produc-tion capacity, especially for thermoelectric generation.


During the first half of the year, the company extended from 2012 to 2015 the duration of two syndicated loan agreements signed in 2007 for a total of 805 million, thus further improving its financial structure. At June 30 2010 the group had 409 employees, up from 380 at December 31 2009. During the first half of 2010 the Sorgenia group continued to roll out its business plan. In the field of thermoelectric generating, commissioning activities are under way on the CCGT plant at Bertonico-Turano Lodigiano (LO), which is scheduled to start operating in the second half of this year. Construction work is continuing on the Aprilia power plant (LT). In the development of generation from wind sources, the 12 MW wind park at San Martino in Pensilis (CB) is now in operation. As far as international activities in renewable sources are con-cerned, in France two wind parks are being built with a total output of 41 MW, at Leffincourt (32 MW) and at Bouillancourt (9 MW), while in Romania authorization has been obtained for the construction of wind parks for a total of 106 MW. In the field of generating from photovoltaic solar sources, during the first half the subsidiary Sor-genia Solar began construction of plants of approximately 10 MW in Campania, Lazio and Sar-dinia. In the sphere of renewable energy from biomass, the company Sorgenia Bioenergy has started op-erating a biomass plant with an output of approximately 1 MW situated in the local district of Castiglione dOrcia (SI). MEDIA SECTOR The Espresso group closed the first half of 2010 with consolidated revenues of 445.1 million, which was substantially in line (-0.9%) with the figure of 449.3 million in the first half of 2009. Consolidated net income was 28.6 million, up from 0.1 million in the first six months of last year. The revenues of the group can be broken down as follows: (in millions of euro) 1st Half 2010 1st Half 2009 Change Values % Values % %Circulation 130.9 29.4 132.7 29.5 (1.3)

Advertising 264.9 59.5 246.2 54.8 7.6

Add-ons 40.3 9.1 61.2 13.6 (34.1)

Other revenues 9.0 2.0 9.1 2.1 (1.1)

TOTAL 445.1 100.0 449.2 100.0 (0.9)

In the first half of 2010, in an economic environment characterized by a very weak recovery that is still uncertain, advertising investment showed a modest increase. According to the latest figures published by Nielsen Media Research, in the first five months of the year advertising grew by 3.8% compared to the same period of 2009. Considering that in the


first half of 2009 advertising investment plummeted by 17.5%, the recovery is not particularly significant. The circulation revenues of the group, excluding add-ons, came in at 130.9 million compared to 132.7 million in the first half of 2009. The performance of circulation revenues, which did not benefit from any price hikes, shows that sales of the group titles held up well. In particular, sales of both la Repubblica and LEspresso on the news-stands recorded a slight rise. This positive evolution, which had already started in 2009, is also confirmed by the results of the latest Audipress reading survey. More specifically, la Repubblica confirms its ranking as the top Italian daily newspaper with over 3.2 million readers per day, increasing its lead over the second newspaper to 11.8%. Considered as a whole the local dailies had 3.5 million readers per day and LEspresso had 2.6 million readers per week. Advertising revenues, totalling 264.9 million, rose by 7.6% on the first half of 2009. The group radio stations are the sector that recorded the most positive performance (+20.2%), growth being driven by the good listening results especially for by Radio Deejay, as well as by the more dynamic marketing efforts of the concessionaire. The performance of internet advertising was also very positive (+17.6%) partly because of the success of the website Repubblica.it, which in the first half reached 1.6 million unique users per day, confirming its ranking as top Italian news site and recording another strong increase on the same period of the previous year (+29%). Revenues from add-on products came to 40.3 million and were down by 34.1% compared to the same period of 2009, a year in which there was a strong concentration of initiatives, and therefore also of revenues, in the first half. In a sharply contracting market environment, the group decided to focus on a more limited number of initiatives, with the aim of preserving the profitability of the segment. Total costs were cut by 9.7% compared to the first six months of last year and recurring costs, net of extraordinary expense, went down by 7.2%. Considering the savings already achieved in the first half of 2009, the trend of costs is fully in line with the objective of the plan which, it should be remembered, involved an overall reduction of 17% compared to the year 2008 (benchmark on which the company restructuring plan was based). This result was achieved without reducing the consolidation or the product portfolio of the group and without compromising quality. The consolidated gross operating margin was 74.7 million ( 40.6 million in the first half of 2009) and the consolidated operating result was 56.7 million ( 19.3 million in the first half of 2009). With the exception of periodicals, all the divisions of the group showed a marked improvement. The daily newspaper sector showed a significant recovery in terms of profitability due to the dras-tic reduction of costs resulting from the restructuring plans, even though they are not yet finished. The radio and internet sectors benefited from the strong rise in revenues. The consolidated net financial position showed a further improvement, contracting from 208.2 million at the end of 2009 to 183.9 million at June 30 2010, with a financial surplus of 24.3 million, despite disbursements of an extraordinary nature in relation to the restructuring plans of over 15 million.


At the end of June there were 2,908 employees on the group payrolls including temporary staff, with a reduction of 542 people in the last two years and of 208 from year end 2009, as the result of the restructuring plans in progress. There is still great uncertainty about the evolution of the macroeconomic scenario in 2010, which does not favour a clear and general recovery of advertising investment. Although the trend of advertising collected in the first five months of the year turned slightly posi-tive (+3.8%), the rise was of little significance compared to the dramatic fall seen in the same pe-riod of 2009 (-17.5%). In this context, the advertising revenues of the group did in fact rise during the first half and it is expected that, in the absence of any changes in the current scenario as yet unforeseeable, the trend may remain positive for the whole of the year. Furthermore, thanks to the cost-cutting program still in progress, the group posted significant sav-ings that were in line with objectives. In light of the above, profitability showed a marked recovery and its is expected that even for the whole year results will be significantly higher than those of the previous year. AUTOMOTIVE COMPONENTS SECTOR The consolidated sales of the Sogefi group in first half 2010 came to 457.6 million and were up by 22.2% (+18.7% with the same exchange rates). The first half saw a positive evolution of world vehicle production, thanks to the recovery of business in the mature markets (Europe, Nafta and Japan) which had fallen sharply in 2009 and to further growth in volumes in countries with devel-oping economies such as China, India and Brazil. The improvement in the markets was due essen-tially to the incentive packages adopted by many countries, which are now being phased out, and to the end of the destocking of unsold vehicles which had begun in the last part of 2008. However, difficulties remain in the industrial-vehicle and earth-moving markets, which are nonetheless starting to show the first signs of recovery. The consolidated net result of the Sogefi group turned positive again with net income of 9.9 mil-lion compared to a net loss of 10.6 million in the first six months of 2009. The breakdown of consolidated sales revenues of the Sogefi group by business sector is as fol-lows: (in millions of euro) 1st Half 2010 1st Half 2009 Change Values % Values % %Filters 231.5 50.6 197.6 52.8 17.2

Suspension components & precision springs 227.3 49.7 177.7 47.4 27.9

Intercompany (1.2) (0.3) (0.8) (0.2) (0.2)

TOTAL 457.6 100.0 374.5 100.0 22.2

Sales rose by 13.9% in Europe (+8.9% in filters and +19.3% in suspension components) and by 51.1% in the South American market, which also benefited from the rise in the value of the Bra-zilian currency and which in first half 2010 represented 22.3% of the total revenues of the Sogefi group. Strong growth in revenues was also reported in China (+173%) and in India (+65.9), where the joint-venture set up at the end of 2008 is operating successfully in the filter sector. In the Unit-ed States, after suspension component production ceased in July 2009, the rapid conversion of the


local company to the production of filter systems enabled the company to achieve a 10.7% growth in sales. The positive performance of revenues together with management taking care to cut all cost fac-tors, made it possible for the group to obtain significant growth in its margins compared to the first half of 2009. Consolidated EBITDA for the first half of 2010 was 45.3 million (9.9% of sales) and was sharp-ly up from the figure of 14.2 million (3.8% of sales) reported in the same period of last year. Non-recurring costs for reorganization amounted to 4.3 million, down from 9.9 million in 2009 Consolidated EBIT came to 22.8 million compared to a negative figure of 7.1 million in the first six months of 2009. In the first half of 2010 the result before taxes and before minority interests came to 17.7 million and compares with a negative figure of 12.7 million in the same period of 2009. At June 30 2010 the consolidated net financial position showed net debt of 182.5 million, slightly higher than the figure of 170.2 million at December 31 2009 on account of the rise in working capital due to increased business activity. The group had 5,723 employees on its payrolls at June 30 2010, down from 5,770 at December 31 2009. In first half 2010 the filter division posted revenues of 231.5 million, which were up by 17.2%, while the suspension components division grew by 27.9% compared to first half 2009, with reve-nues of 227.3 million. In the second half of the year Sogefi should achieve good levels of operating profitability and con-firm for the whole year the significant improvement of all its economic indicators compared to 2009. The extent of the improvement will however depend on the performance of the European original equipment market, which is likely to show a contraction in demand when the incentive packages have expired in all the main countries except France, and on the prices of certain com-modities, which may rise in the later part of the year. HEALTHCARE SECTOR In the first half of 2010 the KOS group continued in its strategy of strengthening its operating subsidiaries and identifying new opportunities for development to consolidate its presence in the private healthcare sector in Italy. During the first half of the year a facility was acquired in the Marche region and two nursing homes were acquired in Lombardy. In the first six months of 2010 the KOS group reported consolidated revenues of 159 million, up from 134.9 million in the same period of last year (+17.9%), the rise being due to the develop-ment of all areas of the business and to the new acquisitions made in the period.


(in millions of euro) 1st Half 2010 1st Half 2009 Change Values % Values % %Elderly 64.7 40.7 57.5 42.6 12.5 Rehabilitation/Psychiatric 69.4 43.6 55.3 41.0 25.5 Acute/High-tech 24.9 15.7 22.1 16.4 12.7 TOTAL 159.0 100.0 134.9 100.0 17.9

In the first half of the year the company incurred costs of approximately 2.2 million, due to the IPO procedure ( 1.6 million) and to expenses relating to the acquisitions made in the period (0.6 million euro, equally distributed between the care-home business and rehabilitation). Consolidated EBITDA was 20.2 million (12.7% of sales revenues) and was up by 21.7% from 16.6 million (12.3% of sales) in the first six months of 2009. Without the IPO and acquisition costs EBITDA would have risen by approximately 35%. Consolidated EBIT was 12 million (7.5% of sales), up from 9.7 (7.2% of sales) million in the same period of last year. Consolidated net income was 2 million, up from 1 million in the first six months of 2009. At June 30 2010 the KOS group had net debt of 215.6 million offset by owned properties with a book value of approximately 142 million. The increase from 163.5 million at December 31 2009 was due mainly to the acquisitions made in the first half and to the change in working capi-tal. At June 30 2010 consolidated equity stood at 139.1 million versus 137.6 million at December 31 2009. KOS today manages 59 facilities, mainly in the centre-north of Italy with a total of over 5,500 beds in operation, plus approximately 400 more under construction. The KOS group is active in three sectors: 1) Nursing homes (RSAs for the non self-sufficient elderly), with 37 care homes under manage-

ment (3,829 beds operational and 336 under construction); 2) Rehabilitation (management of hospitals and rehabilitation centres), with 12 rehabilitation fa-

cilities (in Lombardy, Emilia Romagna, Trentino and Marche), 9 psychiatric rehabilitation communities (in Liguria, Piedmont and Lombardy) and 13 day hospitals, for a total of 1,600 beds in operation and 52 under construction;

3) Hospital management (management of a hospital and of hi-tech services in hospitals), with 7 diagnostic imaging units.

The group had 3.823 employees at June 30 2010, up from 3,421 at December 31 2009. FINANCIAL SERVICES SECTOR The CIR Group operates in the financial services sector through the company Jupiter Finance and through its investment in the KTP group, as described below.


JUPITER FINANCE The company is one of the principal operators in the sector of non-performing loans in Italy. Its areas of business are as follows: Purchasing non-performing loans on a non-recourse basis; Managing and recovering non-performing loans; Structuring deals involving the sale of loans and servicing securitization vehicles as per Law

130/99. At June 30 2010 the non-performing loans managed by Jupiter Finance amounted to 2,254 mil-lion (gross book value, +2% compared to December 31 2009), divided into owned loans (i.e. purchased through the securitization vehicles Zeus Finance and Urania Finance), for 1,299 mil-lion, and third-party loans (i.e. managed on behalf of other investors) for 955 million. The breakdown of the portfolio of owned loans shows a high degree of diversification, from vari-ous points of view: - Approximately 10,000 loans are corporate and mortgage loans with an average credit exposure

of approximately 200,000; - The portfolio consists of 100 deals with 75 different vendors (banks, financial companies, leas-

ing companies); - Mixed geographical distribution: no region in Italy accounts for more than 10% of the total

portfolio. KTP - The KTP Global Finance group (in which CIR has a holding of approximately 47%) oper-ates in Italy in the financial services sector through the company Ktesios. The investment in Pep-per was sold by KTP at the end of the first half. The value of CIRs investment at June 30 2010 was 4 million. Ktesios operates in Italy in the market of loans secured on one fifth of workers salaries or pen-sions. The continuing volatility in the financial markets with a generalized contraction in con-sumer credit availability and the introduction of regulatory restrictions in the sector has had a negative impact on loan volumes and on margins. During the first half of 2010 the company made loans for approximately 200 million, down from 317 million in the first half of last year. The investment in Pepper was sold by KTP on June 15 2010, for an amount equivalent to 100% of approximately 16 million. 5. OTHER ACTIVITIES CIR VENTURES The portfolio of CIR Ventures, the venture capital fund of the Group, contains investments in five companies, of which four in the United States and one in Israel. These compa-nies all operate in the sector of information and communications technology. The total fair value of these investments at June 30 2010 was 14.5 million dollars. INVESTMENTS IN PRIVATE EQUITY FUNDS - The CIR Group, through its subsidiary CIR Interna-tional, manages a diversified portfolio of funds and minority private equity holdings, the fair value of which determined on the basis of the NAV provided by the various funds at June 30 2010 was approximately 77.3 million. In the first half of 2010 further investments were made for ap-proximately 3 million. Remaining commitments outstanding at June 30 2010 amounted to 26 million.


6. SIGNIFICANT EVENTS WHICH OCCURRED AFTER JUNE 30 2010 AND OUT-LOOK FOR THE REST OF THE YEAR

Information has already been given of the main events which occurred after June 30 2010 in the part of the Report dealing with the performance of the business sectors. On July 15, as part of its annual credit review process, Standard & Poors announced that it was confirming CIRs long-term BB rating, revising the outlook from stable to negative. The B short-term rating was also confirmed. In the second half of the year the CIR group will continue with its management efficiency actions and with the investment programs planned for the development of all sectors of the business. The group confirms that for the full year 2010, as was the case in the first half of the year, consoli-dated earnings will be lower overall than those of 2009, as there are not expected to be any non-recurring gains as there were last year. 7. MAIN RISKS AND UNCERTAINTIES TO WHICH THE GROUP IS EXPOSED The main risk factors to which the CIR Group is exposed can be classified in the following cate-gories: - Risks connected with the general conditions of the economy - Risks connected with the results of the Group - Risks connected with borrowing requirements - Risks connected with the fluctuation of exchange rates and interest rates - Risks connected with relations with clients and suppliers - Risks connected with competitiveness in the sectors in which the Group operates - Risks connected with environmental policies For the description of these risks, reference should be made to the Financial Statements for the year ended December 31 2009 in the Report on Operations. 8. OTHER INFORMATION Transactions with companies of the Group and related parties During the period CIR S.p.A. provided management and strategic support services to its subsidi-aries and affiliates, which involved, among other things, supplying administrative and financial services, making loans, and issuing guarantees. Transactions with the controlling parent company consisted of providing services of an adminis-trative and financial nature and being supplied with management support and communication ser-vices. The main concern of CIR and its counterparties in relation to these services is to ensure quality and a high level of efficiency of the services rendered, which derive from CIRs specific knowledge of the businesses of the Group.


The most significant related party transactions were in the utilities sector and referred in particular to transactions entered into with the Verbund group and the joint controlled Tirreno Powes S.p.A.. Regarding the main equity transactions reference should be made to the appropriate sections of the Notes to the Financial Statements. It should be pointed out that the CIR Group did not enter into any transactions with related par-ties, including intercompany transactions, according to Consobs definition, of a non-typical or unusual nature beyond normal business administration or such as to have any significant impact on the economic, financial or equity situation of the Group. Transactions between companies of the Group are settled at normal market conditions on the basis of the quality and the specific nature of the services rendered. The code of conduct governing transactions with related parties was defined by the Board of Di-rectors of the Company in September 2002. Other The company CIR S.p.A. Compagnie Industriali Riunite has its registered office in Via Valeg-gio 41, Turin, Italy and its operating headquarters in Via Ciovassino 1, Milan, Italy. CIR shares, which have been quoted on the Milan Stock Exchange since 1973, since 2004 have been traded on the Blue-chip segment (Reuter code: CIRX.MI, Bloomberg code CIR IM). Since March 2009 the CIR stock has been part of the FTSE MIB index. This Financial Report for the period January 1 June 30 2010 was approved by the Board of Di-rectors on July 30 2010. CIR S.p.A. is subject to management and coordination by Cofide S.p.A..

Consolidated Financial Statements 23

CIR Group

Condensed Consolidated Semi-Annual Financial Statements

STATEMENT OF FINANCIAL POSITION

INCOME STATEMENT

STATEMENT OF COMPREHENSIVE INCOME

STATEMENT OF CASH FLOW

STATEMENT OF CHANGES IN EQUITY

EXPLANATORY NOTES

1. STATEMENT OF FINANCIAL POSITION

(in thousands of euro)

ASSETS Notes 30.06.2010 31.12.2009

NON-CURRENT ASSETS 4,665,225 4,287,814 INTANGIBLE ASSETS (7.a) 1,351,215 1,316,903 TANGIBLE ASSETS (7.b) 2,427,329 2,187,369 INVESTMENT PROPERTY (7.c) 21,700 18,115 INVESTMENTS IN COMPANIES CONSOLIDATED AT EQUITY (7.d) 309,788 275,899 OTHER EQUITY INVESTMENTS (7.e) 5,221 9,629 OTHER RECEIVABLES (7.f) 198,949 207,899

of which with related parties (*) (7.f) 4,262 4,480 SECURITIES (7.g) 101,846 83,051 DEFERRED TAXES (7.h) 249,177 188,949

CURRENT ASSETS 2,567,435 2,362,336 INVENTORIES (8.a) 155,229 156,150 CONTRACTED WORK IN PROGRESS 11,344 3,464 TRADE RECEIVABLES (8.b) 1,090,274 1,042,030

of which with related parties (*) (8.b) 17,340 18,032 OTHER RECEIVABLES (8.c) 187,323 200,627

of which with related parties (*) (8.c) 1,749 1,727 FINANCIAL RECEIVABLES (8.d) 280,787 27,229 SECURITIES (8.e) 359,739 278,548 AVAILABLE-FOR-SALE FINANCIAL ASSETS (8.f) 159,160 104,967 CASH AND CASH EQUIVALENTS (8.g) 323,579 549,321

ASSETS HELD FOR DISPOSAL (8.h) 761 700

TOTAL ASSETS 7,233,421 6,650,850

LIABILITIES AND SHAREHOLDERS' EQUITY 30.06.2010 31.12.2009

SHAREHOLDERS' EQUITY 2,450,459 2,332,335 ISSUED CAPITAL 396,059 396,059 less OWN SHARES (21,537) (21,537)SHARE CAPITAL (9.a) 374,522 374,522 RESERVES (9.b) 311,711 295,983 RETAINED EARNINGS (LOSSES) (9.c) 726,250 582,818 NET INCOME FOR THE PERIOD 42,173 143,432 EQUITY OF THE GROUP 1,454,656 1,396,755 MINORITY SHAREHOLDERS' EQUITY 995,803 935,580

NON-CURRENT LIABILITIES 2,940,316 2,958,552 BONDS AND NOTES (10.a) 563,210 718,262 OTHER BORROWINGS (10.b) 1,978,682 1,843,359 OTHER PAYABLES 1,355 1,177

of which to related parties (*) -- 69 DEFERRED TAXES (7.h.) 190,821 181,489 PERSONNEL PROVISIONS (10.c) 129,497 137,346 PROVISIONS FOR RISKS AND LOSSES (10.d) 76,751 76,919

CURRENT LIABILITIES 1,842,646 1,359,963 BANK OVERDRAFTS 257,738 66,290 BONDS AND NOTES (11.a) 153,373 731 OTHER BORROWINGS (11.b) 365,966 132,499

of which from related parties (*) (11.b) 415 2 TRADE PAYABLES (11.c) 734,531 836,587

of which to related parties (*) (11.c) 24,489 28,649 OTHER PAYABLES (11.d) 244,032 228,178 PROVISIONS FOR RISKS AND LOSSES (10.d) 87,006 95,678

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 7,233,421 6,650,850

(*) As per Consob Resolution no. 6064293 of July 28 2006

24

2. INCOME STATEMENT


Notes1st Half

20101st Half

2009

SALES RECEIVABLES (14) 2,343,076 2,202,832 of which from related parties (*) (14) 88,811 8,041

CHANGE IN INVENTORIES 6,455 (7,812)

COSTS FOR THE PURCHASE OF GOODS (13.a) (1,420,156) (1,339,849)of which from related parties (*) (13.a) (129,648) (134,157)

COSTS FOR SERVICES (13.b) (386,805) (369,250)of which from related parties (*) (13,b) (760) (850)

PERSONNEL COSTS (13.c) (345,877) (335,497)

OTHER OPERATING INCOME (13.d) 44,825 40,486 of which from related parties (*) (13.d) 645 666

OTHER OPERATING COSTS (13.e) (79,505) (72,399)

ADJUSTMENTS TO THE VALUE OF INVESTMENTSVALUED AT EQUITY (7.d) 31,844 29,691

AMORTIZATION, DEPRECIATION & WRITEDOWNS (85,747) (66,846)

INCOME FOR FINANCIAL ITEMS ANDTAXES ( E B I T ) 108,110 81,356

FINANCIAL INCOME (14.a) 27,729 29,124 of which from related parties (*) (14.a) 5,095 5,059

FINANCIAL EXPENSE (14.b) (80,168) (86,033)of which with related parties (*) (14.b) (33) (195)

DIVIDENDS 88 465

GAINS FROM TRADING SECURITIES (14.c) 14,096 141,898

LOSSES FROM TRADING SECURITIES (14.d) (3,408) (18,844)

ADJUSTMENTS TO THE VALUE OF FINANCIAL ASSETS (1,175) 11,583

INCOME BEFORE TAXES 65,272 159,549

INCOME TAXES (15) 29,102 (23,044)

RESULT BEFORE TAXES FROM OPERATING ACTIVITY 94,374 136,505

INCOME/(LOSS) FROM ASSETS HELD FOR DISPOSAL -- --

NET INCOME FOR THE PERIOD INCLUDING MINORITY INTERESTS 94,374 136,505

- NET INCOME OF MINORITY SHAREHOLDERS (52,201) (15,711)

- NET INCOME OF THE GROUP 42,173 120,794

BASIC EARNINGS PER SHARE (in euro) (16) 0.0563 0.1615 DILUTED EARNINGS PER SHARE (in euro) (16) 0.0563 0.1615

(*) As per Consob Resolution no. 6064293 of July 28 2006

25

3. STATEMENT OF COMPREHENSIVE INCOME


1st Half2010

1st Half2009

Net income for the period 94,374 136,505

Other items of comprehensive income

Currency differences on translation of foreign operations 19,669 4,564

Net change in fair value of available-for-sale financial assets 1,241 (1,609)

Net change in cash flow hedge reserve 1,959 (5,975)

Other items of comprehensive income statements 794 --

Taxes on other items of comprehensive income statements (1,421) 1,001 Other items of comprehensive income for the period,net of tax 22,242 (2,019)

TOTAL COMPREHENSIVE INCOME STATEMENTS FOR THE PERIOD 116,616 134,486

Total comprehensive income statements attributable to:Shareholders of the parent company 55,224 116,938 Minority shareholders 61,392 17,548

26

4. STATEMENT OF CASH FLOW


1st Half 2010

1st Half 2009

OPERATING ACTIVITY

NET INCOME FOR THE PERIOD INCLUDING MINORITY INTERESTS 94,374 136,505

ADJUSTMENTS:

AMORTIZATION, DEPRECIATION & WRITEDOWNS 85,747 66,846

SHARE OF RESULT OF COMPANIES CONSOLIDATED AT EQUITY (31,844) (29,691)

ACTUARIAL VALUATION OF STOCK OPTION PLANS 4,615 3,764

CHANGE IN PERSONNEL PROVISIONS, PROVISIONS FOR RISKS & LOSSES (16,689) 10,608

ADJUSTMENTS TO THE VALUE OF FINANCIAL ASSETS 6,175 (11,583)

CAPITAL GAINS ON SUBSCRIPTION OF CAPITAL INCREASES BY MINORITY SHAREHOLDERS -- (76,735)

CAPITAL GAINS ON SALE OF SECURITIES -- (46,319)

INCREASE (REDUCTION) IN NON-CURRENT RECEIVABLES & PAYABLES (41,829) (14,220)

(INCREASE) REDUCTION IN NET WORKING CAPITAL (128,101) 6,829

OTHER CHANGES -- 50,570

CASH FLOW FROM OPERATING ACTIVITY (27,552) 96,574

of which:

- interest received (paid out) (37,874) (14,109)

- income tax disbursements (12,697) (62,710)

INVESTMENT ACTIVITY

(PURCHASE) SALE OF SECURITIES (142,351) 433,095

PURCHASE OF FIXED ASSETS (379,244) (267,201)

CASH FLOW FROM INVESTMENT ACTIVITY (521,595) 165,894

FUNDING ACTIVITY

INFLOWS FROM CAPITAL INCREASES 3,173 184,219

OTHER CHANGES IN EQUITY 22,959 (3,986)

DRAWDOWN/(REPAYMENT) OF OTHER BORROWINGS 112,822 (438,112)

BUYBACK OF OWN SHARES (91) (1,161)

DIVIDENDS PAID OUT (6,906) (9,937)

CASH FLOW FROM FUNDING ACTIVITY 131,957 (268,977)

INCREASE (REDUCTION) IN NET CASH & CASH EQUIVALENTS (417,190) (6,509)

NET CASH & CASH EQUIVALENTS AT START OF PERIOD 483,031 451,562

NET CASH & CASH EQUIVALENTS AT END OF PERIOD 65,841 445,053

27

5. STATEMENT OF CHANGES IN CONSOLIDATED EQUITY

(in thousands of euro) Minority Total

Issued less Share Reserves Retained Net income (losses) Total interestscapital own shares capital earnings (losses) for period

BALANCE AT DECEMBER 31 2008 395,588 (21,487) 374,101 307,856 487,448 95,444 1,264,849 814,039 2,078,888

Capital increases 471 -- 471 528 -- -- 999 186,852 187,851

Dividends to Shareholders -- -- -- -- -- -- -- (21,386) (21,386)

Retained earnings -- -- -- -- 95,444 (95,444) -- -- --

Unclaimed dividends as per Art. 23 of the Bylaws -- -- -- 14 -- -- 14 -- 14

Adjustment for own share transactions -- (50) (50) 50 (74) -- (74) -- (74)

Notional recognition of stock options -- -- -- 5,455 -- -- 5,455 -- 5,455

Effects of equity changesin subsidiaries -- -- -- (895) -- -- (895) (95,996) (96,891)

Comprehensive result for the period

Fair value measurement of hedging instruments -- -- -- (285) -- -- (285) (800) (1,085)

Fair value measurement of securities -- -- -- 7,668 -- -- 7,668 (764) 6,904

Securities fair value reserve released to income statement -- -- -- (38,918) -- -- (38,918) -- (38,918)

Effects of equity changesin subsidiaries -- -- -- 2,257 -- -- 2,257 2,336 4,593

Currency translation differences -- -- -- 12,253 -- -- 12,253 5,318 17,571

Result for the period -- -- -- -- -- 143,432 143,432 45,981 189,413

Total comprehensive result for the period -- -- -- (17,025) -- 143,432 126,407 52,071 178,478

BALANCE AT DECEMBER 31 2009 396,059 (21,537) 374,522 295,983 582,818 143,432 1,396,755 935,580 2,332,335

Capital increases -- -- -- -- -- -- -- 3,173 3,173

Dividends to Shareholders -- -- -- -- -- -- -- (6,906) (6,906)

Retained earnings -- -- -- -- 143,432 (143,432) -- -- --

Notional recognition of stock options -- -- -- 2,217 -- -- 2,217 -- 2,217

Effects of equity changesin subsidiaries -- -- -- 460 -- -- 460 2,564 3,024

Comprehensive result for the period

Fair value measurement of hedging instruments -- -- -- (392) -- -- (392) 986 594

Fair value measurement of securities -- -- -- 960 -- -- 960 (623) 337 Securities fair value reserve released to income statement -- -- -- 848 -- -- 848 -- 848 Effects of equity changesin subsidiaries -- -- -- 514 -- -- 514 280 794 Currency translation differences -- -- -- 11,121 -- -- 11,121 8,548 19,669 Result for the period -- -- -- -- -- 42,173 42,173 52,201 94,374 Total comprehensive result for the period -- -- -- 13,051 -- 42,173 55,224 61,392 116,616

BALANCE AT JUNE 30 2010 396,059 (21,537) 374,522 311,711 726,250 42,173 1,454,656 995,803 2,450,459

Attributable to the Shareholders of the Parent Company

28


EXPLANATORY NOTES 1. STRUCTURE AND CONTENT OF THE FINANCIAL STATEMENTS Criteria used for the preparation of the condensed consolidated semi-annual financial state-ments and accounting principles adopted The consolidated semi-annual interim financial statements of the Group in shortened form are prepared in accordance with the IFRS international accounting standards issued by the Interna-tional Accounting Standards Board (IASB) and ratified by the European Union as per the terms of Regulation no. 1606/2002. This consolidated semi-annual interim financial report was prepared in a condensed form in compliance with IAS 34 Interim Financial Reporting. This semi-annual in-terim report does not therefore include all the information required for the annual report and must be read together with the annual report and financial statements for the year ended December 31 2009. The accounting principles adopted in the preparation of this condensed consolidated semi-annual interim financial report are the same as those adopted in the preparation of the annual consoli-dated financial statements of the Group for the year ended December 31 2009. Below the full text of these principles is given to facilitate consultation. The consolidated semi-annual interim financial statements as of June 30 2010 include the Parent Company of the Group CIR S.p.A. (hereinafter CIR) and the companies over which it has con-trol and were prepared using the statements of the individual companies included in the consolida-tion, either their individual interim financial reports (separate in IAS/IFRS terminology), or their consolidations into subgroups, examined and approved by their administrative bodies and suitably modified and reclassified, where necessary, to bring them into line with the accounting standards listed below where these are compatible with Italian regulations. It should also be noted that some valuation processes, especially the more complex ones such as the determination of any impairment of non-current assets, are generally carried out fully only in the preparation of the annual report, when all the information that may be necessary is likely to be more available and more accurate. This is obviously not true for cases where there are indicators of impairment requiring an immediate valuation of any losses in value. Income taxes are recognized on the basis of the best estimate of the weighted average tax rate ex-pected for the whole year. These financial statements were prepared in thousands of euro, which is the functional and presentation currency of the Group according to the terms of IAS 21, except where expressly indicated otherwise.

30 Consolidated Financial Statements

2. CONSOLIDATION PRINCIPLES 2.a. Consolidation methods Subsidiaries All the companies over which the Group exercises control according to the terms of IAS 27, SIC 12 and IFRIC 2 are considered as subsidiaries. In particular, companies and investment funds are considered as controlled companies when the Group has the power to make decisions regarding financial and operating policy. The existence of this power is presumed to exist when the Group possesses the majority of the voting rights of a company, including potential voting rights that are exercisable without any restrictions or when it has in any case effective control over Shareholders Meetings. Subsidiaries are fully consolidated as from the date on which the Group takes control and are de-consolidated when such control ceases to exist. Consolidation is carried out using the full line-by-line consolidation method. The main criteria adopted for the application of this method are the following: - The book value of the holding is eliminated against the appropriate portion of shareholders

equity and the difference between acquisition cost and the shareholders equity of investee companies is posted, where the conditions exist, to the items of assets and liabilities included in the consolidation. Any remaining part if negative is recognized to the income statement, if positive is recognized to the item of assets called Goodwill. Goodwill is subjected to an im-pairment test to determine its recoverable value;

- Significant transactions between consolidated companies are eliminated as are payables, re-ceivables and unrealized income resulting from transactions between companies of the Group, net of any tax;

- Minority shareholders equity and their share of the result for the period are shown in special items of the consolidated balance sheet and income statement;

- In the event of an acquisition of further shares in a company that is already controlled, the dif-ferences between the acquisition costs and the carrying value of the minority shares purchased are recognized to the equity of the group. Similarly, sales of minority interests without loss of control do not generate gains/losses in the income statement but changes in the equity of the group. This accounting treatment is also used for gains and losses from dilution in the event of a reduction of the holding that does not lead to loss of control, resulting from capital increases by minority shareholders.

Associates All those companies in which the Group has a significant influence, without having control, in ac-cordance with the terms of IAS 28, are considered as associated companies or associates. Signifi-cant influence is presumed to exist when the Group holds a percentage of the voting rights of be-tween 20% and 50% (excluding cases where there is joint control). Associates are consolidated using the equity method as from the date on which the Group acquires significant influence in the associate and they are de-consolidated from the moment when signifi-cant influence ceases to exist. The principal criteria adopted for applying the equity method are the following: - The book value of the holding is eliminated against the appropriate portion of shareholders

equity and any positive difference, identified at the time of the acquisition, net of any lasting loss of value resulting from an impairment test to establish its recoverable value;


- The corresponding share of net income or losses for the period is recognized to the income statement. Whenever the part attributable to the Group of the losses of the associate exceeds the carrying value of the investment in the accounts, the value of the investment is written off and the share of any further losses is not recognized unless the Group has any contractual ob-ligation to do so;

- Any unrealized gains or losses generated by transactions between companies of the Group are netted out except in cases where the losses represent a permanent loss of value of the assets of the associate;

- The accounting principles of the associate are amended, where necessary, in order to make them compatible with the accounting principles adopted by the Group.

Joint ventures: All companies in which the Group exercises control jointly with another company according to the terms of IAS 31 are considered as joint ventures. More specifically it is presumed that joint control exists when the Group owns half of the voting rights of a company. International accounting standards give two methods for consolidating investments in joint ven-tures: - Proportional consolidation; - The equity method. The Group has adopted the equity method of consolidation. 2.b. Translation of foreign companies financial statements into euro The translation into euro of the financial statements of foreign subsidiaries not belonging to the single currency, none of which has an economy subject to hyperinflation according to the defini-tion given in IAS 29, is carried out at the exchange rate prevailing at the reporting date for the balance sheet and at the period average exchange rate for the income statement. Any exchange rate differences resulting from the translation of shareholders equity at the close of period ex-change rate and from the translation of the income statement at the average rate for the period are recorded in the item Other reserves under shareholders equity. The main exchange rates used are the following: 1st Half 2010 1st Half 2009

Average rate 30.06.2010 Average rate 30.06.2009

US Dollar 1.32683 1.2271 1.33278 1.4134

UK Pound 0.8694 0.8174 0.8934 0.8521

Swedish Krona 9.7905 9.5256 10.8542 10.8120

Brazilian Real 2.3806 2.2082 2.9173 2.7469

Argentine Peso 5.1269 4.8256 4.8305 5.3585

Chinese Renminbi 9.0424 8.3215 9.0950 9.6544

Indian Rupee 60.6428 56.9801 65.5308 67.5219

2.c. Consolidation area The consolidated financial statements as of June 30 2010 and the consolidated financial state-ments for the previous year of the Group are the result of the consolidation at those dates of the Parent Company of the CIR Group and of all the companies directly or indirectly controlled,


jointly controlled or associated, with the exception of any companies being wound up. Assets and liabilities relating to companies scheduled for disposal are reclassified in the items of assets and liabilities that show such an eventuality. This item at June 30 2010 shows the net value of a prop-erty belonging to the Sogefi group which is scheduled to be sold. The list of equity investments included in the consolidation area, with an indication of the method used, and of those not included is given in the appropriate section of this document. 2.d. Changes in the consolidation area The main changes in the consolidation compared to the previous year concern the following: Utilities sector The following company entered the consolidation: - Volterra A.E. Media sector It should be noted that, compared to the first six months of 2009, the companies Edigraf S.r.l. (sold to third parties in October 2009) and Rotosud S.p.A. (sold to third parties in March 2010) have now left the consolidation, while the subsidiary Ksolutions S.p.A., currently in liquidation and non-operational, was consolidated at cost instead of being fully consolidated. Lastly, the completion of the merger by incorporation of the company Editoriale Monopoli S.p.A. into Gruppo Editoriale LEspresso S.p.A. on April 22 2010 also changed the composition of the consolidation. This company was previously fully consolidated line by line into Gruppo Editoriale LEspresso S.p.A.. Automotive sector It should be noted that in the first half of the year the subsidiary Allevard Rejna Autosospensions S.A. increased its interest in the subsidiary S.ARA. Composite S.a.S from 64.29% to 83.33%, through a capital increase. During the period there were no further changes to the consolidation. Healthcare sector In the first half of 2010 the following transactions involved a change in the consolidation area: - in the Rehabilitation sector (Istituto di Riabilitazione Santo Stefano S.r.l. and Redancia)

- the acquisition in January 2010 by Istituto di Riabilitazione Santo Stefano S.r.l. of 100% of

Societ Duemiladue S.r.l., the parent company of Sanatrix S.r.l. owner of the care Villa dei Pini di Civitanova Marche (MC), equipped with 180 beds of which 105 for hospital care, 15 for rehabilitation and 60 for the elderly. With this acquisition the group now holds a total of 77% of the capital of Sanatrix S.r.l. The price paid for this acquisition was 18.1 million and includes the majority premium resulting from acquisition of control of the Sana-trix group. The deal was financed by borrowings;

- the acquisition in May 2010, by the company Health Equity S.r.l, a company 60% con-trolled indirectly by Kos S.p.A., of the remaining 50% of the share capital of Fidia S.r.l., for an amount of 5,100;


- the acquisition, through the company Redancia S.r.l., of 100% of the company Tuga 2 S.r.l., owner of a care home that runs a psychiatric rehabilitation community in Liguria with 15 beds. The total investment is for 1,240 thousand and was financed by borrowings;

- the acquisition in May of the remaining 10% interest in the company Tuga S.r.l, for the sum of 100,050, so that its entire capital is now owned by the group. This deal generated a consolidation difference of 70.2 thousand which, being an earn-out deal, was fully ex-pensed to the income statement in accordance with International accounting standards (IFRS 3 revised).

- in the nursing home (RSA) sector

- the acquisition, as part of a single deal carried out by Residenze Anni Azzurri S.r.l., of

100% of the company San Rocco S.r.l., which runs a nursing home in Segrate (MI) and is accredited for 150 beds plus a day-care centre of 12 beds, and 100% of the company Il Melograno S.r.l. which manages a nursing home (Il Melograno) in Cassina De Pecchi (MI) and is accredited for 147 beds plus a daycare centre of 10 beds. As part of the same deal the company HSS Real Estate S.p.A. acquired 100% of the capital of the real estate company Ital.Com. S.p.A., owner of the facility which houses the nursing home Il Melograno in Cas-sina De Pecchi. The total price of the deal was 18.4 million. The property of the company Ital.Com S.p.A was subsequently sold to a real-estate partner for the sum of 11,750 thou-sand. These acquisitions were financed by bank borrowings.

It should also be noted that the company Jupiter Management S.r.l. and the special purpose entity FAR S.A. also joined the consolidation. 3. ACCOUNTING PRINCIPLES APPLIED 3.a. Intangible assets (IAS 38) Intangible assets are recognized only if they can be separately identified, if it is probable that they will generate future economic benefits and if their cost can be measured reliably. Intangible assets with a finite useful life are valued at purchase or production cost net of amortiza-tion and accumulated impairment. Intangible assets are initially recognized at purchase or production cost. Purchase cost is repre-sented by the fair value of the means of payment used to purchase the asset and any additional di-rect cost incurred for preparing the asset for use. The purchase cost is the equivalent price in cash as of the date of recognition and, where payment is deferred beyond normal terms of credit, the difference compared with the cash price is recognized as interest for the whole period of defer-ment. Amortization is calculated on a straight-line basis following the expected useful life of the asset and starts when the asset is ready for use. The carrying value of intangible assets is maintained as long as there is evidence that this value can be recovered through use; to this end at least once a year an impairment test is carried out to check that the intangible asset is able to generate future cash flows.


However, intangible assets with an indefinite useful life are not amortized but are constantly moni-tored for any permanent loss of value. It is mainly the newspaper and magazine titles and frequen-cies of the Espresso Group that are considered as intangible assets with an indefinite useful life. Development costs are recognized as intangible assets when their cost can be measured reliably, when there is a reasonable assumption that the asset can be made available for use or for sale and that it is able to generate future benefits. Once a year or any time there are reasons which justify it, capitalized costs are subjected to an impairment test. Research costs are charged to the income statement as and when they are incurred. Trademarks and licenses, which are initially recognized at cost, are subsequently accounted for net of amortization and any impairment. The period of amortization is defined as the lower of the contractual duration for use of the license and the useful life of the asset. Software licenses, including associated costs, are recognized at cost and are recorded net of accu-mulated amortization and any impairment. Goodwill In the event of the acquisition of companies, the identifiable assets, liabilities and potential liabili-ties acquired are recognized at their fair value on the acquisition date. The positive difference be-tween the acquisition cost and the Groups pro-rata share of the fair value of these assets and li-abilities is classified as goodwill and is recorded in the balance sheet as an intangible asset. Any negative difference (negative goodwill) is however posted to the income statement at the mo-ment of acquisition. After initial recognition, goodwill is valued at cost less any accumulated impairment. Goodwill always refers to identified income-producing assets, the ability of which to generate in-come and cash flows is constantly monitored for any impairment. See also what is set out in paragraph 3x below Business Combinations and Goodwill. 3.b. Tangible assets (IAS 16) Tangible assets are recognized at purchase price or at production cost net of accumulated depre-ciation. Cost includes associated expenses and any direct and indirect costs incurred at the moment of ac-quisition and necessary to make the asset ready for use. Financial expense relating to specific loans for long-term investments are capitalized until the date when the assets start operating. When there are contractual or compulsory obligations for decommissioning, removing or clearing sites where fixed assets are installed, the value recognized includes an estimate of costs that will be incurred on disposal of the same, discounted to present value. Fixed assets are depreciated on a straight-line basis for each year in relation to their remaining useful life. Land, assets under construction and advance payments are not subject to depreciation. Real estate and land not used for corporate operating purposes are classified under a special item of assets and are accounted for on the basis of the terms of IAS 40 Investment properties (see paragraph 3.e. below). Should there be any events which one can assume will cause a lasting reduction in the value of an asset, its carrying value is checked against its recoverable value, which is the higher of its fair value and its value in use. Fair value is defined on the basis of values expressed by the active market, by recent transactions or from the best information available to determine the potential


amount obtainable from the sale of the asset. Value in use is determined from the net present value of cash flows resulting from the use expected of the same asset, applying the best estimates of its residual useful life and a rate that also takes into account the implicit risk of the specific business sectors in which the Group operates. This valuation is carried out for each individual as-set or for the smallest identifiable cash generating unit (CGU). Where there is a negative difference between the values stated above and the carrying value, the assets carrying value is written down, while as soon as the reasons for such loss in value cease to exist the asset then undergoes an upward revaluation. Write-downs and revaluations are posted to the income statement. 3.c. Public entity grants Any grants from a public entity are recognized when there is a reasonable degree of certainty that the receiving company will comply with all the conditions stipulated for such a grant, independ-ently of whether or not there is a formal resolution awarding the said grant, and the certainty that the grant will actually be received. Capital contributions are recognized in the balance sheet either as deferred income, which is posted to the income statement on the basis of the useful life of the asset for which it has been granted so that the depreciation can be reduced, or else they are deducted directly from the asset to which they refer. Any public entity grants obtained in the form of reimbursement of expenses and costs already in-curred or with the purpose of providing immediate support for the beneficiary company without there being any future related costs, are recognized as income in the period in which they can be claimed. 3.d. Leasing contracts (IAS 17) Leasing contracts for assets where the lessee substantially assumes all the risks and rewards of ownership are classified as finance leases. Where there are such finance lease contracts out-standing the asset is recognized at the lower of its fair value and the present value of the minimum lease payments stipulated in the relevant contracts. The total lease payments are allocated either to the liability or to the finance charges so as to achieve a constant rate on the finance balance out-standing. The residual lease payments, net of financial expense, are classified as borrowings. The interest expense is charged to the income statement over the lease period. Assets acquired with fi-nancial leasing contracts are depreciated to an extent consistent with the nature of the asset. Leas-ing contracts in which the lessor substantially retains the risks and rewards of ownership are, on the other hand, classified as operating leases and payments made under such leases are charged to the income statement on a straight-line basis over the period of the lease. In the event of a sale and lease-back agreement, any difference between the price of sale and the carrying value of the asset is not recognized to the income statement unless there is a loss repre-senting an impairment of the asset itself. 3.e. Investment property (IAS 40) An investment property is a property, either land or building or part of a building or both, owned by the owner or by the lessee, through a financial leasing agreement, for the purpose of re-ceiving lease payments or for obtaining a return on the capital invested or for both of these rea-


sons, rather than for the purpose of directly using it for the production or supply of goods or ser-vices or for administration of the company or for sales, in ordinary business activities. The cost of an investment property is represented by its purchase price, any improvements made, any replacements and extraordinary maintenance. For self-constructed investment property an estimation is made of all costs incurred as of the date on which the construction or the development was finished. Until that date the conditions set forth in IAS 16 apply. In the event of an asset held through a finance lease contract, the initial cost is determined accord-ing to IAS 17 from the lower of the fair value of the property and the present value of the mini-mum lease payments due. The Group has opted for the cost method to be applied to all investment property held. According to the cost method, measurement is made net of depreciation and any accumulated impairment losses. At the moment of disposal or in the event of permanent non-use of the assets, all related income and expense must be charged to the income statement. 3.f. Impairment of assets (IAS 36) At least once a year the Group verifies whether the carrying value of intangible and tangible assets (including capitalized development costs) are recoverable, in order to determine whether there is any indication that the assets may have lost value. If there is such an indication, the carrying value of the assets is written down to the relative recoverable value. An intangible asset with an indefinite useful life is subjected to an impairment test every year or more frequently any time that there is an indication that it may have undergone a loss in value. When it is not possible to estimate the recoverable value of an individual asset, the Group esti-mates the recoverable value of the cash generating unit to which the asset belongs. The recoverable value of an asset is the higher of fair value net of costs to sell and its value in use. To determine the value in use of an asset the Group calculates the present value of estimated fu-ture cash flows, gross of taxes, using a discount rate, before tax, which reflects the current market estimate of the time value of money and the specific risks of the business sector. An impairment lo

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