2 0 0 7 - Cembre · Cembre is currently a group employing 525 persons, with a turnover in 2007...

C o s t r u z i o n i E l E t t r o m E C C a n i C h E B r E s C i a n E

REPORT and ACCOUNTS 2 0 0 7

Cembre S.p.A.Head Office: Via Serenissima, 9, Brescia, ItalyShare Capital: EUR 8,840,000 (fully paid-up)

Registration no: 00541390175 (Commercial Register of Brescia)

This document contains translations of the officialfinancial statements and managements reports prepared

in the Italian language for the purpose of the Italian law.

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R E P O R T A N D A C C O U N T S 2 0 0 7

CONTENTS

Group Structure

Report on Operations for the Financial Year 2007

- Attachment 1: Consolidated Income Statement 29- Attachment 2: Investments held by Directors and Statutory Auditors 30- Attachment 3: Corporate Boards 31

Consolidated Financial Statements at December 31, 2007

- Consolidated Balance Sheet 34- Consolidated Income Statement 35- Consolidated Statement of Cash Flows 36- Statement of Changes in the Consolidated Shareholders' Equity 38- Notes to the Consolidated Financial Statements 39Auditing Report on Consolidated Financial Statements 68Report of the Board of Statutory Auditors on Consolidated Financial Statements 69Certification pursuant to article 81-ter of the regulation issued by the Italian market regulatory body (CONSOB) no. 11971 of May 14, 1999 and subsequent integrationsand updatings. 70

Financial Statements at December 31, 2006 of Cembre SpA

- Balance Sheet 72- Income Statement 73- Statement of Cash Flows 74- Statement of Changes in the Shareholders' Equity 76- Notes to the Financial Statements 77- Attachments 102Auditing Report on Cembre S.p.A. Financial Statements 105Report of the Board of Statutory Auditors on Cembre S.p.A. Financial Statements 113Certification pursuant to article 81-ter of the regulation issued by the Italian market regulatory body (CONSOB) no. 11971 of May 14, 1999 and subsequent integrationsand updatings. 114

Abstract of Shareholders General Meeting resolution

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115

Cembre S.p.A. Group headquarters located in Brescia, Italy

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* Source Cembre S.p.A.

to the needs of an increasingly demanding market offering high-quality products that are reliable, durable and safe. The wide product range, the capillary and efficient domestic and international

sales network and the strong focus on customer needs repre-sent the strengths of the Cembre Group and ensure a strong competi-tive advantage in a con-tinuously evolving world market.

Cembre is today the leading Italian manufacturer and one of the largest European manufacturers of electric com-pression connectors and related installa-tion tools*. The company’s extensive know-how in the field of electrical connec-tors, strong R&D activity and the continuous inno-vation in manufacturing technologies and product specifications, allow Cembre to respond quickly

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sales network and the strong focus on customer needs repre-sent the strengths of the Cembre Group and ensure a strong competi-tive advantage in a con-tinuously evolving world market.

The company’s extensive know-how in the field of electrical connec-

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Cembre designs and manufactures a wide range of electrical connectors and tools for their installation. Cembre, in particu-lar, has adopted and developed a ‘com-pression’ connec-tion system that enables it to exploit the hardening proper-ties of selected metals (copper and aluminium), whereby these metals acquire greater strength and resistance when bent by force, thereby guaran-teeing the achievement of better performances by these types of connectors than would have otherwise been obtained by more conventional welding and mechanical clamping (screws and bolts) connec-tion methods.

PRODUCT RANGE

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Cembre designs and manufactures a wide range of electrical connectors and tools for their installation. Cembre, in particu-lar, has adopted and developed a ‘com-

the hardening proper-ties of selected metals (copper and aluminium),

PRODUCT RANGE

teeing the achievement of better performances by these types of connectors than would have otherwise been obtained by more conventional welding and mechanical clamping (screws and bolts) connec-

ties of selected metals (copper and aluminium),

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Compression connectors are characterised by lower electrical resistance and by excellent quality electri-cal contact. Installation tools used for compressing the connectors and cutting the cables enable quick

installation and the achievement of easy and safe optimal connections. The range

of tools includes, according to the application, mechanical, pneu-matic, hydraulic

and electrical tools.

installation and the achievement of easy and safe

of tools includes, according

Compression connectors are characterised by lower electrical resistance and by excellent quality electri-cal contact. Installation tools used for compressing the connectors and cutting the cables enable quick

installation and the achievement of easy and safe optimal connections. The range

of tools includes, according to the application, mechanical, pneu-matic, hydraulic

and electrical tools.

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The Cembre Group is growing rapidly and investing strongly in the devel-opment of its product range and the consolidation of its sales and distribution network, seeking to increase its presence in the international markets.

R&D activities focuse primarily on the development of new products aimed at markets with the highest growth potential such as rail transport, civil and industrial equipment. Implementation of new European Union safety regulations require the adoption of modern connection systems as those manufactured by Cembre Group. Constant attention devoted to trends in demand and the monitoring of customer satisfaction allowed Cembre to develop solutions in line with an increasingly demanding market, stretching the use of own technologies to a growing number of applications.Cembre Group’s expansion of product offer was achieved by launching leading-edge technology products, including new battery powered hydraulic tools, a new range of professional mechanical tools, electrically insulated hydraulic tools, linked cable terminals insulated with halogen free material,

drills for wooden rail-sleepers etc. Whole

families of already existing products

were moreover updat-ed and improved to enhance user friendliness and quali-

tative and performance standards.

DEVELOPMENT OF THE PRODUCT RANGE

STRATEGIES

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gyThe Cembre Group

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gyThe Cembre Group

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gyis growing rapidly and

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gyis growing rapidly and

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gyinvesting strongly in the devel-

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gyinvesting strongly in the devel-

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gyopment of its product range and the

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gyopment of its product range and the

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gyconsolidation of its sales and distribution

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gyconsolidation of its sales and distribution

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gynetwork, seeking to increase its presence in

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gynetwork, seeking to increase its presence in

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gythe international markets.

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gythe international markets.

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gyR&D activities focuse primarily on the development of new products aimed at markets with the highest growth potential such as rail transport, civil and industrial equipment. Implementation

STRATEGIES

B54Y, "In line" portable battery crimping tool specifically devel-oped for the American market

hydraulic tools, linked cable terminals insulated with halogen free material, drills for wooden rail-

sleepers etc. Whole families of already existing products

were moreover updat-ed and improved to enhance user friendliness and quali-

tative and performance

New "Universal" unit for the insertion and extraction of “Pandrol FastClip” type clips fastening rails on sleepers

The sections "Products" and "News"in the internet site

The sections "Products" and "News"in the internet site

www.cembre.com Intern

et"Products" and "News"

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et"Products" and "News"in the internet site

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etin the internet site

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et"Products" and "News"

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et"Products" and "News"in the internet site

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The wide knowledge of the sector and the strong presence on the territory allowed Cembre to identify and understand the needs of the different local markets, adapt-ing products to the specific requirements in terms of quality imposed by safety regulations in the different countries in which it operates.

The Web site allows the company to interact with customers, providing a number of services such as technical assistance, promotions, the presenta-tion of new products and the possibility to liaise with wholesalers operating in the territory.

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WEB SITE

New range of cordless hydraulic cutting tools

The wide knowledge of the sector and the strong presence on the territory allowed Cembre to identify and understand

New range

cutting tools

Cembre to identify and understand the needs of the different local markets, adapt-ing products to the specific requirements in terms of quality imposed by safety regulations in the different countries in which it operates.

Cembre to identify and understand

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Cembre made signifi cant investments in the optimization of its manu-

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gCembre made signifi cant investments in the optimization of its manu-

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Cembre made signifi cant investments in the optimization of its manu-

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gfacturing activities and enlarging its production capacity at the Brescia,

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gfacturing activities and enlarging its production capacity at the Brescia,

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facturing activities and enlarging its production capacity at the Brescia,

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gBirmingham and Bergamo facilities.

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gBirmingham and Bergamo facilities.

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Birmingham and Bergamo facilities.Str

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In Brescia, Cembre have modern numerical control work centres as well Str

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In Brescia, Cembre have modern numerical control work centres as well Str

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gIn Brescia, Cembre have modern numerical control work centres as well

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gas other equipment guaranteeing high fl exibility and quality of the produc-

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gas other equipment guaranteeing high fl exibility and quality of the produc-

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as other equipment guaranteeing high fl exibility and quality of the produc-

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gtion. The Company has an automated warehouse and its own tinplating

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gtion. The Company has an automated warehouse and its own tinplating

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tion. The Company has an automated warehouse and its own tinplating

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gdepartment which allows to reduce production time and costs, ensuring tight

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gdepartment which allows to reduce production time and costs, ensuring tight

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department which allows to reduce production time and costs, ensuring tight

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gquality control.

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gquality control.

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quality control.

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gThe strengthening of production capacity and effi ciency involved also the

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gThe strengthening of production capacity and effi ciency involved also the

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The strengthening of production capacity and effi ciency involved also the

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gBirmingham plant, dedicated to the production of particular specifi c product

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gBirmingham plant, dedicated to the production of particular specifi c product

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Birmingham plant, dedicated to the production of particular specifi c product

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glines for some markets.

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glines for some markets.

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lines for some markets.

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gGeneral Marking Srl during the 2003 moved its operating headquarters

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gGeneral Marking Srl during the 2003 moved its operating headquarters

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General Marking Srl during the 2003 moved its operating headquarters

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gnearby Bergamo, in a new bigger building suitable to cope with the develop-

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gnearby Bergamo, in a new bigger building suitable to cope with the develop-

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nearby Bergamo, in a new bigger building suitable to cope with the develop-

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gment foreseen for the next years.

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gment foreseen for the next years.

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ment foreseen for the next years.

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gINCREASE IN PRODUCTION CAPACITY

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Selection of our current hydraulic,

battery operated tools

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ENVIRONMENT

Multi-site certification of the Cembre Group Quality Management System

QUALITY

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Cembre Quality System was first certified by LRQA in 1990. Initially referring only to Manufacturing according to ISO 9002:1987, certification was extended in 1992 to cover the Design provisions of ISO 9001:1987 norm.

Nowadays the activities of the main premises in Brescia, the regional offices in Italy and subsidiary companies in Great Britain,

France, Spain, Germany and USA are governed by a single multi-site Quality System conform-

ing to ISO 9001:2000 for the "Design, Manufacture, Marketing of cable acces-sories, electrical connectors and related equipments as well as repairing, refur-bishment and associated equipment re-calibration".

This assures our custom-ers of the homogenous

high quality of Cembre products and services.

Cembre SpA has recently recognised the need to align its Environmental Management System with the spirit and content of UNI EN ISO 14001 as fundamental to future development.

To this end the company is undertaking a wide-ranging review of all func-tions including development and design stages, material selection, usage and manufacturing processes.

The resulting definition of operational procedures in line with these aims and provisions will enable Cembre SpA to achieve the target of Environmental Certification within 2008, further highlighting the companies sensitive and careful approach to environmental protection.

Envir

onme

nt &

Qualit

yThis assures our custom-

ers of the homogenous high quality of Cembre

* Source Cembre S.p.A.

CNC Machine Department

Press and high speed press machines department

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Manuf

acturing

Manuf

acturing

Manuf

acturing

Manuf

acturing

Cembre Group’s growth has traditionally been driven by its ability to continually anticipate the evolution of the electrical connectors market, enabling it to develop new products with the highest standards in quality, reliability and safety, as well as to improve the performance of existing products.

MANUFACTURINGCembre quickly developed after its creation in 1969, until it became the leading company* in Italy, specialising in the manufacturing of electrical compression connectors and related installation tools, while gaining impor-tant market shares elsewhere in Europe, where it is now recognised as the leading crimping tools manufacturer.

Cembre is currently a group employing 525 persons, with a turnover in 2007 amounting to € 93,4 million.

Tin platingdepartment

The parent company, Cembre S.p.A., is based in Brescia where, on an area of aproxima-tely 115,000 square meters, are the Head Office, sales offices, technical offices, Research & Development, the automated warehouse, pro-duction facilities and test laboratories.

View of insulated connectors andterminal blocks assembly department

View of the automated warehouse

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MADRID

PARIS

BIRMINGHAM

MUNICH

STOKKE

BARCELONA

Group companies and branch offices

Main importers

Agents in Italy

VALENCIA

BRESCIA

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Group

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Group

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GROUP STRUCTURE

Cembre España S.L.Madrid (Spain)

Cembre S.a.r.l.Paris (France)

Cembre ASStokke (Norway)

Cembre GmbHMunich (Germany)

Cembre Inc.Edison (USA)

Cembre LtdBirmingham (UK)

Cembre SpABrescia (Italy)

General Marking SrlBrescia (Italy)

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

Cembre Group is present in the USA market through Cembre Inc. located in Edison (New Jersey).

Marketing Companies

Production Units

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Holdings situation at March 25, 2008

Cemb

re Ltd

Cemb

re Ltd

Cemb

re Ltd

Cemb

re Ltd

Test Laboratory

Cembre Ltd is Cembre Group’s second largest manufacturing unit.Since its establishment in 1986, it has enjoyed constant growth and presently benefits from a good positioning in the market.

Cembre Ltd is located in a manufacturing centre on the north-eastern outskirts of Birmingham, England’s second largest city, in the heart of the Midlands region, recognised for its high concentration of manufacturing industries, particularly in the areas of steel and motor vehicles. It therefore provides Cembre with an excellent source of highly trained labour skilled in the advanced mechanical technologies fundamental to Cembre’s manufacturing needs. Its operations cover an area of 8,000 m2, of which 5,100 m2 are occupied by manufacturing facilities and office buildings.

Cembre Ltd is primarily focused on serving the specific needs of the United Kingdom market. In addition, its flexibility enables it to support other Group operations

Cembre LtdBirmingham

Productions Departments

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Oelma Srl was acquired by Cembre in February 1999 and subsequently merged into the parent company from January 1, 2002.

Oelma’s product line consists of over 1,500 articles for industrial and civil applications.

linea

Brass terminal block and cable clamps

line

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Oelm

aOe

lma

linea Oe

lma

linea

line

Oelm

aline

Cable glands with increased safety

line

Cable glands with Oelm

aOe

lma

linea Oe

lma

linea

clamps

Brass terminal block and cable block and cable clamps

spiral

Polyamide, nickel plated brass and stainless steel cable glands and accessories

Gener

al Mark

ingGe

neral M

arking

Gener

al Mark

ingGe

neral M

arking

Manual cable marking systems

Warningand safetysigns

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Pc-driven ink plotter marker printing system

General Marking srl was recently incorporated and is a wholly-owned subsidiary of Cembre SpA. The com-pany is active in the sector of industrial marking, manu-facturing cable marking equipment and products for the marking of cables and electrical components. The company has its registered office in Brescia, has ope-rating facilities in Calcinate (Bergamo) and a catalogue of over 12,000 articles.

“Industrial Marking Systems”

Pc-driven ink plotter marker printing systemGe

neral M

arking

Gener

al Mark

ing

Manual cable marking systems

RINGcablesys

Gener

al Mark

ing

SIGNstick-onsys

Thermal transfer printer for identification and label-ling designed and manufac-tured by Cembre SpA.

Thermal transfer systemfor reel media printing

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C e m b r e S. p. A. Cembre SpA Cembre Group

CASH FLOW€ (millions)

STAFF(n°)

28,4

25,8

23,2

20,7

18,1

15,5

12,9

10,3

7,7

5,20

31,0

33,6

36,2

38,7

41,3

43,9

46,5

49,1

51,6

54,2

56,8

59,4

62,0

64,6

67,2

1983 1984 1985 2004 2005 2006 2007

69,8

72,4

88,0

90,6

93,2

95,8

98,4

75,0

77,6

80,2

82,8

85,4

Cembre SpA Cembre Group

1986 2003 2004

C e m b r e S. p. A. Cembre SpA Cembre Group

1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

5,2

4,1

3,1

2,1

1,0

0

6,2

7,2

11,4

14,5

15,5

12,4

13,4

8,3

1999 2000 2001 2002 2003

9,3

2004 2005 2006 2007

10,3

520

1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

100115130145160175190205220235250265280295310325340355370385

1999 2000

400415430445

460

490505

535

475

2001 2002 2003 2004 2005 2006 2007

C e m b r e S. p. A. Group

1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

TURN OVER € (millions)

4.6 5.8 7.1 8.8 10.9 11.4 14.4 16.4 18 18.5 18.4 20.5 26.7 28.7 33.5 37.8 45 50.4 56 56.9 59.9 65.3 70 83.9 93.4

EXPORT€ (millions)

1.5 1.7 2.2 2.1 2.3 2.9 3.7 4.4 5.8 5.9 6.2 7.2 9.3 9.4 14.7 17.3 20.8 24 27.9 29.4 30.1 34 38.8 46.8 54.1

% of turn over 32 28 30 23 20 24 25.7 26.8 32 32 33.7 34.8 35 32.7 44 45.6 46.2 47.7 49.8 51.7 50.3 52.1 55.4 55.8 58

CASH FLOW€ (millions)

0.6 0.8 1 1.4 1.8 1.7 2.2 2.4 2.6 2.3 2.5 2.8 4.5 4.1 5.8 5.5 7 7.5 7.9 7.2 7.5 8.6 10.3 12.5 15.2

STAFF(N°) 107 122 128 141 142 153 172 174 176 183 183 192 214 216 285 312 353 384 417 453 468 462 463 476 525

TURN OVER€ (millions)

Cembre has progressed and developed steadily with the dedication and respon-sible attitude of all the staff. We can look forward to the future with confidence and commitment.

Development

QUOTED ON THE ITALIAN STOCK EXCHANGE

Report on Operations for the financialyear ended December 31, 2007

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R E P O R T A N D A C C O U N T S 2 0 0 7 - R E P O R T O N O P E R A T I O N S

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

Operating Review

Despite an anomalous year for the market, registering a positive trend in the first half of the year while stagnating in the second half, the Cembre Group closed 2007 reporting good results, with consolidated sales growing by 11.4%, from €83.9 million in 2006 to €93.4 million in 2007.Its ability to exploit the good market trend in the first half of the year and the ongoing development of the product range and of process innovation, allowed the Cembre Group to strengthen its presen-ce in its key markets. Domestic sales amounted to €39.3 million, increasing by 5.9%, while exports amounted to €54.1 million, up 15.7% on the previous year. A total of 42% of Group sales in 2007 were represented by Italy (as compared with 44.2% in 2006), 46.4% by the rest of Europe (45.7% in 2006), and the remaining 11.6% by the rest of the World (10.1% in 2006).

Sales by geographical area:

(€’000) 2007 2006

Italy 39,286 37,098Rest of Europe 43,316 38,365Rest of the World 10,815 8,407

Total 93,417 83,870

Revenues by Group company (net of intragroup sales)

(€’000) 2007 2006

Parent company 51,817 46,661Cembre Ltd. (UK) 12,317 12,609Cembre S.a.r.l. (France) 6,303 5,325Cembre España S.L. 11,499 9,926Cembre GmbH (Germany) 4,839 4,503Cembre AS (Norway) 775 528Cembre Inc. (USA) 5,336 3,931General Marking srl (Italy) 531 387

Total 93,417 83,870

Figures for General Marking Srl include only sales to third parties managed directly by the subsidiary. Part of General Marking’s sales to other Group companies that distribute products in their respective markets are not attributed to General Marking in the table above. Such sales grew by 18.6% from €1,554

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thousand to €1,838 thousand.In 2007, Group companies reported the following results, before the consolidation:

Sales Net profit(€’000) 2007 2006 2007 2006

Parent company 73,623 65,471 8,987 6,665Cembre Ltd. (UK) 13,798 13,712 854 913Cembre S.a.r.l. (France) 6,361 5,349 495 281Cembre España S.L. 11,542 9,935 1,142 956Cembre AS (Norway) 780 529 117 43Cembre GmbH (Germany) 4,888 4,517 236 274Cembre Inc. (USA) 5,352 4,075 564 401General Marking srl (Italy) 2,369 1,941 593 45

For a more direct evaluation of the effect of foreign exchange translation, we include below sales figures of companies operating outside the euro area in the respective currency.

Currency Sales Net profit(’000) 2007 2006 2007 2006

Cembre Ltd. (UK) £ 9,442 9,348 584 622Cembre AS (NOR) NKR 6,256 4,253 940 344Cembre Inc (Usa) US$ 7,335 5,116 774 504

To provide a better understanding of the Company’s financial performance for 2007, a Reclassified Consolidated Income Statement for the year ended December 31, 2007 and 2006 is enclosed as At-tachment 1.Consolidated gross operating profit amounts to €21,710 thousand, representing a 23.2% margin on sales, up 13.5% on the previous year when it amounted to €19,131 thousand, representing a 22.8% margin on sales.The increase in the price of copper had a negative impact on profit margins, causing an increase in the cost of goods sold. The average number of employees of the Group grew from 489 in 2006, to 525 in 2007. Normative changes regarding employee termination indemnities generated a non-recurrent gain commented below.Consolidated operating profit for 2007 amounted to €18.420 thousand, representing a 19.7% margin on sales, up 15.6% on €15,941 thousand in 2006, when it represented a 19% margin on sales. Consolidated profit before taxes amounted to €18,118 thousand, representing a 19.4% margin on sales, up 14.1% on €15,861 thousand in 2006, when it represented an 18.9% margin on sales.The balance between interest income and charges is negative by €101 thousand, due to interest accrued on loans taken out and repaid in the year, and interest on current account overdrafts. Foreign-exchange differences were also negative, particularly those relating to the US dollar, resulting in a loss of €210 thousand.The net financial position declined from €1.1 million at December 31, 2006 to an indebtedness of €1.7

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million at the end of December 2007, due mainly to the growth of inventories from €26 million to €31.7 million, the payment of €3.7 million in dividends for the 2006 financial year (as compared with €2.5 million in the previous year). The net financial position was also affected by capital expenditure for the period, up from €5.4 million in 2006 to €6.9 million in 2007. Cash and cash equivalents grew instead from €4 million at the end of 2006, to €4.5 million at the end of 2007, thanks to the cash flow generated by operating activities, amounting to €6.7 million.Consolidated net profit for the year amounted to €11,896 thousand, representing a 12.7% margin on sales, up 27.5% on 2006, when it amounted to €9,327 thousand and represented an 11.1% margin on sales.

Non-recurring effect of changes in the accounting of employee termination indemnities

Consolidated results for 2007 were affected to a relevant degree by a non recurrent operation genera-ted by new norms regulating employee termination indemnities that came into effect January 1, 2007. The restatement of termination indemnities accrued at December 31, 2006 using different actuarial assumptions resulted in a reduction of €1,026 thousand in the value of the same (gross of the related tax effect of €339 thousand).

The above reduction was recorded in full in the income statement for 2007. Figures for 2007 and the related changes on the previous year, net of the effect of the mentioned event, are shown in the table below: 2007 % of sales 2006 % of sales Change(€’000) Restated Restated

Sales 93,417 100 83,870 100 11.4%Gross operating profit 20,684 22,1 19,131 22,8 8.1%Operating profit 17,394 18,6 15,941 19,0 9.1%Pre-tax profit 17,092 18,3 15,861 18,9 7.8%Net profit 11,209 12,0 9,327 11,1 20.2%

Results of the parent company

Results of the parent company for 2007 are shown in the table below.

2007 % of sales 2006 % of sales Change(€’000)

Sales 73,623 100 65,471 100 12.5%Gross operating profit 16,042 21,8 14,266 21,8 12.5%Operating profit 13,666 18,6 11,937 18,2 14.5%Pre-tax profit 13,900 18,9 11,920 18,2 16.6%Net profit 8,987 12,2 6,665 10,2 34.8%

23


Sales revenues grew by 12.5% from €65,471 thousand in 2006 to €73,623 thousand in 2007. Domestic sales grew by 5.8%, while sales in other European countries posted a 17.8% increase, and sales in the rest of the World grew by 32.8%.

Sales by geographical area (€’000) 31.12.2007 31.12.2006

Italy 39,296 37,152Rest of Europe 25,843 21,930Rest of the World 8,484 6,389

Total 73,623 65,471

In 2007 Cembre SpA received €461 thousand in dividends from UK subsidiary Cembre Ltd.The restatement of deferred tax assets and liabilities in line with reduced tax rates introduced by the 2008 Budget Law resulted in the recording of €582 thousand in prepaid tax assets.Net of the non-recurrent gain resulting from the restatement of employee termination indemnities accrued at December 31, 2006 commented above, results of Cembre SpA would have been as follows:

2007 % of sales 2006 % of sales Change(€’000) Restated Restated

Sales 73,623 100 65,471 100 12.5%Gross operating profit 15,016 20.4 14,266 21.8 5.3%Operating profit 12,640 17.2 11,937 18.2 5.9%Pre-tax profit 12,874 17.5 11,920 18.2 8.0%Net profit 8,300 11.3 6,665 10.2 24.5%

Definition of alternative performance indicators

In compliance with Consob Communication DEM/6064293 dated July 28, 2007, below we define al-ternative performance indicators used in the present document to illustrate the financial and operating performance of the Group.Gross operating profit (EBITDA): defined as the difference between sales revenues and costs for mate-rials, of services received, and the net balance of operating income and charges. It represents the profit before depreciation, amortization and write-downs, financial flows and taxes.Operating profit (EBIT): defined as the difference between Gross operating profit and the value of depreciation, amortization and write-downs. It represents the profit achieved before financial flows and taxes.Net financial position: represents the algebraic sum of cash and cash equivalents, financial receivables and current and non-current financial debt.

24


Shareholders’ Equity

Consolidation adjustments determined the following differences between the Financial Statements of the parent company at December 31, 2007 and the consolidated accounts at the same date:

(€’000) Shareholders’ Equity Net profit

Parent company’s statutory accounts 56,820 8,987

German subsidiary product warranty provision reversal (*) 17 2 Elimination of the write-down in the value of the equity investment in subsidiary General Marking S.r.l. 432 - Release of General Marking S.r.l. losses reserve 58 -Book value of consolidated companies 11,963 4,002 Elimination of intra-group profits included in the value of inventories (*) (2,576) (651)Currency translation differences on elimination of intra-group payables and receivables (2) (15)Elimination of dividends - (429)

Consolidated Financial Statements 66,712 11,896

(*) Net of the related tax effect

The Company’s activity is not affected by cyclical or seasonal factors.

Capital expenditure

In 2007, capital expenditure on property, plant and equipment, gross of depreciation and disposals, amounted to €6.9 million, as compared with €5.4 million in 2006. In addition to the normal turnover and upgrade of plant and equipment used in the production process, other relevant investments were made in 2007, among which a new building in Munich to host the offices of the German subsidiary for €2.6 million, and the migration to a new information system of the parent company, still underway, that involved the purchase of software (€0.5 million) and of hardware (€0.2 million).

Revaluation of property, plant and equipment

In compliance with article 10 of Law 72/1983, a list of property, plant and equipment recorded in the Balance Sheet at December 31, 2007 and revalued in the year is provided below:

(€) Law Law Law Total 576/75 72/83 413/91

Land and buildings - 248,220 687,441 935,661

Plant and machinery 2,386 123,748 - 126,134

Other assets 303 7,664 - 7,967

2,689 379,632 687,441 1,069,762

25


Research & Development

In 2007 Research and Development activities focused in the field of cable terminals, railroad equip-ment, hydraulic tools, and cable marking. Research costs were not capitalized, while, in compliance with IAS 38, development costs were instead capitalized. An integrated data management system was designed for future implementation. The development of the new information system resulted in personnel costs amounting to €44 thousand and external consulting costs of €250 thousand. External consulting costs were capitalized.Research and Development activities and projects launched or underway consisted in the widening of the product range included in the catalogue with the introduction of new innovative products previously not available on the market, the improvement of technologies and the efficiency of the production process, and the enhancement of the company’s presence in foreign markets.Research activities and projects launched or carried out in the year consisted in:

- the continuation and completion of projects started in the previous year; - the launch of new projects for the development of innovative products in line with market trends; - the development of innovative processes.

In 2007, research costs included €368 thousand of personnel costs, expensed in the income state-ment. Development costs in the year included €57 thousand of personnel costs, capitalized among intangible assets.Costs relating to technical advice and the acquisition of know-how amounted to €15 thousand.A description of Research and Development activities by sector is included in the section that follows.

Research projects in the field of cable terminals

Work continued on the study and development of new cable terminals and joints, in addition to the development and optimization of cable terminals from pipe.

Railroad Equipment Research projects

A number of projects in this field were launched or developed further, while projects underway include an electrically powered version of a wooden sleeper maintenance tool, a range of products for the mechanical and electrical connection to rail tracks and a control station for rail track maintenance.

Hydraulic Tools research projects

The following studies were undertaken in 2007:- new battery-operated tools for the compression of connectors that may be used for different types of dies specific for the US market;- two cable cutting hydraulic tools;- three battery-operated cable cutting tools;- a battery-operated hydraulic station;- a new small-size battery-operated hydraulic tool;- a small-size battery-operated hydraulic tool with a 3.5 ton head.

26


Cable marking research projects

The development of the following products continued:- a system for the labeling of pole terminal blocks consisting of labels and related supports;- a new series of flat labels;- a new series of cards for plotters.

Related parties

Transactions concluded between Cembre S.p.A. and its subsidiaries in 2007 were exclusively of a commercial nature and are summarized in the table below:

() Receivables Payables Revenues Purchases

Cembre Ltd. 2,226,283 26,447 6,202,481 201,282

Cembre S.a.r.l. 750,713 253 2,993,500 42,624

Cembre España S.L. 2,271,666 39,885 5,852,350 263

Cembre AS 124,051 6,106 369,443 -

Cembre GmbH 1,125,302 3,435 2,795,919 34,161

Cembre Inc. 1,024,716 - 3,391,122 889

General Marking srl 15,442 373,141 259,430 1,833,362

TOTAL 7,538,172 449,267 21,864,245 2,112,580

Commitments of Cembre S.p.A. at the end of the year include a letter of patronage issued in favor of subsidiary General Marking S.r.l. against contractual obligations, amounting to €500 thousand, and a similar letter in favor of German subsidiary Cembre GmbH for €2.5 million. In 2008 the guarantee in favor of General Marking S.r.l. was increased to €2 million.Cembre SpA leased an industrial building to subsidiary General Marking S.r.l.. In 2007 rent for the building amounted to €96 thousand. Cembre SpA also currently leases property for a cumulative annual rent of €494 thousand from Tha Immobiliare SpA, with registered office in Brescia, owned by Anna Maria Onofri, Giovanni Rosani and Sara Rosani.Further detail of these transactions is provided in the notes.With reference to assets and liabilities relating to subsidiaries shown above, we confirm that transac-tions with the same and with related parties fall within the scope of normal operating activities.The €2 million one-year loan extended by Cembre SpA to subsidiary General Marking S.r.l. and expiring January 27, 2007, was renewed for one year at a fixed interest of 3%. At December 31, 2007, interest accrued on the loan amounted to €56 thousand. Upon expiration on January 25, 2008, interest was paid out and the loan was repaid.

Absence of control and coordination

Despite the fact that article 2497-sexies of the Italian Civil Code states that “it is presumed that,

27


unless otherwise proved, the direction and coordination activities of companies is exercised by the company or entity that is required to consolidate the same in its accounts or that, in any case, controls the former company pursuant to article 2359 (of the Italian Civil Code)”, Cembre S.p.A. believes to be operating in full autonomy from its parent Lysne S.p.A.. In particular, as a non-exhaustive example, the Company manages autonomously its own treasury and relationships with its customers and suppliers, and does not make use of any service provided by its parent company.Cembre S.p.A.’s relationships with its parent company Lysne S.p.A. is limited to the normal exer-cise of shareholders’ rights on the part of the parent.

Own shares and shares of parent companies

In 2007, the Cembre Group did not acquire or shell any of its own shares, nor did it own, either directly or through any of its subsidiaries, trust companies or intermediaries, any of its own shares or any of its parent company’s shares.

Ownership Structure and Corporate Governance

In compliance with norms contained in article 123-bis of Legislative Decree 58, dated February 24, 1998 (Testo Unico tax law), we refer to the Report on Corporate Governance which, in addition to providing a general description of corporate governance, contains information regarding the ownership structure of the Company, the adoption of the Code of Conduct and the observance of the resulting commitments. Said Report is available in the Investor Relations section of the Group’s Internet site (www.cembre.it).

Risk management and financial instruments

For information on risk management and financial instruments we refer to the related section in the notes.

Handling of personal information

Cembre S.p.A. (responsible for the handling of personal information) drafted a Privacy Plan throu-gh its Director for the Handling of Private Information.

Subsequent events

No event having significant effects on Cembre’s financial or operating performance occurred after the closing of the financial year.

Outlook

The outlook for 2008, confirmed by the good performance of sales in the first months of the year, is positive, and we expect a growth in activity on 2007 and the maintenance of good profit levels.

Proposal for the Allocation of the Company’s Net Profit

In order to complete the Company’s planned investments and benefit from self-financed growth, it is advisable that at least a portion of net profit generated be retained. In seeking the approval for our

28


actions by submitting to you the present Financial Statements and Report on Operations, we also invite you to approve our proposed allocation of net profit for 2007, amounting to €8,987,113.37 (rounded off to €8,987,113) as follows:

- €0.26 to be distributed to each of the Company’s 17,000,000 shares entitled to dividends, for a total of €4,420,000, payable from May 22, 2008, and an ex-dividend date of May 19, 2008;

- the remainder, amounting to €4,567,113.37, to the extraordinary reserve.

At December 31, 2007, there do not exist foreign-exchange conversion profits.

Attachments

This Report on Operations includes the following Attachments:Attachment 1 Reclassified Income Statement of Cembre S.p.A. for the year ended December 31, 2007;Attachment 2 Company shares held by Board Members and Statutory Auditors. Attachment 3 Company Boards.

Brescia, March 25, 2008

THE CHAIRMAN OF THE BOARD OF DIRECTORS OF PARENT COMPANY CEMBRE S.P.A.

CARLO ROSANI

29


Attachment 1 – Report on Operations 2007 CONSOLIDATED INCOME STATEMENT

(€ '000) 2007 % 2006 % change

Revenues from sales and services provided 93,417 100 83,870 100 11.4%

Other revenues 821 345

TOTAL REVENUES 94,238 84,215

Cost of goods and marchandise (39,955) (42.8) (35,818) (42.7) 11.6%

Cost of services received (13,645) (14.6) (12,191) (14.5) 11.9%

Lease and rental costs (1,084) (1.2) (1,047) (1.2) 3.5%

Personnel costs (24,975) (26.7) (22,498) (26.8) 11.0%

Non-recurrent operations 1,026 1.1 - 0.0

Other operating costs (471) (0.5) (404) (0.5) 16.6%

Change in inventories 6,176 6.6 6,399 7.6 -3.5%

Increase in assets due to internal construction 555 0.6 607 0.7 -8.6%

Write-down of receivables (145) (0.2) (124) (0.1) 16.9%

Accruals to provisions for risks and charges (10) (0.0) (8) (0.0) 25.0%

GROSS OPERATING PROFIT 21,710 23.2 19,131 22.8 13.5%

Tangible assets depreciation (3,113) (3.3) (3,092) (3.7) 0.7%

Intangible assets amortization (177) (0.2) (98) (0.1) 80.6%

OPERATING PROFIT 18,420 19.7 15,941 19.0 15.6%

Financial income (expense) (101) (0.1) (6) (0.0)

Foreign exchange gains (losses) (201) (0.2) (74) (0.1) 171.6%

PROFIT BEFORE TAXES 18,118 19.4 15,861 18.9 14.2%

Income taxes (5,883) (6.3) (6,534) (7.8) -10.0%

Deferred taxes on non-recurrent operations (339) (0.4) - 0.0

NET PROFIT FROM ORDINARY ACTIVITIES 11,896 12.7 9,327 11.1 27.5%

NET PROFIT FROM ASSETS HELD FOR DISPOSAL - -

NET PROFIT 11,896 12.7 9,327 11.1 27.5%

30


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31


Attachment 3 – Report on Operations 2007 CORPORATE BOARDS

Board of Directors

Chairman and Managing Director Carlo Rosani

Vice Chairman and Managing Director Anna Maria Onofri

Managing Director Giovanni Rosani

Director Sara RosaniDirector Giovanni De VecchiDirector Aldo Bottini BongraniIndependent Director Mario ComanaIndependent Director Paolo Lechi di Bagnolo

Secretary

Giorgio Rota

Board of Statutory Auditors

Chairman Guido Astori

Permanent Auditor Leone ScuttiPermanent Auditor Andrea Boreatti

Substitute Auditor Maria Grazia LizziniSubstitute Auditor Giorgio Astori

Independent Auditors

Reconta Ernst & Young

The above list is updated at March 25, 2008.

The Board of Directors and Board of Statutory Auditor’s term expires with the approval of the Financial Statements at December 31, 2008.The Chairman and Managing Director Carlo Rosani holds by statute (article 18) powers of legal re-presentation of the Company. The Board of Directors conferred to the Chairman all the ordinary ma-nagement powers not specifically reserved to it by law. The Board of Directors conferred to Managing Director Giovanni Rosani all the ordinary management powers not specifically reserved to it by law and exclusive powers over the organization, management and monitoring of the internal control system.In case of absence or impediment of the Chairman and of Managing Director Carlo Rosani, Vice Chai-rman and Managing Director Anna Maria Onofri holds all ordinary management powers not reserved to the Board by law, with the exception of the appointment of professionals. All Managing Directors must keep the Board of Directors informed of all relevant transactions concluded in the context of their mandate. The Board of Directors has approved rules that define which particularly relevant transactions may be concluded exclusively by the same.

Consolidated Financial Statementsat December 31, 2007

34

R E P O R T A N D A C C O U N T S 2 0 0 7 - C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S

Consolidated Balance Sheet

(euro '000) Notes Dec. 31, 2007 Dec. 31, 2006

ASSETSof which: related parties

of which: related parties

A) NON-CURRENT ASSETS

Tangible assets 1 32,349 30,528

Intangible assets 2 466 143

Financial assets available for sale 5 5

Other non-current assets 3 77 92

Deferred tax assets 12 1,886 1,807

TOTAL NON-CURRENT ASSETS 34,783 32,575

B) CURRENT ASSETS

Inventories 4 31,725 26,047

Trade receivables 5 26,355 26,504

Tax receivables 6 1 7

Other receivables 7 317 459

Cash and cash equivalents 4,549 3,964

TOTAL CURRENT ASSETS 62,947 56,981

C) NON-CURRENT ASSETS AVAILABLE FOR SALE - -

TOTAL ASSETS(A+B+C) 97,730 89,556

LIABILITIES AND SHAREHOLDERS’ EQUITY

A) SHAREHOLDERS’ EQUITY

Capital stock 8 8,840 8,840

Reserves 8 45,976 41,268

Net profi t 8 11,896 9,327

TOTAL SHAREHOLDERS’ EQUITY 66,712 59,435

B) NON-CURRENT LIABILITIES

Non-current fi nancial liabilities 9 86 71

Employee Severance Indemnity and other personnel benefi ts 10 3,352 143 4,658 133

Provisions for risks and charges 11 295 288

Deferred tax liabilities 12 3,653 4,230

TOTAL NON-CURRENT LIABILITIES 7,386 9,247

C) CURRENT LIABILITIES

Current fi nancial liabilities 9 6,183 2,822

Trade payables 13 11,013 11,464

Tax payables 14 1,033 1,816

Other payables 15 5,403 4,772

TOTAL CURRENT LIABILITIES 23,632 20,874

D) LIABILITIES ON ASSETS HELD FOR DISPOSAL - -

TOTAL LIABILITIES (B+C+D) 31,018 30,121

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY (A+B+C+D) 97,730 89,556

35


Consolidated Income Statement

(euro '000) Notes Dec. 31, 2007 Dec. 31, 2006of which: related parties


Revenues from sales and services provided 16 93,417 83,870

Other revenues 17 821 345

TOTAL REVENUES 94,238 84,215

Cost of goods and merchandise (39,955) (35,818)

Cost of services received 18 (13,645) (723) (12,177) (623)

Lease and rental costs 19 (1,084) (494) (1,047) (483)

Personnel costs 20 (24,975) (185) (22,512) (206)

Non recurring operations 21 1,026 -

Other operating costs 22 (471) (404)

Change in inventories 6,176 6,399

Increase in assets due to internal construction 555 607

Write-down of receivables (145) (124)

Accruals to provisions for risks and charges (10) (8)

GROSS OPERATING PROFIT 21,710 19,131

Property, plant and equipment depreciation (3,113) (3,092)

Intangible asset amortization (177) (98)

OPERATING PROFIT 18,420 15,941

Financial income (expense) 23 (101) (6)

Foreign exchange gains (losses) (201) (74)

PROFIT BEFORE TAXES 18,118 15,861

Income taxes 24 (5,883) (6,534)

Deferred taxes from non recurring operations 24 (339) -

NET PROFIT FROM ORDINARY ACTIVITIES 11,896 9,327


NET PROFIT 11,896 9,327

BASIC EARNINGS PER SHARE 25 0.70 0.55

36


Consolidated Statement of Cash Flows(euro '000) Dec. 31, 2007 Dec. 31, 2006

A) CASH FLOW FROM OPERATING ACTIVITIES

Net profi t for the period 11,896 9,327

Depreciation, amortization and write-downs 3,290 3,190

(Gains)/Losses on disposal of assets (399) (33)

Net change in Employee Termination Indemnity (1,306) 180

Net change in provisions for risks and charges 7 (7)

Operating profi t (loss) before changes in working capital 13,488 12,657

(Increase) Decrease in trade receivables 149 (4,828)

(Increase) Decrease in inventories (5,678) (6,300)

(Increase) Decrease in other receivables and deferred tax assets 69 (475)

Increase (Decrease) of trade payables (579) 4,410

Increase (Decrease) of other payables and deferred tax liabilities (729) 828

Change in working capital (6,768) (6,365)

NET CASH FLOW (USED IN)/FROM OPERATING ACTIVITIES 6,720 6,292

B) CASH FLOW FROM INVESTING ACTIVITIES

Capital expenditure on fi xed assets:

- intangible (500) (87)

- tangible (6,404) (5,353)

Proceeds from disposal of tangible, intangible, available-for-sale fi nancial assets

- tangible 1,869 (30)

Increase (Decrease) of trade payables for assets 128 38

NET CASH FLOW (USED IN)/FROM INVESTING ACTIVITIES (4,907) (5,432)

C) CASH FLOW FROM FINANCING ACTIVITIES

(Increase) Decrease in other non current assets 15 8

Increase (Decrease) in bank loans and borrowings 3,356 (314)

Increase (Decrease) in other loans and borrowings 20 (21)

Increase (Decrease) in derivative instruments - (21)

Change in reserves (879) (24)

Dividends distributed (3,740) (2,550)

NET CASH FLOW (USED IN)/FROM FINANCING ACTIVITIES (1,228) (2,922)

D) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (A+B+C) 585 (2,062)

E) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,964 6,026

F) CASH AND CASH EQUIVALENTS AT END OF PERIOD (D+E) 4,549 3,964

37


CASH AND CASH EQUIVALENTS AT END OF PERIOD 4,549 3,964

Current fi nancial liabilities (6,183) (2,822)

Non current fi nancial liabilities (86) (71)

NET CONSOLIDATED FINANCIAL POSITION (1,720) 1,071

INTERESTS PAID IN THE YEAR (209) (76)

BREAKDOWN OF CASH AND CASH EQUIVALENTS AT END OF PERIOD

Cash 19 18

Banks 4,530 3,946

4,549 3,964

38


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39


Notes to the Consolidated Financial Statements

I. CORPORATE INFORMATION

Cembre S.p.A. is a joint-stock company with registered offi ce in Brescia, Via Serenissima 9.Cembre S.p.A. and its subsidiaries (hereinafter referred to jointly as “the Cembre Group” or “the Group”) are active primarily in the manufacturing and sale of electrical connectors and related tools.The publication of the Consolidated Financial Statements of Cembre S.p.A. for the year ended December 31, 2007 was authorized by a resolution of the Board of Directors dated March 25, 2008.Cembre S.p.A. is controlled by Lysne S.p.A., a holding company based in Brescia, that does not direct or coordinate its subsidiary.

II. FORM AND CONTENT OF THE FINANCIAL STATEMENTS

The present Consolidated Financial Statements at December 31, 2007 were prepared under the In-ternational Financial Reporting Standards (IFRS) adopted by the European Union and the related implementation regulations issued in application of article 9 of Legislative Decree no. 38/2005.Principles adopted in the preparation of the Consolidated Financial Statements are those formally approved by the European Union as at December 31, 2007.The table that follows contains a list of international accounting principles and interpretations ap-proved by the IASB that became effective starting in 2007, which were taken into account, where applicable, in the preparation of the present Consolidated Financial Statements.

Effective

IFRS 7: Financial Instruments: Disclosures Jan. 1, 2007

IFRIC 8: Scope of application of IFRS 2 Jan. 1, 2007

IFRIC 9: Subsequent valuation of implicit derivatives Jan. 1, 2007

IFRIC 10: Interim reports and durable loss in value Jan. 1, 2007

Items in the Consolidated Balance Sheet were recorded at the historical cost. Unless otherwise indicated, fi gures reported in the fi nancial statements and the related notes are expressed in thousands of euro.

Future changes in accounting principles

Starting with the 2008 fi nancial year, the following accounting principles will become effective:

IFRS 2 Share based compensation – Exercise terms and cancellations This change in IFRS 2 – Share based compensation was published in 2008 and will come into effect on the fi rst fi nancial year subsequent to January 1, 2009. The principle restricts the defi nition of “exercise terms” to a condition that includes an explicit or implicit obligation to provide a service. Any other condition is considered a “non-vesting condition” and must be taken into account to determine the fair value of the instrument representing the capital assigned. In case the prize does not mature as a consequence of the fact that it does not satisfy a “non-vesting condition” that falls under the control of the entity or counterparty, this must be accounted for as a cancellation. The Group has not granted share-based benefi ts subject to “non-vesting conditions” and as a consequence does not expect material effects in the recording of share-based compensation plans.

40


IFRS 3R Business combinations and IAS 27/R Consolidated and statutory accountsThe two revised accounting principles were approved in January 2008 and will come into effect on the fi rst fi nancial year subsequent to July 1, 2009. IFRS 3R introduces certain changes in the accounting of business combinations that will have an effect on the amount of goodwill recorded on the profi t for the year in which the acquisition takes place and on profi ts for subsequent years. IAS 27R requires that an adjustment to the ownership share held in a subsidiary be recorded as an equity transaction. As a result, such change has no impact on goodwill and does not generate either gains or losses. Revised principles also introduce changes in the accounting of losses reported by subsidiaries as well as in the case of the loss of control in a subsidiary. Changes introduced by principles IFRS 3R and IAS 27R must be applied prospectively and will have an impact on future acquisitions and transactions with minority shareholders.

IAS 1 Revised – Presentation of fi nancial statementsPrinciple IAS 1 Revised – Presentation of fi nancial statements was approved in September 2007 and will come into effect on the fi rst fi nancial year subsequent to January 1, 2009. The principle separates changes in the Shareholders’ Equity between shareholders and non-shareholders. The Statement of Changes in the Shareholders’ Equity will include only the detail of transactions affecting shareholders, while all other changes relating to transactions with non-shareholders will be reported under a single caption. The principle introduces also a “comprehensive income” table that contains all revenue and cost items for the period that are recorded in the income statement, in addition to all other revenue and cost items recorded. The “comprehensive income” table can be reported a single table or two related tables. The Group is still reviewing the possibility of reporting one or two tables.

Changes to IAS 32 and IAS 1 Financial instruments “held for sale”Changes to IAS 32 and IAS 1 were approved in February 2008 and will come into effect in the fi rst fi nancial year subsequent to January 1, 2009. The revision of IAS 32 requires the classifi cation of certain fi nancial instruments “held for sale” and of certain bonds as equity instruments, in case certain conditions apply. The revision of IAS 1 requires that the notes to the accounts include certain information relating to options “held for sale” classifi ed as equity. The Group does not expect such changes to have a material effect on its consolidated fi nancial statements.

Principles of consolidation

The Consolidated Financial Statements of the Cembre Group include the statutory accounts at December 31, 2007 of Cembre SpA and of its subsidiaries. Accounting principles adopted in the preparation of the fi nancial statements of subsidiaries are consistent with those of the parent company.In the consolidated fi nancial statements, assets, liabilities, costs and revenues of consolidated companies are consolidated line-by-line. The book value of investments in subsidiaries is netted against the respective share in the Shareholders’ Equity held, inclusive of adjustments to the fair value of the related assets and liabilities at the date of their acquisition. The residual difference is attributed to goodwill.

The following companies were consolidated at December 31, 2007:

41


% held

1. Cembre Ltd (UK) 100% 2. Cembre Sarl *(France) 100% 3. Cembre España SL *(Spain) 100% 4. Cembre AS (Norway) 100% 5. Cembre Gmbh*(Germany) 100% 6. Cembre Inc**(US) 100% 7. General Marking Srl (Italy) 100% * 5% share held through Cembre Ltd**29% share held through Cembre Ltd

The consolidation area is unchanged with respect December 31, 2006.

III. CONSOLIDATION PRINCIPLES AND VALUATION CRITERIA

Form of the fi nancial statements

The fi nancial statements are prepared as follows:- current and non-current assets and liabilities are reported separately in the balance sheet;- the analysis of costs in the income statement is carried out based on the nature of the same;- the statement of cash fl ows is prepared by applying the indirect method.Finally, with reference to Consob Regulation no. 15519 dated July 27, 2006, the Financial Statements include a separate reporting of amounts pertaining to related parties, where signifi cant.

Consolidation principles

The Consolidated Financial Statements of the Cembre Group include the statutory accounts of Cembre SpA and those of its subsidiaries. The fi nancial statements of consolidated subsidiaries are consolidated under the line-by-line method, thus including all items, irrespective of the share held by the Group, of the elimination of intragroup transactions and of unrealized gains on transactions with third parties.The book value of investments was netted against the related share in the shareholders’ equity of consolidated companies, attributing to assets and liabilities the respective current value at the time control was acquired and recording contingent liabilities, where appropriate. Where positive, the residual amount was recorded among non-current assets as goodwill. Negative residual differences were recorded in the income statement.All subsidiaries are wholly-owned and in no case therefore have minority interests been recorded.

Translation of fi nancial statements expressed in currencies other than the euroTranslation of fi nancial statements expressed in currencies other than the euroThe functional and reporting currency of the Group is the euro.Financial statements denominated in functional currencies other than the euro are translated accor-ding to the following criteria:- assets and liabilities are translated at the exchange rate applicable at the date of the financial sta-

tements;- income statement items are translated at the average exchange rate for the year;- foreign-exchange translation differences are recorded in a specific Shareholders’ Equity reserve.

42


At the time at which a foreign subsidiary is disposed of, accumulated foreign-exchange differences recorded under Shareholders’ Equity relating to the same are taken to the Income Statement.Exchange rates applied in the translation of financial statements of subsidiaries are shown in the table below.

Currency Exchange rate at Dec. 31, 2007 Average exchange rate for 2007

British pound (€/£) 0.7334 0.6843

US dollar (€/$) 1.4721 1.3705

Norway kroner (€/NOK) 7.9580 8.0165

Property, plant and equipment

Property, plant and equipment is recorded at the historical cost and reported net of accumulated depreciation and losses in value.Ordinary maintenance and repair costs are not capitalized, and are charged to the income statement in the year in which they are incurred.Depreciation commences when the asset is available for use and is calculated on a straight line basis over the estimated residual useful life of the asset, taking into account its residual value. Depreciation rates applied refl ect the useful life generally attributed to the various classes of assets and are unchanged from the previous year. These are:

- Buildings and light installations: 2% – 10%- Plant and machinery: 5% – 25%- Industrial and commercial equipment: 6% – 25%- Other assets: 6% – 33%.

Land has an undetermined useful life and is therefore not subject to depreciation.The book value of property, plant and equipment is subjected to an impairment test whenever events or changes occurred indicate that the book value of the same can no longer be retrieved in line with the depreciation schedule originally set. Whenever there exists such an indication, the assets or cash generating units are written down to refl ect their expected realizable value.The residual value of assets, their useful life and methods applied are reviewed annually and adjusted, where necessary, at the end of each year.Tangible assets are eliminated from the Balance Sheet at the time of their sale or when there no longer exists the expectation of future economic benefi ts from its use or disposal. Losses and gains (calculated as the difference between net revenues from the disposal and the book value of the asset) are recorded in the Income Statement in the year in which they are disposed of.

Leased assets

Assets held under a fi nancial lease, through which all risks and benefi ts relating to ownership are transferred to the Group, are recorded under assets at the lower of their current value and the present value of minimum lease payments due according to the contract, including the bullet payment due at the end of the lease to exercise the repurchase option.The liability corresponding to the lease contract is recorded under fi nancial liabilities.Leased asset are classifi ed under the respective category among property, plant and equipment, and depreciated over the shorter period between the term of the lease and the expected residual useful life of the asset.

43


Lease contracts in which the lessor holds all risks and enjoys all benefi ts deriving from the leased asset are classifi ed as operating leases and recorded as costs in the Income Statement over the term of the contract.

Intangible assets

Intangible assets are recorded under assets, as provided by IAS 38 (Intangible assets), whenever it is probable that future economic benefi ts are generated through use and when the cost of the intangible asset can be determined in a reliable manner.Intangible assets acquired separately are initially capitalized at cost, while those acquired through mergers are capitalized at their fair value at the time of acquisition.With the exception of development costs, assets generated internally cannot be recorded as intangible assets.After the initial recording, intangible assets are carried in the balance sheet at cost, net of accumulated amortization calculated on a straight-line basis over their expected useful economic life, and of write-downs carried out as a result of durable losses in value. Intangible assets having an indefi nite useful life are not amortized and subjected periodically to an impairment test to assess possible loss in value.

The useful life generally attributed to the various classes of assets is the following:

- concessions and licenses: 5 to 10 years- software licenses 3 years- development costs: 5 years- trademarks: 10 to 20 years

Amortization commences when the asset is available for use, that is, when it is in a position and in the necessary condition to operate in the manner intended by management.The book value of intangible assets is subjected to an impairment test whenever events or changes occurred indicate that the book value of the same can no longer be retrieved in line with the amortization schedule originally set. Whenever there exists such an indication and the book value of the asset exceeds its realizable value, the value of the asset is written-down to its expected realizable value.

Financial assets

Financial assets are initially recorded at cost, inclusive of accessory purchase costs, representing the fair value of the price paid. After the initial recording, fi nancial assets are valued in accordance with their fi nal purpose as described below.

Financial assets valued at fair value, whose change is recorded in the Income StatementFinancial assets valued at fair value, whose change is recorded in the Income Statement

These are fi nancial assets held for trading purposes, acquired for the purpose of obtaining a profi t from short-term fl uctuations in price. Unless specifi cally designated as effective hedging instruments, derivatives are classifi ed as fi nancial assets held for trading purposes. Gains and losses on fi nancial assets held for trading purposes are recorded in the income statement.

Financial assets held to maturity

Financial assets other than derivatives that generate fi xed fi nancial fl ows or fl ows that may be determined and have a set maturity, are classifi ed as Financial assets held to maturity when the

44


Group intends to and is capable of holding them to maturity.Financial assets that the Group decides to hold for an indefi nite period of time do not fall under this category.After their initial recording, long-term fi nancial investments held to maturity, such as bonds, are accounted for at the amortized cost, using the effective rate of interest method, are discounted to their present value.The amortized cost is calculated keeping into account discounts and premiums, amortized over the term of the fi nancial asset.

Loans extended and receivables

Loans and receivables are non-derivative financial assets providing for fixed payments or payments that may be determined, not listed on an active market. Such assets are recorded at the amortized cost using the actual discount rate method. Gains and losses are recorded in the Income Statement whenever loans extended and receivables are eliminated from the accounts or they experience losses in value, in addition to the amortization process.

Financial assets available for sale

Financial assets available for sale include fi nancial assets that do not fall under the above categories. After the initial recording, these are accounted for at fair value, while gains and losses are recorded under a specifi c Shareholders’ Equity reserve until the assets are sold or a loss in value is ascertained. In such case, gains and losses accrued are charged to the income statement.In the case of securities widely traded on a regulated market, the fair value is determined with reference to the listed price at the closing of trading on the date of the fi nancial statements. In the case of fi nancial assets for which there does not exist an active market, the fair value is determined through valuation techniques based on the price recorded in recent transactions between unrelated parties or on the basis of the current market value of a similar instrument, or on discounted cash fl ows or option pricing models. Investments in other companies fall in this category.

Loss in value of fi nancial assetsLoss in value of fi nancial assets

The Group verifi es at least yearly the possible loss in value of individual fi nancial assets. These are recorded only at the time when there exists objective evidence, at the occurrence of one or more events, that the asset has experienced a loss of value with respect to its initial recorded value.

Own shares

Own shares are recorded as a reduction of Shareholders’ Equity in a specifi c reserve.The purchase, sale, issue or cancellation of own shares held does not determine the recording of any gain or loss in the Income Statement.

InventoriesInventories are valued at the lower of cost and their expected realizable value, represented by their normal sale price, net of completion and selling costs.The cost of inventories includes the acquisition cost, the transformation cost and other costs incurred to take inventories to their current location and state.The cost of inventories is determined under the weighted-average method, inclusive of the cost of beginning inventories.

45


Provisions for slow-moving stock are accrued for fi nished products, materials and other supplies, keeping into account their expected useful life and retrievable value.

Payables and receivables

Receivables are recorded initially at fair value and subsequently carried at the amortized cost, written-down in case of loss in value. Payables are normally valued at the amortized cost, adjusted under exceptional conditions for changes in value.

Cash and cash equivalents

Cash and cash equivalents are recorded at face value.

Loans

Loans are initially recorded at cost, corresponding to the fair value of the amount received, net of accessory costs.After the initial recording, loans are valued at the amortized cost, using the effective interest method.

Translation of amounts denominated in currencies other than the euro

Transactions denominated in currencies other than the euro are initially accounted for in euro at the exchange rate at the date of the transaction. Currency translation differences arising at the time at which foreign currency receivables are collected and payables are paid out, are recorded in the income statement.At the date of the fi nancial statements, monetary assets and liabilities denominated in currencies other than the euro – consisting of cash on hand or assets and liabilities to be received or paid out, whose amount is set and may be determined – are translated into euro at the exchange rate at the date of the fi nancial statements, recording in the income statement the currency translation difference.Non-monetary items denominated in currencies other than the euro are translated into euro at the exchange rate at the time of the transaction, representing the historical exchange rate.Functional currencies adopted by Group companies correspond to the currencies of the respective county in which subsidiaries are based.

Provisions for risks and charges

Provisions for risks and charges are accrued against known liabilities whose amount and expiration cannot however be determined at the date of the financial statements. Accruals are made when the existence of a current obligation, legal or implicit, deriving from a past event, the fulfillment of which is expected to require the use of resources whose amount can be re-liably estimated, is probable.Provisions are valued at the fair value of liabilities. When the financial effect and the timing of the cash outflow can be estimated in a reliable manner, provisions include the interest component, recorded in the Income Statement among financial inco-me (expense). Provisions accrued are reviewed at each accounting date and adjusted to bring them into line with the best estimate available at that date.

46


Employee benefi ts

Under IAS 19, and before the reform introduced by the 2007 Budget Law, the Employee Severance Indemnity was classifi ed among defi ned benefi t plans and was therefore subject to actuarial adjustments. After the reform, the provisions of which were adopted by the Group from the 2007 Half-year Report, employee termination indemnities accrued up to December 31, 2006, continue to be accounted for as defi ned benefi t plans, while those accrued from January 1, 2007 are accounted for in two different ways:

- where the individual employee has opted for complementary pension funds, employee termination indemnities accrued after January 1, 2007 and until the time at which the choice is made by the employee, are accounted for as a defi ned benefi t plan. Subsequently they are accounted for as a defi ned contribution plan;

- where the individual employee has opted for accumulation with the treasury fund of the national social security agency (INPS), indemnities accrued after January 1, 2007 are accounted for as a defi ned contribution plan.

Elimination of fi nancial assets and liabilities

Financial assets are eliminated when the Group ceases to hold rights to receive fi nancial fl ows deriving from the same or when such rights are transferred to another entity, that is when risks and benefi ts of the fi nancial instrument cease to have an effect on the fi nancial position and operating performance of the Group.A fi nancial liability is written-off exclusively when the related obligation is cancelled, fulfi lled or expired. Any material change in the contractual terms relating to the liability result in its cancellation and in the recording of a new liability. Any difference between the book value and the amount paid to extinguish the liability is recorded in the Income Statement.

Revenues

Revenues are valued at the current value of the amount received or receivable

Disposal of assetsDisposal of assetsThe revenue is recognized when the Company has transferred the risks and benefi ts connected with the ownership of the good, and ceases to exercise the activity associated with ownership and the actual control over the asset sold.

Services renderedRevenues are recorded based on the stage of completion of the operation at the date of the fi nancial statements. When the result of the service rendered cannot be reliably estimated, revenues are recorded only to the extent of retrievable costs.The stage of completion is determined by valuing work carried out or by determining the proportion between costs incurred and total estimated costs to completion.

InterestInterest is recorded in the period in which it accrues, using the effective interest method.

DividendsDividends are recorded when the right of shareholders to receive them arises.

Grants Grants are recorded when there exists a reasonable certainty that that the same will actually be received and the company meets the conditions for the entitlement to the grant.

47


Grants linked to cost components (operating grants) are recorded under “other revenues” and amortized over several years so that revenues match the costs they are intended to compensate.The fair value of grants linked to assets (e.g. grants on the purchase of plant and equipment or grants for capitalized R&D costs), is suspended under long-term liabilities and released to the income statement under “other revenues” over the useful life of the asset to which it relates, thus in the period over which the depreciation expense relating to the asset is charged to the income statement.

Financial charges

Financial charges are recorded as a cost in the period in which they accrue.

Cost of goods purchased and services received

The cost of goods purchased and services received is recorded in the income statement based on the accrual method.

Income taxes (current, prepaid and deferred)

Current taxes are determined based on a realistic estimate of the tax expense for the period in accordance with applicable tax regulations in the respective countries.The Group records deferred and prepaid taxes arising from temporary differences between the book value of assets and liabilities and the related values reported for tax purposes, in addition to differences in the value of assets and liabilities generated by consolidation adjustments.Prepaid taxes are recorded only where there exists reasonable certainty of their retrieval through future profi ts within the term in which tax benefi ts are enjoyed. Deferred tax assets are recorded also where there exist deductible losses or tax credits, whenever it is deemed probable that suffi cient future profi ts will be generated in the medium-term (3 to 5 years).

Financial derivatives

Derivative fi nancial instruments are valued at market value (fair value). A derivative fi nancial instrument can be acquired for trading or hedging purposes.Gains and losses on fi nancial instruments acquired for trading purposes are charged to the income statement.Derivatives acquired for hedging purposes may be accounted for under the hedge accounting method – offsetting the recording of the derivative in the income statement with adjustments to the value of assets and liabilities hedged – only when derivatives meet specifi c criteria.Hedge derivatives are classifi ed as “fair value hedges” when they are acquired to hedge against the risk of fl uctuations in the market value of the underlying asset or liability or fl uctuations in the fi nancial fl ows deriving from the same, both in the case of existing assets and liabilities or those deriving from a future transaction.In the case of fair value hedges, gains and losses on the restatement of the market value of a derivative instrument are taken to the income statement.With regard to the hedging of fi nancial fl ows, gains and losses on the hedge instrument are recorded under Shareholders’ Equity when they relate to the portion of the hedge considered effective, while the portion not hedged is recorded in the income statement.

Earnings per share

Earnings per share are calculated by dividing consolidated net profi t by the weighted average number of shares in circulation for the period. Fully diluted earnings per share (calculated by subtracting from consolidated net profi t the cost of converting all stock options into ordinary shares) are obtained by adjusting the number of shares in circulation assuming the exercise of stock options having a diluting effect.

48


Use of estimates

In accordance with IAS/IFRS, the Group made use of estimates and assumptions based on prior experience and other factors deemed determinant, but not certain. Actual data could therefore differ from estimates and projections made.Estimated data is reviewed periodically and adjustments made to the same are taken to the Income Statement for the period in which the review takes place in case the review affect only one period, or, subsequent accounting periods in case it affects also the same. Below we describe review processes and key assumptions used by management in applying accounting principles.

Provision for doubtful accountsProvision for doubtful accountsThe provision for doubtful accounts refl ects management estimates regarding losses on trade receivables. Losses on trade receivables expected by the Group are based on past experience on similar portfolios of receivables, current overdues vs. historical overdues, losses and collections, the close monitoring of credit risk and credit worthiness of customers, in addition to projections on economic and market conditions.

Retrievable value of non-current assetsRetrievable value of non-current assetsNon-current assets include property, plant and equipment, intangible assets, investments and other fi nancial assets. Whenever circumstances so require, the management reviews periodically the book value of non-current assets held and used by the Group, in addition to assets to be disposed of. Such activity is carried out using estimates of expected cash fl ows from the sale of the asset and of adequate discount rates used in calculating the present value of the same.Whenever the book value of a non-current asset experiences a loss in value, the Company records a write-down equal to the difference between the book value of the asset and its retrievable value either through use or disposal of the same.

Post-retirement benefi tsPost-retirement benefi tsIn the estimation of post-retirement benefi ts the Group makes use of traditional actuarial techniques based on stochastic simulations of the “Montecarlo” type. Assumptions made relate to the discount rate and the annual infl ation rate. Actuarial advisors of the Company make also use of demographic projections based on current mortality rates, employee disablement and resignation rates.

Retrievability of deferred tax assetsRetrievability of deferred tax assetsThe Group evaluates the possibility to retrieve deferred tax assets on the basis of profi ts and expected future market conditions in view of current sale contracts and ability of expected future profi ts to offset tax credits, in addition to the expected variance of the same.

Potential liabilitiesIn carrying out its activity, management consults with its legal and tax advisors and experts. The Group ascertains a liability arising from litigation whenever it deems probable that a fi nancial outlay will be made in the future and when the amount of resulting losses can be reasonably estimated. In case a fi nancial outlay becomes possible but its amount cannot be determined, such occurrence is reported in the notes.

49


IV. INFORMATION BY SECTOR

Cembre adopted as its primary reporting focus information by geographical area based on the location in which the operations of the company are based or the production process takes place.Information by sector of activity is not provided as the Cembre Group operates in a single sector denominated “Electric connectors and related tools”.As required under IAS 14, sector information by geographical area, based on the location in which the operations of the company are based or the production process takes place is provided below.

2007 ItalyRest of Europe

Rest of World

Elimination of intragroup

transactionsTotal

Revenues Sales to customers 52,348 35,733 5,336 93,417Sales to other Group companies 23,713 1,635 17 (25,365) -Revenues by sector 76,061 37,368 5,353 (25,365) 93,417

Operating profit by sector 13,426 4,071 923 18,420

Overhead costs not assigned -

Operating profit 18,420Financial income (expense) (302)Income taxes (6,222)Net profit 11,896

2006 ItalyRest of Europe

Rest of World

Elimination of intragroup

transactionsTotal

Revenues Sales to customers 47,048 32,891 3,931 83,870Sales to other Group companies 20,438 1,150 143 (21,731) -Revenues by sector 67,486 34,041 4,074 (21,731) 83,870

Operating profi t by sector 11,667 3,598 676 15,941

Overhead costs not assigned -

Operating profit 15,941Financial income (expense) (80)Income taxes (6,534)

Net profit 9,327

As the breakdown of sales by geographical area is different from that of the related Group activities, a breakdown of sales by geographical area of customers is shown below.

2007 2006Italy 39,286 37,098Europe 43,316 38,365Rest of World 10,815 8,407 93,417 83,870

50


The breakdown of assets and liabilities is shown below:

Dec. 31, 2007 Italy Rest of Europe

Rest of World Total

Assets and Liabilities Assets of the sector 66,956 30,319 3,031 100,306Unassigned assets (2,576)Total assets 97,730

Liabilities of the sector 24,903 6,015 117 31,035Unassigned liabilities (17)Total liabilities 31,018

Other information by sector Capital expenditure: - Property, plant and equipment 2,943 3,331 130 6,404- Intangible assets 499 1 - 500

6,904Depreciation and amortization: - Property, plant and equipment (2,440) (624) (49) (3,113)- Intangible assets (174) (3) - (177)

Write-downs - - - -

Accruals to provision for employee benefits 686 3 - 689

Average no. of employees 381 132 12 525

Dec. 31, 2006 Italy Rest of Europe

Rest of World Total

Assets and Liabilities Assets of the sector 63,218 25,791 2,472 91,481Unassigned assets (1,925)Total assets 89,556

Liabilities of the sector 25,531 4,306 300 30,137Unassigned liabilities (16)Total liabilities 30,121

Other information by sector Capital expenditure: - Property, plant and equipment 4,896 668 43 5,607- Intangible assets 81 6 - 87

5,694Depreciation and amortization: - Property, plant and equipment 2,461 593 38 3,092- Intangible assets 90 8 - 98

Write-downs - - - -

Accruals to provision foremployee benefits 613 25 - 638

Average no. of employees 341 125 10 476

51


V. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. PROPERTY, PLANT AND EQUIPMENT

Land and buildings

Plant and machinery

Equip-ment

Other assets

Leased assets

Work in progress

Total

Historical cost 26,227 28,682 6,741 5,754 241 295 67,940

Accumulated depreciation (4,948) (22,433) (5,429) (4,488) (114) - (37,412)

Bal. at Dec. 31, 2006 21,279 6,249 1,312 1,266 127 295 30,528

Increases 3,216 1,766 256 817 86 263 6,404

Currency translation differences (320) (57) (3) (20) - - (400)

Depreciation (454) (1,597) (443) (553) (66) - (3,113)

Net divestments (1,005) (10) - (13) - (42) (1,070)

Reclassifications - 152 44 7 - (203) -

Bal. at Dec. 31, 2007 22,716 6,503 1,166 1,504 147 313 32,349

Land and buildings

Plant and machinery

Equip-ment

Other assets

Leased assets

Work in progress

Total

Historical cost 23,836 26,609 6,331 5,726 229 254 62,985

Accumulated depreciation (4,524) (20,872) (4,972) (4,325) (88) - (34,781)

Bal. at Dec. 31, 2005 19,312 5,737 1,359 1,401 141 254 28,204

Increases 2,313 2,084 421 436 58 295 5,607

Currency translation differences 78 9 (1) (6) - - 80

Depreciation (433) (1,577) (467) (544) (71) - (3,092)

Net divestments - (4) - (13) - (254) (271)

Reclassifications 9 - - (8) (1) - -

Bal. at Dec. 31, 2006 21,279 6,249 1,312 1,266 127 295 30,528

Capital expenditure in 2007 consists primarily of purchases made by the parent company and the German subsidiary. Relevant investments in 2007 included the purchase of a building in Munich to host the offices of the German subsidiary for €2.6 million, and the construction of three enclosed passages between the various production and warehousing units of the Brescia plant, resulting in an expense of €0.5 million. The industrial building owned in San Giuliano Milanese was instead sold, resulting in an overall decline in land and buildings owned by the Group, net of accumulated depreciation, of €1 million. The sale generated a €0.4 million capital gain, recorded in the income statement under Other revenues.Purchases of plant and machinery included a work station worth €0.5 million, and three automatic machines costing €0.4 million. Increases in other assets consist prevalently in the acquisition of hardware for the parent company’s new information system.

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2. INTANGIBLE ASSETS

Development costs Software Work in progress Total

Historical cost 181 2,301 - 2,482

Accumulated amortization (76) (2,263) - (2,339)

Balance at Dec. 31, 2006 105 38 - 143

Increases 57 193 250 500

Amortization (48) (129) - (177)

Balance at Dec. 31, 2007 114 102 250 466

The increase in software and work in progress are due to the implementation of the new information system by the parent company.

3. OTHER NON-CURRENT ASSETS

The item includes exclusively security deposits.

4. INVENTORIES

Dec. 31, 2007 Dec. 31, 2006 Change

Raw materials 7,752 6,377 1,375

Work in progress and semi-finished goods 7,842 6,617 1,225

Finished goods 16,131 13,053 3,078

Total 31,725 26,047 5,678

The value of finished goods inventories is adjusted to its expected realizable value through a provision for slow-moving stock amounting to €1,543 thousand.

Changes in the provision in 2007 are shown below.

2007 2006

Balance at January 1 1,648 1,499

Accruals 81 154

Uses (150) 0

Foreign-exchange differences (36) (5)


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5. TRADE RECEIVABLES

Dec. 31, 2007 Dec. 31, 2006 Change

Gross trade receivables 27,003 27,072 (69)

Provision for doubtful accounts (648) (568) (80)

Total 26,355 26,504 (149)

Trade receivables by geographical area.

Dec. 31, 2007 Dec. 31, 2006 Change

Italy 14,509 14,527 (18)Europe 10,821 10,554 267North America 690 709 (19)Oceania 381 449 (68)Middle East 318 277 41Rest of the world 284 556 (272)Total 27,003 27,072 (69)

As shown in the table above, despite the growth trade receivables were in line with the previous year. Average collection time declined in fact from 115 days in 2006 to 106 days in 2007.

Changes in the provision for doubtful accounts, accrued in part for overall bad debt and in part for individual accounts, is shown in the table that follows:

2007 2006

Balance at January 1 568 505

Accruals 153 126

Uses (72) (62)

Foreign-exchange differences (1) (1)

Balance at January 31 648 568

Trade receivables by maturity:

Not expired

0-90 days

91-180 days

181-365 days

Over 1 year

Under litigation

2007 21,329 4,492 358 191 224 4092006 20,604 4,953 561 339 225 390

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6. TAX RECEIVABLES

Dec. 31, 2007 Dec. 31, 2006 Change

Tax credits 1 7 (6)Total 1 7 (6)

The amount relates to tax receivables of the French subsidiary.

7. TAX RECEIVABLES

Dec. 31, 2007 Dec. 31, 2006 Change

Receivables from employees 38 23 15VAT receivable 174 375 (201)Other 105 61 44Total 317 459 (142)

Item Other includes mainly advances to suppliers and bills receivable.

8. SHAREHOLDERS’ EQUITY

At December 31, 2007, the capital stock of the parent company amounted to €8,840 thousand, and was made up of 17 million ordinary shares of par value €0.52 each, fully underwritten and paid-up.At December 31, 2007 the Company did not hold treasury shares.A reconciliation between the Shareholders’ Equity and net profit of the parent company and the Consolidated Shareholders’ Equity and net profit is provided in the Management Report.Changes in individual components of the Consolidated Shareholders’ Equity are shown in the Sta-tement of Changes in the Consolidated Shareholders’ Equity included in the Consolidated Financial Statements.

The consolidation reserve is made up as follows:

Dec. 31, 2007 Dec. 31, 2006

Elimination of investments in subsidiaries 9,429 6,861

Elimination of unrealized intra-group gains included in the value of inventories (1,925) (1,660)

German subsidiary product warranty provision reversal 16 12

Dividends 429 -

Currency translation differences on intra-group payables and receivables 12 -

7,961 5,213

55


9. FINANCIAL LIABILITIES

Effective interest rate (%) Maturity

Dec. 31, 2007

Dec. 31, 2006

Bank overdrafts of the parent 3.8-7.0 on demand 3,915 2,567

Bank overdrafts of Cembre Ltd. 6 (rate+1.5 spread) on demand 22 99

Bank overdrafts of Cembre GmbH 8.5 Dec. 2007 35 -

General Marking loan 3.9 July 2007 - 100Cembre GmbH loan Euribor+0.375 Sept. 2008 2,150 - 2,150 100

Leasing Spanish subsidiary (short-term portion) 4.05-6.45 2006-2011 61 56

CURRENT FINANCIAL LIABILITIES 6,183 2,822 Leasing Spanish subsidiary (long-term portion) 4.05-6.45 2006-2011 86 71

NON-CURRENT FINANCIAL LIABILITIES 86 71

The present value of minimum future lease payments, discounted at the average rate paid on current lease contracts, is shown in the table that follows:

Year Cash flow No. of days Current value2008 61 365 582009 49 730 442010 24 1,095 202011 13 1,460 11Total 147 133

Difference 14

Avg. discounting rate 5.44%

Long-term portion of financial leases by maturity

2009 2010 2011 Total

Minimum amounts 49 24 13 86

Discounted amounts 44 20 11 75

The parent company granted guarantees against a loan extended to subsidiary Cembre GmbH and the opening of credit in favor of General Marking.

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10. EMPLOYEE SEVERANCE INDEMNITY AND OTHER RETIREMENT BENEFITS

The item includes the Employee Severance Indemnity accrued for employees of Italian companies. Special retirement benefi ts, due in accordance with French regulations to persons employed in France at the time of retirement, are also included in the provision.With the reform of employee termination indemnities, starting with January 1, 2007 Cembre SpA will no longer be required to accrue retirement benefi ts in favor of its employees in a provision, but will pay out benefi ts accrued after such date to the INPS treasury account, unless such benefi ts have been destined to other pension funds by individual employees. Employee termination indemnities accrued at December 31, 2006 must therefore be discounted to their present value without keeping into account expected future pay increases of employees, while amounts accruing from January 1, 2007 are treated for accounting purposes as a defi ned benefi t plan.In application of the reform of employee termination indemnities, a valuation of employee termination indemnities accrued at December 31, 2007 was carried out by a registered actuary, and the value of employee termination indemnities accrued at December 31, 2006 was restated. The latter calculation resulted in a €1,026 thousand reduction (curtailment) in the value of the provision, recorded in full in the income statement.The table that follows shows the effect of the reform on the initial value of employee termination indemnities and on the value of the same at December 31, 2007.

Former treatment New treatment Initial effectEmployee termination indemnities at December 31, 2006

4,658 3,632 1,026

Employee termination indemnities at December 31, 2007

3,352

Change accrued in 2007 (280)

of which: - accruals 689

- uses (424)

- INPS treasury account (524)

- actuarial effect at Dec. 31, 2007 (21)

11. PROVISIONS FOR RISKS AND CHARGES

Social Security

(INAIL) litigation

Customer indemnities

Total

At December 31, 2006 231 57 288Accruals - 10 10Uses - (3) (3)At December 31, 2007 231 64 295

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12. DEFERRED TAX ASSETS AND LIABILITIES

Dec. 31, 2007 Dec. 31, 2006Deferred tax liabilities Average cost valuation of inventories by the parent (462) (562)Accelerated depreciation (1,048) (1,371)Elimination of Cembre GmbH product warranty provision (12) (10)Reversal of land depreciation (27) (32)Revaluation of land (1,859) (2,255)Discounting of employee termination indemnity (149) 166Capital gain on sale of industrial building (96) -

Gross deferred tax liabilities (3,653) (4,064)

Deferred tax assetsElimination of unrealized intra-group profits included in the 1,179 1,143Write-down of inventories 236 335Goodwill amortization 48 63Write-down of investment - 7Accumulated losses of General Marking 299 -Risk provision 5 6Other 119 87

Gross deferred tax assets 1,886 1,641Net deferred tax liabilities (1,767) (2,423)

Positive results achieved by subsidiary General Marking in the last two years led to the recording of deferred tax assets on losses accumulated by the same in previous years. Such amounts had previously not been recorded as their retrieval was deemed improbable.To allow a meaningful comparison between deferred taxes at the end of 2007 and at the end of the previous year, in the table above, deferred tax assets for 2006 arising on the restatement of employee termination indemnities, were reclassifi ed under deferred tax assets. Total amounts shown in the table therefore differ by this amount from the corresponding items reported in the balance sheet.The 2008 Budget Law introduced changes in tax rates payable by Italian companies. Starting in 2008, the IRES (corporate tax) rate was reduced from 33% to 27.5%, while IRAP (regional tax on productive activities) was reduced from 4.25% to 3.9%. In application of IAS 12, deferred tax assets and liabilities were restated to refl ect the reduced tax rates. The effect of such restatement, recorded in the income statement and included in the above table, is detailed in note 24.

13. TRADE PAYABLES

Dec. 31, 2007 Dec. 31, 2006 ChangePayable to suppliers 10,864 11,394 (530)Advances 149 70 79Total 11,013 11,464 (451)

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Trade payables by geographical area

Dec. 31,

2007Dec. 31,

2006Change

Italy 8,145 8,155 (10)Europe 2,659 3,089 (430)America 8 61 (53)Oceania 40 80 (40)Other 12 9 3Total 10,864 11,394 (530)

14. TAX PAYABLES

Dec. 31,

2007Dec. 31,

2006Change

Current taxes payable 1,033 1,816 (783)

15. OTHER PAYABLES

Dec. 31,

2007Dec. 31,

2006Change

Payables to employees 1,014 870 144Employee withholding taxes payable 940 785 155Bonuses owed to customers 962 895 67VAT and similar foreign taxes payable 465 454 11Commissions payable 232 233 (1)Payable to Statutory Auditors and similar foreign boards 40 48 (8)Payable to Directors 12 11 1Social security payables 1,694 1,382 312Payable on sundry taxes 29 48 (19)Other 15 46 (31)Total 5,403 4,772 631

16. REVENUES FROM SALES AND SERVICES PROVIDED In 2007, revenues grew by 11.4% on the previous year. Domestic sales represented 42% of total sales, up 5.9% on 2006, while sales in the rest of Europe represented 46.4% of the total, up 12.9% on the previous year. Sales in the rest of the world grew sharply by 28.7% and represented 11.6% of total sales.

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17. OTHER REVENUES

Dec. 31, 2007 Dec. 31, 2006 ChangeCapital gains 404 34 370Insurance damages 41 22 19Reimbursements 246 257 (11)Other 130 32 98Total 821 345 476

Insurance damages relate to damages received in the year. The sale of the industrial building in San Giuliano Milanese resulted in the recording in a €380 thousand capital gain.

18. COST OF SERVICES

Dec. 31, 2007 Dec. 31, 2006 ChangeSubcontracted work 3,687 3,117 570Electricity, heating and water 1,149 1,087 62Transport of goods sold 2,242 2,027 215Fuel 240 239 1Travelling expenses 719 609 110Maintenance and repair 1,265 1,071 194Consulting 875 775 100Advertising and promotion 321 362 (41)Insurance 496 457 39Boards’ compensation 952 809 143Postage and telephone 341 360 (19)Commissions 371 348 23Security and cleaning 305 290 15Bank charges 125 126 (1)Other 557 500 57Total 13,645 12,177 1,468

The increase in the cost of services is closely connected with the growth in sales.

19. LEASES AND RENTALS

Dec. 31, 2007 Dec. 31, 2006 ChangeRent and related costs 722 715 7Vehicle leasing 362 332 30Total 1,084 1,047 37

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20. PERSONNEL COSTS Dec. 31, 2007 Dec. 31, 2006 Change

Wages and salaries 18,764 16,999 1,765Social security contributions 4,885 4,323 562Employee termination indemnity 866 793 73Retirement benefits 106 87 19Other costs 354 310 44Total 24,975 22,512 2,463

Wages and salaries include €688 thousand relating to outsourced personnel, mainly of the parent company.

Average number of employees by category

Dec. 31, 2007 Dec. 31, 2006 ChangeManagers 14 15 (1)Administrative and commercial staff 234 224 10Workers 255 237 18Outsourced personnel 22 13 9Total 525 489 36

Average number of employees by Group company

Administrative Outsourced Managers and commercial Workers personnel Total staffCembre S.p.A. 6 149 191 21 367General Marking S.r.l. - 5 9 - 14Cembre Ltd 3 25 34 - 62Cembre Sarl 1 17 4 1 23Cembre Espana SL 1 21 11 - 33Cembre AS - 2 - - 2Cembre Inc 2 8 2 - 12Cembre GmbH 1 7 4 - 12Total 14 234 255 22 525

21. NON-RECURRENT OPERATIONS

Following the reform of employee termination indemnities that became effective in 2007, employee termination indemnities accrued at December 31, 2006 were restated to reflect new actuaries. This non-recurrent event resulted in a €1,026 thousand reduction (curtailment) in the provision, recorded in full in the 2007 income statement.

staffCembre S.p.A. 6 149 191 21 367General Marking S.r.l. - 5 9 - 14Cembre Ltd 3 25 34 - 62Cembre Sarl 1 17 4 1 23Cembre Espana SL 1 21 11 - 33Cembre AS - 2 - - 2Cembre Inc 2 8 2 - 12Cembre GmbH 1 7 4 - 12Total 14 234 255 22 525

Workers

Cembre S.p.A. 6 149 191 21 367General Marking S.r.l. - 5 9 - 14Cembre Ltd 3 25 34 - 62Cembre Sarl 1 17 4 1 23Cembre Espana SL 1 21 11 - 33Cembre AS - 2 - - 2Cembre Inc 2 8 2 - 12Cembre GmbH 1 7 4 - 12Total 14 234 255 22 525

Managers staffCembre S.p.A. 6 149 191 21 367General Marking S.r.l. - 5 9 - 14Cembre Ltd 3 25 34 - 62Cembre Sarl 1 17 4 1 23Cembre Espana SL 1 21 11 - 33Cembre AS - 2 - - 2Cembre Inc 2 8 2 - 12Cembre GmbH 1 7 4 - 12Total 14 234 255 22 525



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22. OTHER OPERATING COSTS

Other operating costs are made up as follows: Dec. 31, 2007 Dec. 31, 2006 ChangeSundry taxes 348 224 124Losses on receivables 16 10 6Capital losses 7 4 3Donations 36 38 (2)Other 64 128 (64)Total 471 404 67

Item Other includes prevalently property taxes paid by the UK subsidiary.

23. FINANCIAL INCOME (EXPENSE)

Dec. 31, 2007 Dec. 31, 2006 Change

Loans and bank overdrafts (200) (70) (130)Other financial charges (10) (6) (4) (210) (76) (134) Interest earned on bank account balances 108 61 47Other financial income 1 9 (8) 109 70 39 Financial income (expense) (101) (6) (95)

24. INCOME TAXES

Dec. 31, 2007 Dec. 31, 2006 ChangeCurrent taxes (6,866) (6,562) (304)Deferred taxes 644 28 616Total (6,222) (6,534) 312

The table that follows shows a reconciliation between the theoretical tax expense, calculated at the normal tax rate of the parent company (Corporate (IRES) + Regional Tax on Productive Activities (IRAP) = 37.25%), and the actual tax expense recorded in the consolidated accounts. Deferred tax assets and liabilities originated in the year were calculated at the reduced tax rates applicable from 2008 (IRES+IRAP = 31.40%).

62


2007 2006 amount % tax rate amount % tax rateProfit before taxes 18,118 15,861 Theoretical tax expense 6,749 37.25% 5,909 37.25%Effect of non-deductible costs 1,171 6.46% 747 4.71%Effect of tax-exempt income and deductions (1,790) -9.88% (604) -3.81%Effect of tax-deductible losses of subsidiaries (2) -0.01% (76) -0.48%Effect of different IRAP taxable income 536 2.96% 703 4.43%Effect of new tax rates on deferred taxes 40 0.22% - 0.00%Effect of decline in domestic tax rates (345) -1.90% - 0.00%Effect of different foreign tax rates (137) -0.76% (145) -0.91%Actual tax expense recorded 6,222 34.34% 6,534 41.19%

At December 31, 2007, there do not exist temporary differences and accrued losses on which deferred tax assets have not been recorded.

Deferred tax assets and liabilities

Dec. 31, 2007 Dec. 31, 2006Deferred tax liabilities Average cost valuation of inventories 100 (303)Accelerated depreciation 323 129Reversal of German subsidiary’s product warranty (2) (2)Reversal of land depreciation 5 -Land revaluation 396 -Discounting of employee termination indemnity (315) 2Capital gain on sale of industrial building (96) -

411 (174)Deferred tax assetsElimination of unrealized intra-group gains included in the value 36 158Write-down of inventories (99) -Amortization of goodwill (15) (6)Write-down of investment (7) (6)Accumulated losses of General Marking 299 -Risk provision (1) -Other 32 26

245 172

Previous years’ taxes - 26Foreign-exchange translation differences (11) 4

Deferred tax assets accrued in the period 644 28

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The effect of the reduction in tax rates on deferred tax assets and liabilities, included in the above table, is shown separately in the table that follows:

Effect of reduction in domestic tax ratesDeferred tax liabilities Average cost valuation of inventories of the parent 86Accelerated depreciation 177Reversal of land depreciation 5Land revaluation 346Discounting of employee termination indemnity 30

644Deferred tax assetsElimination of unrealized intra-group gains included in the value of inventories (179)Write-down of inventories (44)Amortization of goodwill (9)Accumulated losses of General Marking (58)Risk provision (6)Other (3)

(299)

Total effect of reduction in domestic tax rates 345

25. EARNINGS PER SHARE

Earnings per share are calculated by dividing net profi t by the weighted average number of shares in circulation for the period, excluding own shares held at the end of the year.

Dec. 31, 2007 Dec. 31, 2006Consolidated net profit (€‘000) 11,896 9,327 No. of ordinary shares (‘000) 17,000 17,000 Earnings per share (€) 0.70 0.55

26. DIVIDENDS

On May 31, 2007 the company distributed (with ex-dividend date May 28) a dividend on net profi t for the year ended December 31, 2006, amounting to €3,740 thousand, equivalent to €0.22 for each share entitled to dividends. 2007 2006Resolved and paid in the year Balance due for 2006 dividend: €0.22 (2005: €0.15) 3,740 2,550

Proposal submitted to the Shareholders’ Meeting (not recorded as liability at December 31) Balance due for 2007 dividend: €0.26 (2006: €0.22) 4,420 3,740

Proposed dividends submitted for approval to the Shareholders’ Meeting (not recorded as a liability at December 31) amount to €4,420 thousand.

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27. COMMITMENTS AND RISKS

At December 31, 2007, guarantees granted by the Cembre Group were:

Dec. 31, 2007 Dec. 31, 2006 ChangeGuarantees granted 285 138 147

28. NET FINANCIAL POSITION

At December 31, 2007, the net financial position of the Group amounted to an indebtedness of €1,720 thousand, declining on the end of the previous year due primarily to capital expenditure, both on tangible and intangible assets, made in 2007 and the payment of tax advances and dividends, resulting in a higher recourse of the parent company to short-term loans. At December 31, 2007, the Company did not have outstanding loans containing covenants or negative pledges. The table that follows provides a detail of the consolidated net financial position as provided by Consob Regulation DEM/6064313 dated July 28, 2006:

Dec. 31, 2007 Dec. 31, 2006A Cash 19 18 B Bank deposits 4,530 3,946 C Cash and equivalents (A+B) 4,549 3,964 D Financial receivables - - E Current bank debt (6,122) (2,766)F Payables on derivatives - -G Other current financial payables (61) (56)H Current financial debt (E+F+G) (6,183) (2,822)I Net current financial position (C+D+H) (1,634) 1,142 J Non-current bank debt - - K Other non-current financial debt (86) (71)L Non-current financial debt (J+K) (86) (71)M Net financial position (I+L) (1,720) 1,071

29. RELATED PARTIES

The table that follows shows transactions between Cembre Spa and its subsidiaries at December 31, 2007.

Receivables Payables Revenues ExpensesCembre Ltd. 2,226 27 6,202 201Cembre S.a.r.l. 751 - 2,994 43Cembre España S.L. 2,272 40 5,852 -Cembre AS 124 6 369 -Cembre GmbH 1,125 3 2,796 34Cembre Inc. 1,025 - 3,391 1General Marking srl 15 373 259 1,833Total 7,538 449 21,863 2,112

Dec. 31, 2007 Dec. 31, 2006A Cash 19 18 B Bank deposits 4,530 3,946 C Cash and equivalents (A+B) 4,549 3,964 D Financial receivables - -E Current bank debt (6,122) (2,766)F Payables on derivatives - -G Other current financial payables (61) (56)H Current financial debt (E+F+G) (6,183) (2,822)I Net current financial position (C+D+H) (1,634) 1,142 J Non-current bank debt - - K Other non-current financial debt (86) (71)L Non-current financial debt (J+K) (86) (71)M Net financial position (I+L) (1,720) 1,071

A Cash 19 18 B Bank deposits 4,530 3,946 C Cash and equivalents (A+B) 4,549 3,964 D Financial receivables - -E Current bank debt (6,122) (2,766)F Payables on derivatives - -G Other current financial payables (61) (56)H Current financial debt (E+F+G) (6,183) (2,822)I Net current financial position (C+D+H) (1,634) 1,142 J Non-current bank debt - - K Other non-current financial debt (86) (71)L Non-current financial debt (J+K) (86) (71)M Net financial position (I+L) (1,720) 1,071

65


Cembre S.p.A. leased an industrial building to subsidiary General Marking. Rent for the building for 2007 amounts to €96 thousand. With reference to assets and liabilities relating to subsidiaries shown above, we confirm that transac-tions with the same and with related parties fall within the scope of normal operating activities.Guarantees granted by the parent company include a letter of patronage for €0.5 million issued in favor of General Marking Srl against contractual obligations of the same, and a guarantee of €2.5 million against obligations of subsidiary Cembre GmbH. In 2008, the guarantee in favor of General Marking Srl was increased to €2 million.Among assets leased to Cembre by third parties are an industrial building adjacent to the Company’s registered office measuring a total of 5,960 square meters on three floors, in addition to the Milan, Padua and Bologna sales offices, all of which are owned by company Tha Immobiliare SpA, with registered office in Brescia, controlled by Anna Maria Onofri, Giovanni Rosani and Sara Rosani, directors of Cembre SpA. Lease payments for 2007 amounted to €494 thousand. Rent for 2007 is in line with market conditions. It is in the Company’s interest to benefit from the continuity of office space reducing the risk of early termination of leases. At the end of 2007, all amounts due to Tha Immobiliare had been settled.Cembre S.p.A. does not have direct relationships with its parent company Lysne S.p.A. of any other nature than that of the exercise of shareholders’ rights on the part of the parent. Lysne S.p.A. does not carry out any management or coordination activity with respect to Cembre S.p.A.

Boards’ compensation

In 2007, compensation for the Board of Directors and the Board of Statutory Auditors amounted to:

Statutory Auditors DirectorsEmoluments as directors and auditors of Cembre SpA 60 645Emoluments as directors of subsidiaries - 18Retribution as employees - 185Non-monetary benefits - 19

Non-monetary benefi ts relate to the use of a company car and insurance policies underwritten on their behalf.

30. RISK MANAGEMENT AND FINANCIAL INSTRUMENTS

The Group does not make significant use of derivative instruments to hedge against interest risk and currency exposure. At December 31, 2007, the sole hedging contract was a currency (€) forward pur-chase agreements stipulated by UK subsidiary Cembre Ltd. on December 17, 2007, amounting to €300 thousand each, expired and reimbursed on January 4, 2008.The short-term maturity of a large portion of financial instruments held is such that their carrying value is in line with the fair value of the same.

Interest risk

The Group normally stipulates short-term floating rate loan contracts. At December 31, 2007, all loans had been repaid with the exception of a loan extended to subsidiary Cembre GmbH against the purchase of its new main office. Pursuant to the loan contract the subsidiary is extended a further line of credit of €2.5 million, expiring on September 16, 2008, to be used for transaction of fixed amount at set rates. Interest payable is set at the time the line of credit is used, and is equal to the

66


Euribor rate plus a spread of 0.375%. At December 31, 2007, uses of said credit line amounted to €2.2 million. Interest is payable at maturity. The Group makes also use of bank overdrafts to face ordinary liquidity needs.

Currency risk

Despite a strong international presence, the Group does not have a significant exposure to currency risk (on an operating or equity basis), as it operates mainly in the euro area, the currency in which its trade transactions are mainly denominated.Exposure to currency risk is determined mainly by sales in US dollars, British pounds and Norwegian kroners. The size of these transactions is not significant in influencing the overall performance of the Group.To hedge part of the risk deriving from purchases of supplies in euro from the parent company, UK subsidiary Cembre Ltd. entered into forward currency purchase agreements to acquire euro, as de-scribed in the table that follows.

Date of contract Amount in euro

Forward exchange-rate (€/£)

£ amount Expiration

Actual exchan-ge-rate (€/£)

Forward £ amount

Effect(£)

Dec. 17, 2007 300,000 1.3989 214,454 Jan. 4, 2008 1.3424 223,480 9,026

As apparent, the hedge resulted in a £9 thousand gain at the expiration date, equivalent to €12 thousand. As described in the consolidation principles section, financial statements of consolidated companies prepared in currencies other than the euro are translated into euro at the exchange rate published on the Internet site of the Ufficio Italiano Cambi. In the table that follows we report the economic effect of possible fluctuations in exchange rates for main financial figures of consolidated companies operating outside the euro area.

Currency Exchange ratefluctuation

Effect onShareholders’

Equity

Effect onsales

Effect onpre-tax profit

Cembre Ltd GBP +5% / -5% 392 / (392) 690 / (690) 57 / (57)Cembre AS NOK +5% / -5% 19 / (19) 39 / (39) 8 / (8)Cembre Inc USD +5% / -5% 94 / (94) 268 / (268) 46 / (46)

In 2007, the effect of foreign-exchange transactions was negative by €201 thousand, of which €38 thousand relating to elisions among consolidated companies. The balance is due almost exclusively by transactions carried out by the parent company and in particular trade transactions denominated in US dollars with the US subsidiary.

Liquidity risk

The exposure of the Group to liquidity risk is not material.

Credit risk

Exposure to credit risk relates exclusively to trade receivables.None of the areas in which the Group operates poses relevant credit risks.Operating procedures limit the sale of products or services to customers who do not possess an adequate credit profile or provide guarantees.

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31. SUBSEQUENT EVENTS

No event having signifi cant effects on the Group’s fi nancial position or operating performance occurred after the closing of the fi nancial year.

32. CONSOLIDATED COMPANIES

The consolidation area is unchanged from December 31, 2006. Companies consolidated line-by-line are:

Company Registered office Share capitalShare held at Dec. 31,

2007

Share held at Dec. 31,

2006

Cembre LtdSutton Coldfield (Birmingham)

£ 1,700,000 100% 100%

Cembre Sarl Morangis (Paris) € 1,071,000 100% (*) 100% (*)

Cembre España SL Coslada (Madrid) € 1,902,000 100% (*) 100% (*)

Cembre AS Stokke (Norway) NOK 2,400,000 100% 100%

Cembre GmbH Monaco (Germany) € 512,000 100% (*) 100% (*)

Cembre IncEdison

(New Jersey - Usa)US$ 840,000 100%(**) 100%(**)

General Marking srl Brescia (Italy) € 99,000 100% 100%

(*) of which 5% held through Cembre Ltd.(**) of which 29% held through Cembre Ltd.


THE CHAIRMAN OF THE BOARD OF DIRECTORS OF PARENT COMPANY CEMBRE S.P.A.

CARLO ROSANI

68


Report of the Board of Statutory Auditors on ConsolidatedFinancial Statements of the Cembre Group at December 31, 2007

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

Brescia, April 1, 2008

The Board of Statutory Auditors

Guido Astori Chairman Andrea Boreatti Permanent Auditor Leone Scutti Permanent Auditor

69


70


Financial Statements at December 31, 2007

72

R E P O R T A N D A C C O U N T S 2 0 0 7 - F I N A N C I A L S T A T E M E N T S

Balance Sheet(in euro) Notes Dec. 31, 2007 Dec. 31, 2006

ASSETS of which: related parties


A) NON CURRENT ASSETS

Tangible assets 1 21,819,941 22,347,764

Intangible assets 2 460,296 135,227

Investments in subsidiaries 3 8,057,883 8,115,406

Financial assets available for sale 4 5,224 5,224

Other non-current assets 5 9,762 10,160

Deferred tax assets 15 371,017 628,253

TOTAL NON-CURRENT ASSETS 30,724,123 31,242,034

B) CURRENT ASSETS

Inventories 6 23,927,378 19,147,506

Trade receivables 7 16,508,934 16,823,315

Trade receivables from subsidiaries 8 7,538,172 7,538,172 6,077,021 6,077,021

Financial receivables from subsidiaries 9 2,055,562 2,055,562 2,046,438 2,046,438

Other assets 10 240,953 406,484

Cash and cash equivalents 11 727,275 1,199,796

TOTAL CURRENT ASSETS 50,998,274 45,700,560

C) NON-CURRENT ASSETS AVAILABLE FOR SALE - -

TOTAL ASSETS(A+B+C) 81,722,397 76,942,594

LIABILITIES AND SHAREHOLDERS’ EQUITY

A) SHAREHOLDERS’ EQUITY

Capital stock 12 8,840,000 8,840,000

Reserves 12 38,993,166 36,067,821

Net profi t 12 8,987,113 6,665,345

TOTAL SHAREHOLDERS’ EQUITY 56,820,279 51,573,166

B) NON-CURRENT LIABILITIES

Employee Severance Indemnity and other personnel benefi ts 13 3,208,264 142,762 4,511,572 132,808

Provisions for risks and charges 14 295,024 288,154

Deferred tax liabilities 15 3,542,600 4,059,331

TOTAL NON-CURRENT LIABILITIES 7,045,888 8,859,057

C) CURRENT LIABILITIES

Current fi nancial liabilities 16 3,914,810 2,567,102

Trade payables 17 9,724,517 9,669,634

Trade payables to subsidiaries 18 449,267 449,267 423,003 423,003

Tax payables 19 402,831 986,873

Other Payables 20 3,364,805 2,863,759

TOTAL CURRENT LIABILITIES 17,856,230 16,510,371

D) LIABILITIES ON ASSETS HELD FOR DISPOSAL - -

TOTAL LIABILITIES (B+C+D) 24,902,118 25,369,428

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY (A+B+C+D) 81,722,397 76,942,594

73


Income Statement(in euro) Notes Dec. 31, 2007 Dec. 31, 2006



Revenues from sales and services provided 21 73,622,957 21,805,769 65,470,671 18,810,371

Other revenues 22 682,689 149,730 249,086 94,513

TOTAL REVENUES 74,305,646 65,719,757

Cost of goods and merchandise 23 (36,260,151) (2,091,091) (31,773,332) (1,328,334)

Cost of services received 24 (9,818,500) (726,039) (8,761,042) (651,754)

Lease and rental costs 25 (765,364) (493,503) (746,094) (483,149)

Personnel costs 26 (17,318,638) (185,044) (15,358,098) (205,545)

Non recurring opeartions 27 1,026,143 -

Other operating costs 28 (214,013) (169,522)

Change in inventories 4,779,871 4,870,842

Increase in assets due to internal construction 439,832 606,986

Write-down of receivables (123,256) (115,673)

Accruals to provisions for risks and charges 29 (9,514) (7,941)

GROSS OPERATING PROFIT 16,042,056 14,265,883

Tangible asset depreciation (2,202,256) (2,239,102)

Intangible asset amortization (173,785) (89,823)

OPERATING PROFIT 13,666,015 11,936,958

Financial income (expense) 30 400,035 59,123 62,939 46,438

Foreign exchange gains (losses) 31 (165,791) (80,131)

PROFIT BEFORE TAXES 13,900,259 11,919,766

Income taxes 32 (4,574,519) (5,254,421)

Deferred taxes from non recurring operations 32 (338,627) -

NET PROFIT FROM ORDINARY ACTIVITIES 8,987,113 6,665,345


NET PROFIT 8,987,113 6,665,345

74


Statement of Cash Flows

(in euro) Dec. 31, 2007 Dec. 31, 2006

A) CASH FLOW FROM OPERATING ACTIVITIES

Net profi t for the period 8,987,113 6,665,345

Depreciation, amortization and write-downs 2,376,041 2,328,925

(Gains)/Losses on disposal of assets (388,246) (4,518)

Net change in Employee Termination Indemnity (1,303,308) 159,271

Net change in provisions for risks and charges 6,870 7,552

Operating profi t (loss) before changes in working capital 9,678,470 9,156,575

(Increase) Decrease in trade receivables (1,146,770) (3,436,386)

(Increase) Decrease in inventories (4,779,872) (4,870,841)

(Increase) Decrease in other receivables and deferred tax assets 422,767 (313,414)

Increase (Decrease) of trade payables (47,026) 3,995,753

Increase (Decrease) of other payables and deferred tax liabilities (599,727) 397,615

Change in working capital (6,150,628) (4,227,273)

NET CASH FLOW (USED IN)/FROM OPERATING ACTIVITIES 3,527,842 4,929,302

B) CASH FLOW FROM INVESTING ACTIVITIES

Capital expenditure on fi xed assets:

- intangible (498,854) (80,438)

- tangible (2,723,815) (4,467,968)

Proceeds from disposal of tangible, intangible, fi nancial assets

- tangible 1,437,628 13,738

- fi nancial 57,523 -

Increase (Decrease) of trade payables for assets 128,173 37,514

NET CASH FLOW (USED IN)/FROM INVESTING ACTIVITIES (1,599,345) (4,497,154)

C) CASH FLOW FROM FINANCING ACTIVITIES

(Increase) Decrease in other non current assets 398 (54)

(Increase) Decrease of fi nancial receivables (9,124) (2,046,492)

Increase (Decrease) in bank loans and borrowings 1,347,708 2,275,403

Increase (Decrease) in derivative instruments - (21,024)

Dividends distributed (3,740,000) (2,550,000)

NET CASH FLOW (USED IN)/FROM FINANCING ACTIVITIES (2,401,018) (2,342,167)

D) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (A+B+C) (472,521) (1,910,019)

E) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,199,796 3,109,815

F) CASH AND CASH EQUIVALENTS AT END OF PERIOD (D+E) 727,275 1,199,796

75


CASH AND CASH EQUIVALENTS AT END OF PERIOD 727,275 1,199,796

Financial receivables from subsidiaries 2,055,562 2,046,438

Current fi nancial liabilities (3,914,810) (2,567,102)

NET FINANCIAL POSITION (1,131,973) 679,132

INTEREST PAID IN THE PERIOD (172,189) (37,689)

BREAKDOWN OF CASH AND CASH EQUIVALENTS AT END OF PERIOD

Cash 9,817 7,189

Banks 717,458 1,192,607

727,275 1,199,796

76


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77


Notes to the Financial Statements of Cembre S.p.A. at December 31, 2007

I. CORPORATE INFORMATION

Cembre S.p.A. is a joint-stock company with registered offi ce in Brescia, Via Serenissima 9.Cembre S.p.A. (hereinafter referred to as the “Company”) is active primarily in the manufacturing and sale of electrical connectors and related tools.The publication of the Financial Statements of Cembre S.p.A. for the year ended December 31, 2007 was authorized by a resolution of the Board of Directors dated March 25, 2008.Cembre S.p.A. is controlled by Lysne S.p.A., a holding company based in Brescia, that does not direct or coordinate its subsidiary.

II. FORM AND CONTENT OF THE FINANCIAL STATEMENTS

The present Financial Statements at December 31, 2007 were prepared under the International Fi-nancial Reporting Standards (IFRS) adopted by the European Union and the related implementation regulations issued in application of article 9 of Legislative Decree no. 38/2005. Principles adopted in the preparation of the Financial Statements are those formally approved by the European Union as at December 31, 2007.The table that follows contains a list of international accounting principles and interpretations approved by the IASB that became effective starting in 2007, which were taken into account, where applicable, in the preparation of the present Financial Statements.

Effective

IFRS 7: Financial Instruments: Disclosures Jan. 1, 2007

IFRIC 8: Scope of application of IFRS 2 Jan. 1, 2007

IFRIC 9: Subsequent valuation of implicit derivatives Jan. 1, 2007

IFRIC 10: Interim reports and durable loss in value Jan. 1, 2007

Items in the Balance Sheet were recorded at the historical cost. Unless otherwise indicated, fi gures reported in the fi nancial statements and the related notes are expressed in euro.

Future changes in accounting principles

Starting with the 2008 fi nancial year, the following accounting principles will become effective:

IFRS 2 Share based compensation – Exercise terms and cancellations This change in IFRS 2 – Share based compensation was published in 2008 and will come into effect on the fi rst fi nancial year subsequent to January 1, 2009. The principle restricts the defi nition of “exercise terms” to a condition that includes an explicit or implicit obligation to provide a service. Any other condition is considered a “non-vesting condition” and must be taken into account to determine the fair value of the instrument representing the capital assigned. In case the prize does not mature as a consequence of the fact that it does not satisfy a “non-vesting condition” that falls under the control of the entity or counterparty, this must be accounted for as a cancellation. The Company has not granted share-based benefi ts subject to “non-vesting conditions” and as a consequence does not expect material effects in the recording of share-based compensation plans.

IFRS 3R Business combinations and IAS 27/R Consolidated and statutory accountsThe two revised accounting principles were approved in January 2008 and will come into effect on the fi rst fi nancial year subsequent to July 1, 2009. IFRS 3R introduces certain changes in the accounting of business combinations that will have an effect on the amount of goodwill recorded on

78


the profi t for the year in which the acquisition takes place and on profi ts for subsequent years. IAS 27R requires that an adjustment to the ownership share held in a subsidiary be recorded as an equity transaction. As a result, such change has no impact on goodwill and does not generate either gains or losses. Revised principles also introduce changes in the accounting of losses reported by subsidiaries as well as in the case of the loss of control in a subsidiary. Changes introduced by principles IFRS 3R and IAS 27R must be applied prospectively and will have an impact on future acquisitions and transactions with minority shareholders.

IAS 1 Revised – Presentation of fi nancial statementsPrinciple IAS 1 Revised – Presentation of fi nancial statements was approved in September 2007 and will come into effect on the fi rst fi nancial year subsequent to January 1, 2009. The principle separates changes in the Shareholders’ Equity between shareholders and non-shareholders. The Statement of Changes in the Shareholders’ Equity will include only the detail of transactions affecting shareholders, while all other changes relating to transactions with non-shareholders will be reported under a single caption. The principle introduces also a “comprehensive income” table that contains all revenue and cost items for the period that are recorded in the income statement, in addition to all other revenue and cost items recorded. The “comprehensive income” table can be reported a single table or two related tables. The Company is still reviewing the possibility of reporting one or two tables.

Changes to IAS 32 and IAS 1 Financial instruments “held for sale”Changes to IAS 32 and IAS 1 were approved in February 2008 and will come into effect in the fi rst fi nancial year subsequent to January 1, 2009. The revision of IAS 32 requires the classifi cation of certain fi nancial instruments “held for sale” and of certain bonds as equity instruments, in case certain conditions apply. The revision of IAS 1 requires that the notes to the accounts include certain information relating to options “held for sale” classifi ed as equity. The Company does not expect such changes to have a material effect on its fi nancial statements.

III. ACCOUNTING PRINCIPLES AND VALUATION CRITERIA

Form of the Financial Statements

The fi nancial statements are prepared as follows:- current and non-current assets and liabilities are reported separately in the Balance Sheet;- the analysis of costs in the Income Statement is carried out based on the nature of the same;- the Statement of Cash Flows is prepared by applying the indirect method.Finally, with reference to Consob Regulation no. 15519 dated July 27, 2006, the Financial Statements include a separate reporting of amounts pertaining to related parties, where signifi cant.

Property, plant and equipment

Property, plant and equipment is recorded at the historical cost and reported net of accumulated depreciation and losses in value.Ordinary maintenance and repair costs are not capitalized, and are charged to the income statement in the year in which they are incurred.Depreciation commences when the asset is available for use and is calculated on a straight line basis over the estimated residual useful life of the asset, taking into account its residual value.Depreciation rates applied refl ect the useful life generally attributed to the various classes of assets and are unchanged from the previous year. These are:

- Buildings and light installations: 3% – 10%- Plant and machinery: 10% – 15.5%- Industrial and commercial equipment: 25%- Other assets: 12% – 25%

79


The book value of property, plant and equipment is subjected to an impairment test whenever events or changes occurred indicate that the book value of the same can no longer be retrieved in line with the depreciation schedule originally set. Whenever there exists such an indication, the assets or cash generating units are written down to refl ect their expected realizable value.Land has an undetermined useful life and is therefore not subject to depreciation.The book value of property, plant and equipment is subjected to an impairment test whenever events or changes occurred indicate that the book value of the same can no longer be retrieved in line with the depreciation schedule originally set. Whenever there exists such an indication and in case the book value exceeds the expected retrievable value, the assets or cash generating units are written down to refl ect their expected realizable value.The residual value of assets, their useful life and methods applied are reviewed annually and adjusted, where necessary, at the end of each year.Tangible assets are eliminated from the Balance Sheet at the time of their sale or when there no longer exists the expectation of future economic benefi ts from its use or disposal. Losses and gains (calculated as the difference between net revenues from the disposal and the book value of the asset) are recorded in the Income Statement in the year in which they are disposed of.

Leased assets

Assets held under a financial lease, through which all risks and benefits relating to ownership are tran-sferred to the Company, are recorded under assets at the lower of their current value and the present value of minimum lease payments due according to the contract, including the bullet payment due at the end of the lease to exercise the repurchase option.The liability corresponding to the lease contract is recorded under financial liabilities. Leased asset are classified under the respective category among property, plant and equipment, and depreciated over the shorter period between the term of the lease and the expected residual useful life of the asset.Lease contracts in which the lessor holds all risks and enjoys all benefits deriving from the leased asset are classified as operating leases and recorded as costs in the Income Statement over the term of the contract.

Intangible assets

Intangible assets are recorded under assets, as provided by IAS 38 (Intangible assets), whenever it is probable that future economic benefi ts are generated through use and when the cost of the intangible asset can be determined in a reliable manner.Intangible assets acquired separately are initially capitalized at cost, while those acquired through mergers are capitalized at their fair value at the time of acquisition.With the exception of development costs, assets generated internally cannot be recorded as intangible assets.After the initial recording, intangible assets are carried in the balance sheet at cost, net of accumulated amortization calculated on a straight-line basis over their expected useful economic life, and of write-downs carried out as a result of durable losses in value. Intangible assets having an indefi nite useful life are not amortized and subjected periodically to an impairment test to assess possible loss in value.

The useful life generally attributed to the various classes of assets is the following:

- concessions and licenses: 5 to 10 years- software licenses 3 years- development costs: 5 years- trademarks: 10 to 20 years

Amortization commences when the asset is available for use, that is, when it is in a position and in the necessary condition to operate in the manner intended by management.

80


The book value of intangible assets is subjected to an impairment test whenever events or changes occurred indicate that the book value of the same can no longer be retrieved in line with the amortization schedule originally set. Whenever there exists such an indication and the book value of the asset exceeds its realizable value, the value of the asset is written-down to its expected realizable value.

Investments in subsidiaries

Investments in subsidiaries are recorded at cost, adjusted where necessary for losses in value. Any positive difference that emerges upon acquisition between the acquisition cost and the portion of the Shareholders’ Equity acquired, is therefore included in the book value of the investment.Investments in subsidiaries are subjected to an impairment test whenever indicators of a loss in value are detected. Whenever it appears that an investment in a subsidiary has experienced a loss in value, the same is recorded in the Income Statement as a write-down.Whenever losses of a subsidiary exceed the book value of the investment, the value of the same is written-down to zero and losses exceeding such value are recorded in a specifi c liability provision. In case the loss is subsequently reversed or reduced, the related amount is written-up in the Income Statement to the original cost of the investment.

Financial assets

Financial assets are initially recorded at cost, inclusive of accessory purchase costs, representing the fair value of the price paid. After the initial recording, fi nancial assets are valued in accordance with their fi nal purpose as described below.

Financial assets valued at fair value, whose change is recorded in the Income StatementFinancial assets valued at fair value, whose change is recorded in the Income Statement

These are fi nancial assets held for trading purposes, acquired for the purpose of obtaining a profi t from short-term fl uctuations in price. Unless specifi cally designated as effective hedging instruments, derivatives are classifi ed as fi nancial assets held for trading purposes. Gains and losses on fi nancial assets held for trading purposes are recorded in the income statement.

Financial assets held to maturity

Financial assets other than derivatives that generate fi xed fi nancial fl ows or fl ows that may be determined and have a set maturity, are classifi ed as Financial assets held to maturity when the Company intends to and is capable of holding them to maturity.Financial assets that the Company decides to hold for an indefi nite period of time do not fall under this category.After their initial recording, long-term fi nancial investments held to maturity, such as bonds, are accounted for at the amortized cost, using the effective rate of interest method, representing the rate at which estimated future payments or collections over the expected useful life of the asset are discounted to their present value.The amortized cost is calculated keeping into account discounts and premiums, amortized over the term of the fi nancial asset.

Loans extended and receivables

Loans and receivables are non-derivative financial assets providing for fixed payments or payments that may be determined, not listed on an active market. Such assets are recorded at the amortized cost using the actual discount rate method. Gains and losses are recorded in the Income Statement whenever loans extended and receivables are eliminated from the accounts or they experience losses in value, in addition to the amortization process.

Financial assets available for sale

Financial assets available for sale include fi nancial assets that do not fall under the above categories. After the initial recording, these are accounted for at fair value, while gains and losses are recorded

81


under a specifi c Shareholders’ Equity reserve until the assets are sold or a loss in value is ascertained. In such case, gains and losses accrued are charged to the income statement.In the case of securities widely traded on a regulated market, the fair value is determined with reference to the listed price at the closing of trading on the date of the fi nancial statements. In the case of fi nancial assets for which there does not exist an active market, the fair value is determined through valuation techniques based on the price recorded in recent transactions between unrelated parties or on the basis of the current market value of a similar instrument, or on discounted cash fl ows or option pricing models. Investments in other companies fall in this category.

Loss in value of fi nancial assetsLoss in value of fi nancial assets

The Company verifi es at least yearly the possible loss in value of individual fi nancial assets. These are recorded only at the time when there exists objective evidence, at the occurrence of one or more events, that the asset has experienced a loss of value with respect to its initial recorded value.

Own shares

Own shares are recorded as a reduction of Shareholders’ Equity in a specifi c reserve.The purchase, sale, issue or cancellation of own shares held does not determine the recording of any gain or loss in the Income Statement.

Inventories

Inventories are valued at the lower of cost and their expected realizable value, represented by their normal sale price, net of completion and selling costs.The cost of inventories includes the acquisition cost, the transformation cost and other costs incurred to take inventories to their current location and state.The cost of inventories is determined under the weighted-average method, inclusive of the cost of beginning inventories. Provisions for slow-moving stock are accrued for fi nished products, materials and other supplies, keeping into account their expected useful life and retrievable value.

Payables and receivables

Receivables are recorded initially at fair value and subsequently carried at the amortized cost, written-down in case of loss in value. Payables are normally valued at the amortized cost, adjusted under exceptional conditions for changes in value.

Cash and cash equivalents

Cash and cash equivalents are recorded at face value.

Loans

Loans are initially recorded at cost, corresponding to the fair value of the amount received, net of accessory costs.After the initial recording, loans are valued at the amortized cost, using the effective interest method.

Translation of amounts denominated in currencies other than the euro

Transactions denominated in currencies other than the euro are initially accounted for in euro at the exchange rate at the date of the transaction. Currency translation differences arising at the time at which foreign currency receivables are collected and payables are paid out, are recorded in the income statement.At the date of the fi nancial statements, monetary assets and liabilities denominated in currencies other than the euro – consisting of cash on hand or assets and liabilities to be received or paid out, whose amount is set and may be determined – are translated into euro at the exchange rate at the date

82


of the fi nancial statements, recording in the income statement the currency translation difference.Non-monetary items denominated in currencies other than the euro are translated into euro at the exchange rate at the time of the transaction, representing the historical exchange rate.

Provisions for risks and charges

Provisions for risks and charges are accrued against known liabilities whose amount and expiration cannot however be determined at the date of the financial statements. Accruals are made when the existence of a current obligation, legal or implicit, deriving from a past event, the fulfillment of which is expected to require the use of resources whose amount can be reliably estimated, is probable.Provisions are valued at the fair value of liabilities. When the financial effect and the timing of the cash outflow can be estimated in a reliable manner, provisions include the interest component, re-corded in the Income Statement under financial income (expense). Provisions accrued are reviewed at each accounting date and adjusted to bring them into line with the best estimate available at that date.

Employee benefi ts

Under IAS 19, and before the reform introduced by the 2007 Budget Law, the Employee Severance Indemnity was classifi ed among defi ned benefi t plans and was therefore subject to actuarial adjustments. After the reform, employee termination indemnities accrued up to December 31, 2006, continue to be accounted for as defi ned benefi t plans, while those accrued from January 1, 2007 are accounted for in two different ways:

- where the individual employee has opted for complementary pension funds, employee termination indemnities accrued after January 1, 2007 and until the time at which the choice is made by the employee, are accounted for as a defi ned benefi t plan. Subsequently they are accounted for as a defi ned contribution plan;

- where the individual employee has opted for accumulation with the treasury fund of the national social security agency (INPS), indemnities accrued after January 1, 2007 are accounted for as a defi ned contribution plan.

Elimination of fi nancial assets and liabilities

Financial assets are eliminated when the Company ceases to hold rights to receive fi nancial fl ows deriving from the same or when such rights are transferred to another entity, that is when risks and benefi ts of the fi nancial instrument cease to have an effect on the fi nancial position and operating performance of the Company. A fi nancial liability is written-off exclusively when the related obligation is cancelled, fulfi lled or expired. Any material change in the contractual terms relating to the liability result in its cancellation and in the recording of a new liability. Any difference between the book value and the amount paid to extinguish the liability is recorded in the Income Statement.

RevenuesRevenues are valued at the current value of the amount received or receivable.

Disposal of assetsDisposal of assetsThe revenue is recognized when the Company has transferred the risks and benefi ts connected with the ownership of the good, and ceases to exercise the activity associated with ownership and the actual control over the asset sold.

Services renderedRevenues are recorded based on the stage of completion of the operation at the date of the fi nancial statements. When the result of the service rendered cannot be reliably estimated, revenues are recorded only to the extent of retrievable costs.

83


The stage of completion is determined by valuing work carried out or by determining the proportion between costs incurred and total estimated costs to completion.

InterestInterest is recorded in the period in which it accrues, using the effective interest method.

DividendsDividends are recorded when the right of shareholders to receive them arises.

Grants

Grants are recorded when there exists a reasonable certainty that that the same will actually be received and the company meets the conditions for the entitlement to the grant.Grants linked to cost components (operating grants) are recorded under “other revenues” and amortized over several years so that revenues match the costs they are intended to compensate.The fair value of grants linked to assets (e.g. grants on the purchase of plant and equipment or grants for capitalized R&D costs), is suspended under long-term liabilities and released to the income statement under “other revenues” over the useful life of the asset to which it relates, thus in the period over which the depreciation expense relating to the asset is charged to the income statement.

Financial charges

Financial charges are recorded as a cost in the period in which they accrue.

Cost of goods purchased and services received

The cost of goods purchased and services received is recorded in the income statement based on the accrual method.

Income taxes (current, prepaid and deferred)

Current taxes are determined based on a realistic estimate of the tax expense for the period in accordance with applicable tax regulations.The Company records deferred and prepaid taxes arising from temporary differences between the book value of assets and liabilities and the related values reported for tax purposes, in addition to differences in the value of assets and liabilities generated by consolidation adjustments.Prepaid taxes are recorded only where there exists reasonable certainty of their retrieval through future profi ts within the term in which tax benefi ts are enjoyed. Deferred tax assets are recorded also where there exist deductible losses or tax credits, whenever it is deemed probable that suffi cient future profi ts will be generated in the medium-term (3 to 5 years).

Financial derivatives

Derivative fi nancial instruments are valued at market value (fair value). A derivative fi nancial instrument can be acquired for trading or hedging purposes.Gains and losses on fi nancial instruments acquired for trading purposes are charged to the income statement.Derivatives acquired for hedging purposes may be accounted for under the hedge accounting method – offsetting the recording of the derivative in the income statement with adjustments to the value of assets and liabilities hedged – only when derivatives meet specifi c criteria.Hedge derivatives are classifi ed as “fair value hedges” when they are acquired to hedge against the risk of fl uctuations in the market value of the underlying asset or liability or fl uctuations in the fi nancial fl ows deriving from the same, both in the case of existing assets and liabilities or those deriving from a future transaction.In the case of fair value hedges, gains and losses on the restatement of the market value of a derivative

84


instrument are taken to the income statement.With regard to the hedging of fi nancial fl ows, gains and losses on the hedge instrument are recorded under Shareholders’ Equity when they relate to the portion of the hedge considered effective, while the portion not hedged is recorded in the income statement.

Use of estimates

In accordance with IAS/IFRS, the Company made use of estimates and assumptions based on prior experience and other factors deemed determinant, but not certain. Actual data could therefore differ from estimates and projections made.Estimated data is reviewed periodically and adjustments made to the same are taken to the Income Statement for the period in which the review takes place in case the review affect only one period, or, subsequent accounting periods in case it affects also the same. Below we describe review processes and key assumptions used by management in applying accounting principles.

Provision for doubtful accountsThe provision for doubtful accounts reflects management estimates regarding losses on trade recei-vables.Losses on trade receivables expected by the Company are based on past experience on similar por-tfolios of receivables, current overdues vs. historical overdues, losses and collections, the close moni-toring of credit risk and credit worthiness of customers, in addition to projections on economic and market conditions.

Retrievable value of non-current assetsNon-current assets include property, plant and equipment, intangible assets, investments and other financial assets. Whenever circumstances so require, the management reviews periodically the book value of non-current assets held and used by the Company, in addition to assets to be disposed of. Such activity is carried out using estimates of expected cash flows from the sale of the asset and of adequate discount rates used in calculating the present value of the same. Whenever the book value of a non-current asset experiences a loss in value, the Company records a write-down equal to the difference between the book value of the asset and its retrievable value either through use or disposal of the same.

Post-retirement benefitsIn the estimation of post-retirement benefits the Company makes use of traditional actuarial tech-niques based on stochastic simulations of the “Montecarlo” type. Assumptions made relate to the discount rate and the annual inflation rate. Actuarial advisors of the Company make also use of demo-graphic projections based on current mortality rates, employee disablement and resignation rates.

Retrievability of deferred tax assetsCembre S.p.A. evaluates the possibility to retrieve deferred tax assets on the basis of profits and ex-pected future market conditions in view of current sale contracts and ability of expected future profits to offset tax credits, in addition to the expected variance of the same.

Potential liabilitiesIn carrying out its activity, management consults with its legal and tax advisors and experts. The Company ascertains a liability arising from litigation whenever it deems probable that a financial outlay will be made in the future and when the amount of resulting losses can be reasonably estimated. In case a financial outlay becomes possible but its amount cannot be determined, such occurrence is reported in the notes.

85


NOTES TO THE FINANCIAL STATEMENTS OF CEMBRE S.P.A.

1. TANGIBLE ASSETS

Land and buildings

Plant and machinery

EquipmentOther assets

Work in progress

Total

Historical cost 20,688,258 25,562,985 5,027,971 3,507,450 291,743 55,078,407

Accumulated depreciation (4,323,583) (21,031,959) (4,504,823) (2,870,278) - (32,730,643)

Bal. at Dec. 31, 2006 16,364,675 4,531,026 523,148 637,172 291,743 22,347,764

Increases 564,370 1,356,922 128,902 431,314 242,307 2,723,815

Depreciation (347,379) (1,349,219) (234,865) (270,793) - (2,202,256)

Net divestments (1,005,252) (2,709) - (2,782) (38,639) (1,049,382)

Reclassifications - 151,510 51,346 - (202,856) -

Bal. at Dec. 31, 2007 15,576,414 4,687,530 468,531 794,911 292,555 21,819,941

Land and buildings

Plant and machinery

EquipmentOther assets

Work in progress

Total

Historical cost 18,433,415 23,994,725 4,661,845 3,529,526 253,399 50,872,910

Accumulated depreciation (3,995,977) (19,713,695) (4,238,395) (2,796,725) - (30,744,792)

Bal. at Dec. 31, 2005 14,437,438 4,281,030 423,450 732,801 253,399 20,128,118

Increases 2,259,930 1,608,205 366,126 195,363 291,743 4,721,367

Depreciation (332,693) (1,357,651) (266,428) (282,330) - (2,239,102)

Net divestments - (558) - (8,662) (253,399) (262,619)

Bal. at Dec. 31, 2006 16,364,675 4,531,026 523,148 637,172 291,743 22,347,764

The streamlining of production and logistics led to the closing of the San Giuliano Milanese plant and the consequent sale of the industrial building hosting the plant, with a net divestment of €1,005 thousand and a capital gain of €380 thousand, recorded in the income statement under “other reve-nues”.Enclosed passages were built between the various production and warehousing units of the Brescia plant, resulting in an expense of €464 thousand.The renewal and upgrade of plant and machinery continued. Main purchases included a work station worth €450 thousand, and three pieces of machinery costing €387 thousand, while internal construc-tion of machinery generated costs amounting to €271 thousand.Expenditure on equipment in the year consists almost exclusively in the manufacturing and acquisi-tion of casts, of which €95 thousand were built internally.Increases in other assets consist prevalently in the acquisition of office electronic equipment and hardware (€208 thousand) and the acquisition of motor vehicles (€159 thousand).

86


2. INTANGIBLE ASSETS

Development costs Software Work in progress Total

Historical cost 226,688 2,089,017 - 2,315,705

Accumulated amortization (121,814) (2,058,664) - (2,180,478)

Balance at Dec. 31, 2006 104,874 30,353 - 135,227

Increases 57,450 191,404 250,000 498,854

Amortization (47,730) (126,055) - (173,785)

Balance at Dec. 31, 2007 114,594 95,702 250,000 460,296

Development costs relate to the widening of the product range with the introduction of a number of new products.The increase in software and work in progress are due to the implementation of the new information system. Work in progress relates mainly to advances paid on software.

3. INVESTMENTS IN SUBSIDIARIES

Subsidiary Dec. 31, 2006 Changes Write-downs Dec. 31, 2007

Cembre Ltd 3,437,433 - - 3,437,433

Cembre Sarl 1,048,197 - - 1,048,197

Cembre España SL 1,810,004 - - 1,810,004

Cembre AS 293,070 - - 293,070

Cembre GmbH 481,508 - - 481,508

Cembre Inc. 888,671 - - 888,671

General Marking S.r.l. 156,523 (57,523) - 99,000

Total 8,115,406 (57,523) - 8,057,883

At the end of the 3rd Quarter of 2005, Cembre S.p.A. paid to its subsidiary General Marking €498 thousand to cover losses accumulated. At the end of the same year, €431 thousand had been drawn-down from the reserve, while the residual €58 thousand were recorded as an increase in the value of the investment in the subsidiary. In view of the good results achieved by General Marking in 2006, in 2007 the subsidiary decided to release the reserve and to repay the amount to its parent, which has consequently reduced the value of the investment accordingly.

The table below shows financial highlights of subsidiaries, all of which are directly owned.


Cembre Ltd 3,437,433 - - 3,437,433

Cembre Sarl 1,048,197 - - 1,048,197

Cembre España SL 1,810,004 - - 1,810,004

Cembre AS 293,070 - - 293,070

Cembre GmbH 481,508 - - 481,508

Cembre Inc. 888,671 - - 888,671


Total 8,115,406 (57,523) - 8,057,883


Cembre Ltd 3,437,433 - - 3,437,433

Cembre Sarl 1,048,197 - - 1,048,197

Cembre España SL 1,810,004 - - 1,810,004

Cembre AS 293,070 - - 293,070

Cembre GmbH 481,508 - - 481,508

Cembre Inc. 888,671 - - 888,671


Total 8,115,406 (57,523) - 8,057,883


Cembre Ltd 3,437,433 - - 3,437,433

Cembre Sarl 1,048,197 - - 1,048,197

Cembre España SL 1,810,004 - - 1,810,004

Cembre AS 293,070 - - 293,070

Cembre GmbH 481,508 - - 481,508

Cembre Inc. 888,671 - - 888,671


Total 8,115,406 (57,523) - 8,057,883


Cembre Ltd 3,437,433 - - 3,437,433

Cembre Sarl 1,048,197 - - 1,048,197

Cembre España SL 1,810,004 - - 1,810,004

Cembre AS 293,070 - - 293,070

Cembre GmbH 481,508 - - 481,508

Cembre Inc. 888,671 - - 888,671


Total 8,115,406 (57,523) - 8,057,883

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Subsidiary Share capital Sh. Equity Net profit % (€) (€) (€) held

Cembre Ltd (Sutton Coldfield - Birmingham) 2,318,129 7,846,404 853,824 100

Cembre Sarl (Morangis - Paris, France) 1,071,000 3,281,077 495,172 95(a)

Cembre España SL (Coslada - Madrid, Spain) 1,902,000 5,214,000 1,141,599 95(a)

Cembre AS (Stokke - Norway) 301,584 373,508 117,212 100

Cembre GmbH (Munich - Germany) 512,000 1,718,486 236,407 95(a)

Cembre Inc. (Edison - New Jersey-USA) 978,195 1,888,962 564,468 71(b)

General Marking S.r.l. (Brescia - Italy) 99,000 732,893 589,632 100

(a) the remaining 5% held through Cembre Ltd.(b) the remaining 29% held through Cembre Ltd.

Share Capital, Shareholders' Equity and Net Profit figures above relate to the respective Financial Statements at December 31, 2007 approved by the boards of the above subsidiaries. Share Capital and Reserves originally not expressed in euro were translated at the year-end exchange rates, while Net Profit figures were translated into euro at the average exchange rate for the year.

4. OTHER INVESTMENTS

Dec. 31, 2007 Dec. 31, 2006

Inn.tec. srl 5,165 5,165Conai 59 59

Total 5,224 5,224

Other investments consist in the equity investments in Consorzio Nazionale Imballaggi and that in Inn.tec. S.r.l., technology innovation consortium, both with registered office at the Brescia Province head office.

5. OTHER NON-CURRENT ASSETS

The item includes exclusively security deposits.

6. INVENTORIES

Dec. 31, 2007 Dec. 31, 2006 Change

Raw materials 6,828,863 5,515,645 1,313,218

Work in progress and semi-finished goods 7,716,710 6,509,493 1,207,217

Finished goods 9,381,805 7,122,368 2,259,437

Total 23,927,378 19,147,506 4,779,872

Dec. 31, 2007 Dec. 31, 2006


Total 5,224 5,224

Dec. 31, 2007 Dec. 31, 2006


Total 5,224 5,224

88


The provision for slow-moving stock amounts to €750,235. Uses in the year amount to €149,765 due to the disposal of obsolete products in stock.The provision was charged directly to the value of finished products to bring their value into line with their expected realizable value.

7. TRADE RECEIVABLES FROM CUSTOMERS

Dec. 31, 2007 Dec. 31, 2006 Change

Gross trade receivables 17,078,317 17,328,080 (249,763)

Provision for doubtful accounts (569,383) (504,765) (64,618)

Total 16,508,934 16,823,315 (314,381)

Trade receivables by geographical area

Dec. 31, 2007 Dec. 31, 2006 Change

Italy 14,492 14,487 5

Europe 1,522 1,477 45

North America 144 124 20

Oceania 378 443 (65)

Middle East 318 277 41

Rest of the world 224 520 (296)

Total 17,078 17,328 (250)

The provision for doubtful accounts is reviewed periodically on the basis of the retrievability of indivi-dual exposures. Whenever bankruptcy procedures are opened, the amount receivable from the related customer is written-off. To provide further protection, a provision for overall bad debt is accrued.

Changes in the provision for doubtful accounts in the year are shown below:

Dec. 31, 2007 Dec. 31, 2006


Accruals 123,522 115,672

Uses (58,914) (60,221)

Balance at December 31 569,373 504,765

Trade receivables by maturity:

Not

expired0-90 days

91-180 days

181-365 days

366-730 days

Over 2 years

Under litigation

2007 13,725 2,348 285 169 73 69 4092006 13,080 3,144 356 215 107 36 390

89


8. TRADE RECEIVABLES FROM SUBSIDIARIES

Dec. 31, 2007 Dec. 31, 2006 Change

Cembre Ltd (UK) 2,226,283 1,786,848 439,435

Cembre Sarl (France) 750,713 636,918 113,795

Cembre España SL (Spain) 2,271,666 2,204,077 67,589

Cembre AS (Norway) 124,051 86,130 37,921

Cembre GmbH (Germany) 1,125,302 564,493 560,809

Cembre Inc. (US) 1,024,716 710,050 314,666

General Marking S.r.l. (Italy) 15,442 88,505 (73,063)

Total 7,538,172 6,077,021 1,461,151

9. LOANS EXTENDED TO SUBSIDIARIES

In 2006, Cembre SpA extended to subsidiary General Marking a €2,000,000 one-year loan expiring January 27, 2007. The loan was renewed for one year at a fixed rate of 3%. At December 31, 2007, interest accrued on the loan amounted to €56 thousand. The loan was repaid at maturity.

10. OTHER ASSETS

Dec. 31, 2007 Dec. 31, 2006 Change

Receivable from employees 19,754 15,723 4,031VAT receivable 125,710 348,497 (222,787)Other 95,489 42,264 53,225

Total 240,953 406,484 (165,531)

Item “Other” consists mainly of advances to suppliers.

11. CASH AND CASH EQUIVALENTS

The balance represents cash on hand and liquid assets at the date of the fi nancial statements.

12. SHAREHOLDERS’ EQUITY

At December 31, 2007, the capital stock of Cembre SpA amounted to €8,840,000, and was made up of 17 million ordinary shares of par value €0.52 each, fully underwritten and paid-up.The legal reserve amounts to 20% of the share capital.The sale of the industrial building in San Giuliano resulted in the reclassifi cation of €84 thousand

Dec. 31, 2007 Dec. 31, 2006 Change

Cembre Ltd (UK) 2,226,283 1,786,848 439,435



Cembre AS (Norway) 124,051 86,130 37,921


Cembre Inc. (US) 1,024,716 710,050 314,666


Total 7,538,172 6,077,021 1,461,151

Dec. 31, 2007 Dec. 31, 2006 Change

Cembre Ltd (UK) 2,226,283 1,786,848 439,435



Cembre AS (Norway) 124,051 86,130 37,921


Cembre Inc. (US) 1,024,716 710,050 314,666


Total 7,538,172 6,077,021 1,461,151

Dec. 31, 2007 Dec. 31, 2006 Change

Cembre Ltd (UK) 2,226,283 1,786,848 439,435



Cembre AS (Norway) 124,051 86,130 37,921


Cembre Inc. (US) 1,024,716 710,050 314,666


Total 7,538,172 6,077,021 1,461,151

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relating to the write-up in the value of the related plot of land, net of deferred taxes, from the Reserve for the transition to IAS/IFRS to Retained earnings. The effect of changes in the accounting of employee termination indemnities resulted in the reversal of the negative reserve for the conversion to IAS, generated upon the fi rst-time application of the same and amounting to €233 thousand, reclassifi ed as a reduction of the extraordinary reserve.The table that follows shows the origin, possible uses and availability for distribution of equity reserves:

Nature/description Amount Uses Portion available

Share capital 8,840,000 Equity reserves: Share premium reserve 12,244,869 A B C 12,244,869Revaluation reserve 585,159 A B ---Suspended-tax reserves 68,412 B ---Reserves accrued from earnings: Legal reserve 1,768,000 B ---Reserve for transition to IAS/IFRS 4,051,204 B ---Extraordinary reserve 20,191,996 A B C 20,191,996Retained earnings 83,526 A B C 83,526

Total 47,833,166 32,520,391

Portion not available for distribution 2,236,988 Portion available for distribution 30,283,403

Legend: A= capital increases; B= coverage of losses; C= distribution to Shareholders.

13. EMPLOYEE TERMINATION INDEMNITY AND OTHER PERSONNEL PROVISIONS

Changes in the provision are shown below.

(€) Dec. 31, 2007 Dec. 31, 2006Beginning balance 4,511,572 4,352,301Accruals 671,384 595,916Uses (408,373) (511,567)Reduction (Curtailment) (1,026,143) -Discounting effect (15,753) 74,922Social Security (INPS) pension fund (524,423) -Closing balance 3,208,264 4,511,572

With the reform of employee termination indemnities, starting with January 1, 2007 Cembre SpA will no longer be required to accrue retirement benefi ts in favor of its employees in a provision, but will pay out benefi ts accrued after such date to the INPS treasury account, unless such benefi ts have been destined to other pension funds by individual employees.Employee termination indemnities accrued at December 31, 2006 must therefore be discounted to their present value without keeping into account expected future pay increases of employees, while amounts accruing from January 1, 2007 are treated for accounting purposes as a defi ned benefi t plan.


8,840,000

Share premium reserve 12,244,869 A B C 12,244,869Revaluation reserve 585,159 A B ---Suspended-tax reserves 68,412 B ---

Legal reserve 1,768,000 B ---Reserve for transition to IAS/IFRS 4,051,204 B ---Extraordinary reserve 20,191,996 A B C 20,191,996Retained earnings 83,526 A B C 83,526

Total 47,833,166 32,520,391


Share premium reserve 12,244,869 A B C 12,244,869Revaluation reserve 585,159 A B ---Suspended-tax reserves 68,412 B ---

Legal reserve 1,768,000 B ---Reserve for transition to IAS/IFRS 4,051,204 B ---Extraordinary reserve 20,191,996 A B C 20,191,996Retained earnings 83,526 A B C 83,526

Total 47,833,166 32,520,391

91


In application of the reform of employee termination indemnities, a valuation of employee termination indemnities accrued at December 31, 2007 was carried out on behalf of Cembre by a registered actuary, and the value of employee termination indemnities accrued at December 31, 2006 was restated. The latter calculation resulted in a €1,026 thousand reduction (curtailment) in the value of the provision, recorded in full in the income statement.The table that follows shows the effect of the reform on the initial value of employee termination indemnities and on the value of the same at December 31, 2007.

Former treatment New treatment Initial effectEmployee termination indemnities at December 31, 2006

4,511 3,485 1,026

Employee termination indemnities at December 31, 2007

3,208

Change accrued in 2007 (277) of which: - accruals 671 - uses (408) - INPS treasury account (524) - actuarial effect at December 31, 2007 (16)

14. PROVISIONS FOR RISKS AND CHARGES

Social Security

(INAIL) litigation

Customer indemnities

Total

At December 31, 2006 230,698 57,456 288,154Accruals - 9,514 9,514Uses - (2,644) (2,644)At December 31, 2007 230,698 64,326 295,024

The provision for risks on Social Security (INAIL) litigation was accrued to cover possible liabilities arising from retroactive changes in the classifi cation of risks contested by the institution, against which Cembre SpA fi led an analytical and motivated appeal. The competent fi rst-degree Court ruled in favor of the Company. While other degrees of appeal are pending it was deemed appropriate to leave the provision unchanged.

15. DEFERRED TAX ASSETS AND LIABILITIES

Deferred tax assets are recorded prevalently against the provision for slow moving stock described above, and against the discounting of employee termination indemnities, limited to the portion of the accrual that may not be deducted for tax purposes.Deferred tax liabilities are instead recorded prevalently against the revaluation of land carried out upon the fi rst-time application of IFRS, against the valuation of inventories at the average cost (as for tax purposes these are valued at LIFO), in addition to the reversal of accelerated depreciation. To allow a meaningful comparison between deferred taxes at the end of 2007 and at the end of the previous year, deferred tax assets generated in 2006 by the discounting employee termination

92


indemnities accrued were subtracted in the table below from deferred tax liabilities. Such item, which in past years had generated deferred tax assets, as a result of the different accounting of employee termination indemnities introduced by the reform, generated in fact deferred tax liabilities. Total amounts shown in the table therefore differ by this amount from the corresponding items reported in the balance sheet.Finally, as a result of the tax reform introduced with the 2008 Budget Law, deferred taxes were adjusted to refl ect the reduced tax rates applicable from January 1, 2008 (IRES–corporate tax: 27.5%; IRAP–regional tax on productive activities: 3.9%).Further detail is provided in the note on Income taxes.No receivable matures beyond fi ve years. Dec. 31, 2007 Dec. 31, 2006Deferred tax liabilities Average cost valuation of inventories by the parent (462,018) (561,791)Accelerated depreciation (950,056) (1,210,353)Reversal of land depreciation (27,030) (32,066)Revaluation of land (1,859,165) (2,255,121)Discounting of employee termination indemnity (148,217) 165,965Capital gain on sale of industrial building (96,114) -

Gross deferred tax liabilities (3,542,600) (3,893,366)

Deferred tax assets Write-down of inventories 235,574 335,250Goodwill amortization 47,903 62,739Write-down of investment - 6,534Risk provision 5,308 6,297Provision for doubtful accounts 27,500 33,000Other 54,732 18,468

Gross deferred tax assets 371,017 462,288Net deferred tax liabilities (3,171,583) (3,431,078)

There do not exist other temporary differences or accruals that can generate deferred taxes not accounted for.

16. CURRENT FINANCIAL LIABILITIES

The item includes exclusively bank overdrafts generated in the ordinary management of collections and payments.

17. TRADE PAYABLES TO SUPPLIERS

Dec. 31, 2007 Dec. 31, 2006 ChangePayable to suppliers 9,575,663 9,599,174 (23,511)Advances 148,854 70,460 78,394Total 9,724,517 9,669,634 54,883

93


Trade payables to suppliers are recorded net of trade discounts. Cash discounts are instead recorded at the time of payment. The nominal value of trade payables is adjusted for returns and trade discounts (invoicing adjustments) agreed upon with the counterpart.

Trade payables by geographical area

Dec. 31, 2007 Dec. 31, 2006 Change

Italy 7,927 7,892 35

Europe 1,594 1,616 (22)

North America 4 2 2

Oceania 40 80 (40)

Other 11 9 2

Total 9,576 9,599 (23)

18. TRADE PAYABLES TO SUBSIDIARIES

Dec. 31, 2007 Dec. 31, 2006 Change

Cembre Ltd (UK) 26,447 29,579 (3,132)

General Marking S.r.l. (Italy) 373,141 309,842 63,299

Cembre GmbH (Germany) 3,435 190 3,245

Cembre España (Spain) 39,885 - 39,885

Cembre Sarl (France) 253 2,199 (1,946)

Cembre AS (Norway) 6,106 - 6,106

Cembre Inc. (US) - 81,193 (81,193)

Total 449,267 423,003 26,264

19. TAX PAYABLES

Dec. 31, 2007 Dec. 31, 2006 ChangeCurrent taxes payable 402,831 986,873 (584,042)

Further detail is provided in the note on income taxes.

Dec. 31, 2007 Dec. 31, 2006 Change

Cembre Ltd (UK) 26,447 29,579 (3,132)






Cembre Inc. (US) - 81,193 (81,193)

Total 449,267 423,003 26,264

Dec. 31, 2007 Dec. 31, 2006 Change

Cembre Ltd (UK) 26,447 29,579 (3,132)






Cembre Inc. (US) - 81,193 (81,193)

Total 449,267 423,003 26,264

Dec. 31, 2007 Dec. 31, 2006 Change

Cembre Ltd (UK) 26,447 29,579 (3,132)






Cembre Inc. (US) - 81,193 (81,193)

Total 449,267 423,003 26,264

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20. OTHER PAYABLES Dec. 31, 2007 Dec. 31, 2006 ChangePayables to employees 802,401 711,237 91,164Employee withholding taxes payable 785,562 651,434 134,128Bonuses owed to customers 214,489 215,077 (588)Commissions payable 214,293 232,524 (18,231)Payable to Statutory Auditors 11,270 25,233 (13,963)Social security payables 1,302,588 990,524 312,064Payable on other taxes and withholding taxes 13,889 16,847 (2,958)Other 20,313 20,883 (570)Total 3,364,805 2,863,759 501,046

21. REVENUES FROM SALES AND SERVICES PROVIDED Revenues by geographical area

Area Dec. 31, 2007 Dec. 31, 2006 ChangeItaly 39,296 37,152 2,144Rest of Europe 25,843 21,930 3,913Rest of the world 8,484 6,389 2,095Total 73,623 65,471 8,152

Changes are commented upon in the Management Report.

22. OTHER REVENUES

Dec. 31, 2007 Dec. 31, 2006 ChangeCapital gains on disposal of assets 389,463 6,576 382,887Rent 95,681 94,512 1,169Insurance damages 35,809 - 35,809Other reimbursements 126,470 109,155 17,315Other 35,266 38,843 (3,577)Total 682,689 249,086 433,603

Capital gains consist primarily of the sale of the industrial building located in San Giuliano (Milan), generating a €380 thousand capital gain.

23. COST OF RAW MATERIALS AND GOODS

Dec. 31, 2007 Dec. 31, 2006 ChangeRaw materials and goods 33,379,386 28,835,227 4,544,159Consumables and auxiliary materials 2,804,906 2,850,334 (45,428)Transport and customs 75,859 87,771 (11,912)Total 36,260,151 31,773,332 4,486,819

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24. COST OF SERVICES

Dec. 31, 2007 Dec. 31, 2006 ChangeSubcontracted work 3,584,293 3,071,211 513,082Transport 1,333,688 1,187,336 146,352Maintenance and repair 1,000,432 854,414 146,018Electricity, heating and water 993,999 946,949 47,050Consulting 613,788 527,650 86,138Directors’ compensation 684,535 577,869 106,666Statutory Auditors’ compensation 59,626 57,079 2,547Commissions 317,896 313,777 4,119Postage and telephone 164,664 174,135 (9,471)Fuel 135,807 136,437 (630)Traveling expenses 201,368 163,368 38,000Insurance 217,911 199,476 18,435Bank expenses 82,186 79,275 2,911Personnel training 32,567 25,159 7,408Advertising and promotion 40,252 34,672 5,580Security and cleaning 254,798 251,652 3,146Other 100,690 160,583 (59,893)Total 9,818,500 8,761,042 1,057,458

25. LEASES AND RENTALS

Dec. 31, 2007 Dec. 31, 2006 ChangeRent and related costs 568,646 533,280 35,366Vehicle leasing 196,718 212,814 (16,096)Total 765,364 746,094 19,270

Lease and rental costs are made up by rent paid on buildings leased from others and related parties, as described in the Management Report, and by motor vehicles lease costs.

26. PERSONNEL COSTS The item includes the cost of employees, inclusive of paid holidays and accruals made pursuant to current regulations and collective labor contracts. Employee termination indemnities include the accrual for the year inclusive of the revaluation of the provision, the amount accrued by employe-es terminating employment in the year, and the share borne by employees of contributions to the COMETA integrative pension fund.

96


Dec. 31, 2007 Dec. 31, 2006 ChangeWages and salaries 12,440,734 11,129,850 1,310,884Social security contributions 3,717,535 3,221,813 495,722Employee termination indemnities 838,775 744,105 94,670Retirement benefits 15,100 7,408 7,692Other costs 306,494 254,922 51,572Total 17,318,638 15,358,098 1,960,540

Average number of employees by category

Dec. 31, 2007 Dec. 31, 2006 ChangeManagers 6 7 (1)Administrative and commercial staff 149 141 8Workers 191 178 13Outsourced personnel 21 13 8Total 367 339 28

In 2006 Cembre SpA employed 21 persons outsourced from others for a total cost of €664 thousand. The amount was classified under wages and salaries.

27. NON-RECURRENT OPERATIONS

Following the reform of employee termination indemnities that became effective in 2007, employee termination indemnities accrued at December 31, 2006 were restated to reflect new actuaries. This non-recurrent event resulted in a €1,026 thousand reduction (curtailment) in the provision, recorded in full in the 2007 income statement.

28. OTHER OPERATING COSTS

Other operating costs are made up as follows:

Dec. 31, 2007 Dec. 31, 2006 ChangeSundry taxes 122,250 117,544 4,706Donations 36,000 37,950 (1,950)Other 55,763 14,028 41,735Total 214,013 169,522 44,491

29. RISK PROVISIONS

Dec. 31, 2007 Dec. 31, 2006 ChangeCustomer indemnities 9,514 7,941 1,573

The customer indemnities provision amounts to €9,514 thousand and was accrued against possible charges in the case of the termination of agency mandates.

97


30. FINANCIAL INCOME (EXPENSE)

Dec. 31, 2007 Dec. 31, 2006 Change

Loans and bank overdrafts (172,190) (37,689) (134,501) (172,190) (37,689) (134,501) Dividends from subsidiaries 461,008 - 461,008

Interest from subsidiaries 59,123 46,438 12,685Interest earned on bank account balances 50,712 46,158 4,554Other financial income 1,382 8,032 (6,650) 111,217 100,628 10,589

Financial income (expense) 400,035 62,939 337,096

In 2007, Cembre Ltd. paid out to the parent company £315 thousand in dividends, corresponding to €461 thousand reported in the table above. Interest from subsidiaries consist of interest accrued on the loan extended to subsidiary General Marking Srl described in the note on Related parties.

31. FOREIGN-EXCHANGE GAINS (LOSSES)

Dec. 31, 2007 Dec. 31, 2006 ChangeRealized foreign exchange gains 6,435 17,652 (11,217)Realized foreign exchange losses (144,914) (76,273) (68,641)Gains on foreign exchange translation 648 3,605 (2,957)Losses on foreign exchange translation (27,960) (25,115) (2,845)Total (165,791) (80,131) (85,660)

32. INCOME TAXES

The accrual to the tax provision is made in accordance with expected taxable income, taking into ac-count adjustments made to income reported in the statutory accounts.The table that follows shows a reconciliation between the theoretical tax expense, calculated at the normal tax rate, and the actual tax expense

IRES IRAP TOTAL

Profit before taxes 13,900,260 (*) 13,900,260Theoretical tax expense 4,587,086 1,106,087 5,693,173

Tax effect on increases 957,651 19,157 976,808Tax effect on decreases (1,157,097) (17,605) (1,174,702)Effect of decline in tax rates (548,707) (33,426) (582,133)Actual tax expense recorded 3,838,933 1,074,213 4,913,146

(*) Taxable income for the purposes of IRAP (regional tax on productive activities) amounts to €25,921,296.

IRES IRAP TOTAL



IRES IRAP TOTAL



IRES IRAP TOTAL



98


Deferred tax assets and liabilities Dec. 31, 2007 Dec. 31, 2006Average cost valuation of inventories 99,773 (302,714)Accelerated depreciation 260,297 141,911Reversal of land depreciation 5,036 -Land revaluation 395,956 -Discounting of employee termination indemnity (314,182) 2,120Capital gain on sale of industrial building (96,114) -Write-down of inventories (99,676) -Goodwill amortization (14,836) (5,912)Write-down of investment (6,534) (6,534)Risk provision (989) -Provision for doubtful accounts (5,500) -Other 36,264 (9,266)Total deferred and prepaid taxes 259,495 (180,395)

The change in deferred tax assets was affected signifi cantly by adjustments made to refl ect the reduction of tax rates introduced from 2008. In the table that follows we illustrate separately the effect of the tax reform and of ordinary changes in the period.

Change Effect of new tax rates Average cost valuation of inventories 13,696 86,077Accelerated depreciation 83,296 177,001Reversal of land depreciation - 5,036Land revaluation 49,583 346,373Discounting of employee termination indemnity (343,825) 29,643Capital gain on sale of industrial building (96,114) -Write-down of inventories (55,787) (43,889)Goodwill amortization (5,911) (8,925)Write-down of investment (6,534) -Risk provision - (989)Provision for doubtful accounts - (5,500)Other 38,958 (2,694)Total deferred and prepaid taxes (322,638) 582,133

The restatement of employee termination indemnities accrued at December 31, 2006 as a result of the change in accounting, resulted in the recording of €339 thousand in deferred tax liabilities, reported under a separate caption in the income statement and included in the table above among taxes on the discounting of employee termination indemnities.

33. DIVIDENDS

On May 31, 2007 the company distributed (with ex-dividend date May 28) a dividend on net profi t for the year ended December 31, 2006, amounting to €3,740 thousand, equivalent to €0.22 for each share entitled to dividends. 2007 2006Resolved and paid in the year Balance due for 2006 dividend: €0.22 (2005: €0.15) 3,740 2,550

Proposal submitted to the Shareholders’ Meeting (not recorded as liability at December 31) Balance due for 2007 dividend: €0.26 (2006: €0.22) 4,420 3,740

Proposed dividends submitted for approval to the Shareholders’ Meeting (not recorded as a liability at December 31) amount to €4,420 thousand.

Dec. 31, 2007 Dec. 31, 2006Average cost valuation of inventories 99,773 (302,714)Accelerated depreciation 260,297 141,911Reversal of land depreciation 5,036 -Land revaluation 395,956 -Discounting of employee termination indemnity (314,182) 2,120Capital gain on sale of industrial building (96,114) -Write-down of inventories (99,676) -Goodwill amortization (14,836) (5,912)Write-down of investment (6,534) (6,534)Risk provision (989) -Provision for doubtful accounts (5,500) -Other 36,264 (9,266)Total deferred and prepaid taxes 259,495 (180,395)

Dec. 31, 2007 Dec. 31, 2006Average cost valuation of inventories 99,773 (302,714)Accelerated depreciation 260,297 141,911Reversal of land depreciation 5,036 -Land revaluation 395,956 -Discounting of employee termination indemnity (314,182) 2,120Capital gain on sale of industrial building (96,114) -Write-down of inventories (99,676) -Goodwill amortization (14,836) (5,912)Write-down of investment (6,534) (6,534)Risk provision (989) -Provision for doubtful accounts (5,500) -Other 36,264 (9,266)Total deferred and prepaid taxes 259,495 (180,395)

Change Average cost valuation of inventories 13,696 86,077Accelerated depreciation 83,296 177,001Reversal of land depreciation - 5,036Land revaluation 49,583 346,373Discounting of employee termination indemnity (343,825) 29,643Capital gain on sale of industrial building (96,114) -Write-down of inventories (55,787) (43,889)Goodwill amortization (5,911) (8,925)Write-down of investment (6,534) -Risk provision - (989)Provision for doubtful accounts - (5,500)Other 38,958 (2,694)Total deferred and prepaid taxes (322,638) 582,133

Average cost valuation of inventories 13,696 86,077Accelerated depreciation 83,296 177,001Reversal of land depreciation - 5,036Land revaluation 49,583 346,373Discounting of employee termination indemnity (343,825) 29,643Capital gain on sale of industrial building (96,114) -Write-down of inventories (55,787) (43,889)Goodwill amortization (5,911) (8,925)Write-down of investment (6,534) -Risk provision - (989)Provision for doubtful accounts - (5,500)Other 38,958 (2,694)Total deferred and prepaid taxes (322,638) 582,133

99


34. COMMITMENTS AND RISKS

At December 31, 2006, guarantees granted by Cembre SpA to third parties amounted to €3,282,983, as compared with €636,318 at December 31, 2006.Guarantees granted include a letter of patronage for €0.5 million issued in favor of General Marking Srl against contractual obligations of the same, and a guarantee of €2.5 million against obligations of subsidiary Cembre GmbH. In 2008, the guarantee in favor of General Marking Srl was increased to €2 million.

35. NET FINANCIAL POSITION

At December 31, 2007, the net financial position of Cembre SpA amounted to an indebtedness of €1,131,973, declining on the end of the previous year due primarily to capital expenditure, both on tangible and intangible assets, made in 2007. The cash flow was affected by the payment of €4,770 thousand in tax advances, and the payment of €3,740 thousand in dividends. At December 31, 2007, the Company did not have outstanding loans containing covenants or negative pledges. The table that follows provides a detail of the net financial position as provided by Consob Regulation DEM/6064313 dated July 28, 2006:

Dec. 31, 2007 Dec. 31, 2006A Cash 9,817 7,189 B Bank deposits 717,458 1,192,607 C Cash and equivalents (A+B) 727,275 1,199,796 D Financial receivables from subsidiaries 2,055,562 2,046,438 E Financial receivables 2,055,562 2,046,438 D Current bank debt (3,914,810) (2,567,102)E Payables on derivatives - - G Current financial debt (D+E) (3,914,810) (2,567,102)H Net current financial position (C+E+G) (1,131,973) 679,132 M Non-current financial debt - - N Net financial position (H+M) (1,131,973) 679,132

36. RELATED PARTIES

The table that follows shows transactions between Cembre Spa and its subsidiaries at December 31, 2007, limited to sales and purchases. Debit and credit balances are shown in the related paragraphs of the present notes.

Subsidiary Sales PurchasesCembre Ltd. 6,202,481 201,282Cembre S.a.r.l. 2,993,500 42,624Cembre España S.L. 5,852,350 263Cembre AS 369,443 -Cembre GmbH 2,795,919 34,161Cembre Inc. 3,391,122 889General Marking S.r.l. 259,430 1,833,362Total 21,864,245 2,112,580

As required by CONSOB, Cembre S.p.A.’s shareholdings over 10% held in limited liability publicly traded companies and unlisted joint-stock companies at December 31, 2007, are shown in the table below. The Company holds full title to the investments listed below.

Dec. 31, 2007 Dec. 31, 2006A Cash 9,817 7,189 B Bank deposits 717,458 1,192,607 C Cash and equivalents (A+B) 727,275 1,199,796 D Financial receivables from subsidiaries 2,055,562 2,046,438 E Financial receivables 2,055,562 2,046,438 D Current bank debt (3,914,810) (2,567,102)E Payables on derivatives - - G Current financial debt (D+E) (3,914,810) (2,567,102)H Net current financial position (C+E+G) (1,131,973) 679,132 M Non-current financial debt - - N Net financial position (H+M) (1,131,973) 679,132

A Cash 9,817 7,189 B Bank deposits 717,458 1,192,607 C Cash and equivalents (A+B) 727,275 1,199,796 D Financial receivables from subsidiaries 2,055,562 2,046,438 E Financial receivables 2,055,562 2,046,438 D Current bank debt (3,914,810) (2,567,102)E Payables on derivatives - - G Current financial debt (D+E) (3,914,810) (2,567,102)H Net current financial position (C+E+G) (1,131,973) 679,132 M Non-current financial debt - - N Net financial position (H+M) (1,131,973) 679,132

100


Si precisa che tutte le partecipazioni sotto indicate sono detenute a titolo di proprietà.

Share % held % of Company Head office Capital

directly indirectly through total voting

rights

Cembre Ltd Sutton Coldfield Gbp 1,700,000 100% 100% 100% (Birmingham - UK)

Cembre Sarl Morangis € 1,071,000 95% 5% Cembre Ltd 100% 100% (Paris - France)

Cembre Coslada € 1,902,000 95% 5% Cembre Ltd 100% 100% España SL (Madrid-Spain)

Cembre AS Stokke Nok 2,400,000 100% 100% 100% (Norway)

Cembre GmbH Monaco € 512,000 95% 5% Cembre Ltd 100% 100% (Germany)

Cembre Inc. Edison US $ 1,440,000 71% 29% Cembre Ltd 100% 100% (New Jersey - USA)

General Brescia € 99,000 100% 100% 100% Marking S.r.l. (Italy)

Cembre S.p.A. leased an industrial building to subsidiary General Marking. Rent for the building for 2007 amounts to €96 thousand.Among assets leased to Cembre by third parties are an industrial building adjacent to the Company’s registered offi ce measuring a total of 5,960 square meters on three fl oors, in addition to the Milan, Padua and Bologna sales offi ces, all of which are owned by company Tha Immobiliare SpA, with registered offi ce in Brescia, controlled by Anna Maria Onofri, Giovanni Rosani and Sara Rosani, directors of Cembre SpA. Lease payments for 2007 amounted to €494 thousand. Rent for 2007 is in line with market conditions. It is in the Company’s interest to benefi t from the continuity of offi ce space reducing the risk of early termination of leases. At the end of 2007, all amounts due to Tha Immobiliare had been settled.With reference to assets and liabilities relating to subsidiaries shown above, we confi rm that transactions with the same and with related parties fall within the scope of normal operating activities.Cembre S.p.A. does not have direct relationships with its parent company Lysne S.p.A. of any other nature than that of the exercise of shareholders’ rights on the part of the parent. Lysne S.p.A. does not carry out any management or coordination activity with respect to Cembre S.p.A.

37. RISK MANAGEMENT AND FINANCIAL INSTRUMENTS

Due to its minimal exposure, Cembre S.p.A. does not make signifi cant use of derivative instruments to hedge against interest risk and currency exposure.

Interest risk

Cembre S.p.A. normally stipulates fl oating rate loan contracts.At December 31, 2007, no loan remained outstanding. Bank debt consists exclusively of overdrafts. The short-term maturity of a large portion of fi nancial instruments held is such that their carrying value is in line with the fair value of the same.

Currency risk

Despite a strong international presence, Cembre S.p.A. does not have a signifi cant exposure to currency risk (on an operating or equity basis), as it operates mainly in the euro area, the currency in which its trade transactions are mainly denominated. At December 31, 2007, the following foreign exchange positions were held:

101


2007 2006currencycurrency € equivalentequivalent currencycurrency € equivalentequivalent

Receivables in US$ 1,508,484 1,024,716 935,135 710,049Receivables in AUS$ 31,067 18,540 143,466 85,954Receivables in YEN 9,970 60 0 0

Payables in US$ 1,645 1,117 114,631 87,039Payables in AUS$ 64,963 38,768 138,914 83,227Payables in CHF 128,795 77,836 210,650 131,091Payables in GBPPayables in GBP 0 0 298 444

Current accounts in US$ 469,850 319,170 700,052 531,550

Amounts were translated into euro at the exchange rate applicable at December 31, 2007. The translation generated a negative difference with the book value of foreign currency amounts of €31 thousand, recorded in the income statement. In the table that follows we report the economic effect of possible fl uctuations in exchange rates of the said amounts.

Exchange rate change Receivables Payables Current accounts2007 5% (50) 6 (15) -5% 55 (12) 17 2006 5% (38) 14 (25) -5% 42 (16) 28

As illustrated above, the size of these transactions and the resulting balances are not signifi cant in infl uencing the overall performance of the Company.

Liquidity risk

The exposure of the Company to liquidity risk is not material.

Credit risk

Exposure to credit risk relates exclusively to trade receivables.None of the areas in which Cembre S.p.A. operates poses relevant credit risks.Operating procedures limit the sale of products or services to customers who do not possess an adequate credit profi le or provide guarantees.

38. SUBSEQUENT EVENTS

No event having signifi cant effects on the Company’s fi nancial position or operating performance occurred after the closing of the fi nancial year.

Attachments

The present document contains the following attachments:

Attachment 1: Directors and Auditors’ Compensation;

Attachment 2: Summary of last approved financial statements of consolidated companies;

Attachment 3: Auditing certification.


THE CHAIRMAN OF THE BOARD OF DIRECTORS CARLO ROSANI

102


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103


Attachment 2 – Notes to the Financial Statements of Cembre S.p.A.

SUMMARY FINANCIAL DATA OF CONSOLIDATED SUBSIDIARIES

(EX ARTICLE 2429 OF THE ITALIAN CIVIL CODE)

(in euro) Non-current Current Total assets Shareholders' Total liabilities Total liabilities and

assets assets Equity Shareholders' Equity

Cembre Ltd 5,209,577 6,074,228 11,283,804 7,846,404 3,437,400 11,283,804

Cembre Sarl 487,102 4,459,271 4,946,373 3,281,077 1,665,295 4,946,373

Cembre España SL 935,294 7,903,390 8,838,684 5,214,000 3,624,684 8,838,684

Cembre AS 2,239 578,830 581,069 373,508 207,561 581,069

Cembre GmbH 2,704,041 2,751,693 5,455,734 1,718,486 3,737,248 5,455,734

Cembre Inc 245,067 2,786,079 3,031,146 1,888,962 1,142,184 3,031,146

General Marking S.r.l. 1,903,457 1,355,633 3,259,091 736,628 2,522,463 3,259,091

Total Gross operating Operating Profit Income Net profit revenues profit profit before taxes taxes (loss)

Cembre Ltd 13,868,849 1,551,996 1,125,278 1,135,009 (281,185) 853,824

Cembre Sarl 6,450,351 761,299 720,452 713,554 (218,382) 495,172

Cembre España SL 11,580,950 1,795,296 1,659,708 1,691,999 (550,400) 1,141,599

Cembre AS 780,412 150,390 149,566 155,419 (38,207) 117,212

Cembre GmbH 4,961,531 439,586 416,490 399,920 (163,513) 236,407

Cembre Inc 5,407,616 972,242 923,023 923,023 (358,555) 564,468

General Marking S.r.l. 2,369,504 626,737 388,679 327,954 265,274 593,228

Figures above relate to the respective Financial Statements at December 31, 2007. The translation of amounts expressed in currencies other than the euro was carried out as described in the notes to the Financial Statements at December 31, 2007.

104


Attachment 3 – Notes to the Financial Statements of Cembre S.p.A.COMPENSATIO FOR AUDITING SERVICES AND SERVICES OTHER THAN AUDITING

(pursuant to article 149-duodecies of Listed Companies Code (CONSOB)

Service Independent auditors Service received by Compensation (€’000)

Auditing Reconta Ernst & Young Cembre S.p.A. 82

Auditing Reconta Ernst & Young Subsidiaries 105

Tax advisory Reconta Ernst & Young Subsidiaries 7

105


Report of the Board of Statutory Auditors on the Financial Statements of Cembre S.p.A. at December 31, 2007

To our Shareholders:pursuant to article 153 of legislative decree no. 58, dated February 24, 1998, of the Italian Civil Code, and subsequent amendments, the Board of Statutory Auditors reports to the Shareholders’ Meeting called to approve the 2007 Financial Statements on the monitoring activity carried out and on omis-sions and censurable facts observed, in addition to expressing a recommendation on the Financial Statements, their approval and other pertinent issues.In compliance with responsibilities assigned by article 149 of legislative decree no. 58, dated February 24, 1998, and subsequent amendments, the Board of Statutory Auditors reports the following:

In 2007 the Board:- attended two Shareholders’ Meetings; - attended five meetings of the Board of Directors in which Directors informed the Board of Statutory

Auditors on main operations of economic and financial relevance carried out by the Company and its subsidiaries. In this regard, we can reasonably state that operations resolved and/or carried out, complied with the Law and the provisions of the By-laws, were not in potential conflict of interest or in contrast with Shareholders’ resolutions taken, were carried out in compliance with correct management principles, were not manifestly imprudent, did not involve an excessive amount of risk, constitute a potential conflict of interest or were such as to compromise the integrity of the company’s assets;

- in the person of its Chairman, attended four meetings of the Internal Audit Committee, carried out pursuant to provisions of the By-laws, Laws and norms that regulate their functioning;

- met three times with the Company’s independent auditors and had a number of contacts by tele-phone.

The Board of Statutory Auditors met nine times, in addition to verifying through an appointed Perma-nent Auditor the decommissioning of plant and equipment, and carrying out two other verifications through its Chairman to attest expenditure on R&D projects and verifying costs relating to IRAP (regional tax on productive activities) tax facilitations.We have acquired direct knowledge and monitored, to the extent required by our task, the adequacy of the organizational structure of the Company and of its administrative and managerial organization in relation to its size, gathering information from persons in charge of the organization of the Com-pany and through meetings with the independent auditors involving exchange of data and relevant information, to verify the respect of diligent and correct administration principles. We have also monitored the adequacy of the internal auditing system, also at the consolidated level, to verify the respect of internal procedures, both operating and administrative, and their ability to

106


ensure a correct and efficient management, aiming to identify, prevent and manage, wherever possible, financial and operating risks, in addition to possible frauds that could damage the company. The Company adopted an organizational, managerial and control model pursuant to Legislative Decree 231/01 and subsequent amendments, on the Administrative Responsibilities of Entities, as resolved by the Board of Directors on March 25, 2008, creating a Monitoring Board that will issue periodical reports.The model aims at preventing and identifying possible infringements of the Law through the mapping of risks incurred by the company in its operating activities.Instructions imparted to subsidiaries pursuant to article 114, paragraph 2, of Legislative Decree no. 58/1998 appear adequate.Information pursuant to article 150, comma 2 of Legislative Decree no. 58/98 was supplied and sou-ght independently by the Board of Statutory Auditors, from which no data or relevant information, omissions, censurable facts, irregularities or in any case significant events worth reporting to relevant Authorities or of mention in the present report have emerged.The Board of Statutory Auditors did not receive any report pursuant to article 2408 of the Italian Civil Code or has any knowledge of any other denunciation pursuant to the same received by others.The Board of Directors transmitted to us, within the term set by law, the Report on the first six mon-ths of 2007, publishing it pursuant to rules set by Consob, complying with publishing requirements of quarterly reports.Likewise, the Board of Directors transmitted to us the Balance Sheet, Income Statement, Statement of Cash Flows and Statement of Changes in the Shareholders’ Equity, together with the Notes to the accounts. The Report on Operations for the 2007 financial year illustrates events occurred after the date of the financial statements and the outlook for 2008.

With regard to Consob communications, we can attest that:- information provided by Directors in the Report on Operations can be deemed exhaustive and

complete. The notes to the accounts provide detailed information on the form and content of the Financial Statements, accounting principles and valuation criteria adopted;

- in compliance with Consob communication dated July 28, 2006, the Report on Operations includes performance indicators (significant results, contribution margins, aggregate data);

- in the verifications and checks we performed on the Company, we did not encounter any atypical or unusual transaction;

- with regard to transactions between Group companies and those with related parties, the Report on Operations and the Notes to the accounts describe and explain exchanges of goods and services between the Company and its subsidiaries or other related parties, attesting that the same were car-ried out at market conditions, keeping into account the quality of goods and services exchanges;

- in the field of risk management and financial instruments, the nature and amount of risks were reported;

- The Audit Report does not contain reference to lack of disclosure or related observations and proposals;

107


- in the year we delivered the opinions requested to the Board of Statutory Auditors pursuant to the law;

- in compliance with article 149 n.1 lett.c) bis of Legislative Decree no. 58, February 24, 1998, we acknowledge that, as it appears in the Report on Corporate Governance, the Cembre Group par-ticipates and complies with the Self-conduct code issued by the Committee for Corporate Gover-nance of listed companies, as integrated and implemented, through its adoption and compliance with Regulations for STAR segment listed companies;

- the adoption of the said Code was verified by the Board of Statutory Auditors and represented the subject, in its various aspects, of the Report on Corporate Governance that the Board of Directors made available and to which we refer for a more complete and adequate information.

We enclose in the present report a full description of positions held as directors or statutory auditors in other joint-stock companies by permanent auditors and substitute auditors.In addition to the auditing of the statutory accounts and consolidated financial statements, Cembre S.p.A. appointed Reconta Ernst & Young to carry out a limited audit of its Consolidated Half-year Reports and Quarterly Reports, including the review, verification and auditing of tax returns and Forms 770, together with the tax audit of its subsidiaries (tax services), for a total compensation of €7,000.We have verified the correct application of criteria and procedures adopted by the Board of Directors in the year to evaluate the independence of Independent Directors and that of the Board of Statutory Auditors, as required by the Code of Conduct.The statutory accounts for which we verified compliance with laws regulating its format and pre-paration through checks carried out by us within the limits of our task as provided by article 149 of Legislative Decree no. 58, February 24, 1998, and subsequent amendments, and information provided by the Independent Auditors, report a net income of €8,987,113, as compared with a net income of €6,665,345 in the previous year.The Board of Statutory Auditors therefore deems the Financial Statements at December 31, 2007 and the proposed allocation of net profit for the year submitted by the Board of Directors to be suitable to receive your approval.

Brescia, April 1, 2008

The Board of Statutory Auditors

Guido Astori Chairman

Andrea Boreatti Permanent Auditor

Leone Scutti Permanent Auditor

108


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109


BOREATTI DOTT. ANDREA

Dottore commercialista – Revisore contabile

Via Angelo Maj, 14/D

24121 BERGAMO

Tel. 035 248044 – Fax 035 225281

E-mail: [email protected]

BOARD POSITIONS HELD (ART. 148 BIS C.I. LGS. DEC. 58/98) IN JOINT-STOCK COMPANIES TO BE DISCLOSED TO SHAREHOLDERS’ MEETINGS

(EX ART. 2400 COMMA 4, EX ART.2 LAW 28/12/2005 No.262)

BOARD POSITIONS HELD IN JOINT-STOCK COMPANIES

COMPANY REGISTERED OFFICE TAX ID POSITION

EXPIRATION

approval of financial

statements

POINTS

JOINT-STOCK COMPANY:

Cembre Spa Brescia, via Serenissima, 9 00541390175 Permanent Auditor without accounting

audit responsibilities 2008 1.00

LARGE COMPANY (CONSOLIDATED):

Lysne Spa Brescia - Via Diaz 9 01071060162 Chairman of Board of Statutory Auditors

without accounting audit responsibilities 2007 0,40

LARGE COMPANY WITHOUT AUDITING RESPONSIBILITIES:

Arti Grafiche Johnson Spa Seriate (Bg) - Via Grinetta 9/A 00440220168 Permanent Auditor without accounting

audit responsibilities 2007 0,40

MEDIUM COMPANY WITH AUDITING RESPONSIBILITIES:

Coge Srl Bergamo - Via Quinto Alpini 4 01820220166 Chairman of Board of Statutory Auditors

with accounting audit responsibilities 2009 0,40

Edilferri Spa Castel Rozzone (Bg) - Via Monte Rosa 9 02878410162 Permanent Auditor with accounting audit

responsibilities 2007 0,40

Filca Cooperative Soc. a rlpa Lecco - Piazza Manzoni 2 01574940134 Permanent Auditor with accounting audit


Sile Srl Barzana (Bg) - Via San Pietro 5 02635690163 Chairman of Board of Statutory Auditors


MEDIUM COMPANY WITHOUT AUDITING RESPONSIBILITIES:

Crb Srl Costruzioni Residenziali Brianza Castelcovati (Bs) - Via Degli Artigiani 8 02196920983

Permanent Auditor without accounting


Gamba Bruno Spa Bergamo - Via Baioni 31/C 02991740172

Permanent Auditor without accounting


SMALL COMPANY:

Benatti Holding Srl Lecco - Via Cavour 44 02971550138 Permanent Auditor without accounting


Ciceri Spa Curno (Bg) - Via Dell'Aeronautica 19 02262880160 Chairman of Board of Statutory Auditors


BOREATTI DOTT. ANDREA

Dottore commercialista – Revisore contabile

Via Angelo Maj, 14/D

24121 BERGAMO

Tel. 035 248044 – Fax 035 225281

E-mail: [email protected]

BOARD POSITIONS HELD (ART. 148 BIS C.I. LGS. DEC. 58/98) IN JOINT-STOCK COMPANIES TO BE DISCLOSED TO SHAREHOLDERS’ MEETINGS

(EX ART. 2400 COMMA 4, EX ART.2 LAW 28/12/2005 No.262)

COMPANY REGISTERED OFFICE TAX ID POSITION

EXPIRATION

approval of financial

statements

POINTS

SMALL COMPANY:

Helga Immobiliare Srl Bergamo - Via Dei Partigiani 4 0657650164 Chairman of Board of Statutory Auditors


Iniziative Editoriali Srl Lecco - Via Fiume 8 10379310153 Permanent Auditor with accounting audit


Kilily Spa Bergamo - Via Angelo Maj 14/D 02698280167 Chairman of Board of Statutory Auditors


M & P Capital Srl Bergamo - Via Angelo Maj 14/D 03186060160 Permanent Auditor without accounting


Modulo Zeta Srl Lecco - Via Fabio Filzi 12 06851150158 Permanent Auditor with accounting audit


Monitor Tv Spa Lecco - Piazza Manzoni 2 0524210135 Permanent Auditor with accounting audit


Tha Immobiliare Spa Brescia - Via Diaz 9 02250350168 Chairman of Board of Statutory Auditors


BOARD POSITIONS

Banca Popolare Lecchese Lecco - P.zza Manzoni Ang. Via Visconti 02261070136 Director 2007 0,75

Ars Net Srl Bergamo - Via Angelo Maj 14/D 03082640164 Sole director Not defined 0,00

1 position held in joint stock company and 20 overall positions held (including exempt).

Bergamo, April 01, 2008

Boreatti Dott. Andrea

110


LEONE SCUTTI

Ragioniere Commercialista – Revisore Contabile Via Pontida n.1 – P.za Martiri di Belfiore n.3

25121 B R E S C I A

Tel. 03047460 r.a. – Fax 03040533

Cod.Fisc. SCTLNE36S16D086B

Partita Iva 00622650174

E.mail: [email protected]

BOARD POSITIONS HELD (ART. 148 BIS C.I. LGS. DEC. 58/98) IN JOINT-STOCK COMPANIES TO BE DISCLOSED TO SHAREHOLDERS’ MEETINGS (EX ART. 2400

COMMA 4, EX ART.2 LAW 28/12/2005 No.262)

JOINT-STOCK COMPANY

Name Registered office Tax ID and Position

EXPIRATION

Reg. No.

Approval of financial

statements

Points

CEMBRE SpA Brescia, Via Serenissima n.9 00541390175

Permanent Auditor without ac-

counting audit responsibilities

2008

1

LARGE COMPANY WITH AUDITING RESPONSIBILITIES

Eural Gnutti SpA Rovato (BS), Via S. Andrea n.3 00481190171 Permanent Auditor

2007

0.6

Industrie Pasotti SpA Brescia, Via della Musia n.97 00297220170 Permanent Auditor

2008

0.6

Trafilerie Carlo Gnutti SpA Chiari (BS), Via S.Bernardino n.23a 00276360179 Permanent Auditor

June 30, 2009

0.6

MEDIUM COMPANY WITH AUDITING RESPONSIBILITIES

Atib Srl Dello (BS), Via Quinzanese n.3 00297880171 Permanent Auditor

2007

0.4

Cremaschini F.lli SpA Brescia, Via Pontida n.1 01255460170 Permanent Auditor

2008

0.4

Euromec Srl Isorella (BS), Via Visano n.78/80 00503860173 Permanent Auditor

2009

0.4

Os.al.mec Srl Maclodio (BS), Via Roma n.55 00478390172 Permanent Auditor

2009

0.4

Sei SpA Ghedi (BS), Via Industriale n.8/d 00274240175 Permanent Auditor

2009

0.4

Socar SpA Brescia (BS), Via Cesare Deretti n.10 01979720172 Permanent Auditor

2008

0.4

MEDIUM COMPANY WITHOUT AUDITING RESPONSIBILITIES

Alumec SpA Rudiano (BS), Via Lavoro e Industria Trav.200 00474750171 Chairman

2009

0.2

Eco-Zinder Srl Brescia, Via Pontida n.1 08905640150 Permanent Auditor

2008

0.2

Gambari International Srl Lumezzane (BS), Via Mainone n.8 01654730983 Permanent Auditor

2009

0.2

G.C.E. Srl Brescia, Via Pontida n.1 01922980980 Permanent Auditor

2008

0.2

SMALL COMPANIES

Fimo SpA Brescia, Via Pontida n.1 00275800175 Permanent Auditor

2009

/

Gruppo Beni Immobili SpA Brescia, Piazza Martiri di Belfiore n.3 02734780980 Chairman

2008

/

Isomec Srl Isorella (BS), Via Visano n.72/a 01243820170 Permanent Auditor

2007

/

La Tesa SpA San Zeno Naviglio (BS), Via Iv Novembre n.32 00561010174 Permanent Auditor

2009

/

L.M.V. SpA Brescia, Via Stretta n.32 00273130179 Chairman

2007

/

Omec Serrature SpA Lumezzane (BS), Via Caselli n.22 01244790174 Permanent Auditor

2007

/

Orizio Paolo SpA in liquidazione Rodengo Saino (BS), Via Stacca n.3 00270960172 Permanent Auditor

2007

/

Projecta Engineering SpA Brescia, Via Rodi n.15 03133620173 Permanent Auditor

2007

/

Sarda SpA Domusnovas (CA), Loc. Matt' e' Conti 00263830929 Permanent Auditor

2007

/

The Four Company Srl Villa Carcina (BS), Via Marconi n.118b 00313440174 Permanent Auditor

2007

/

1 position held in joint stock company and 24 overall positions held (including exempt)

Brescia 01.04.2008

Rag. Leone Scutti

111


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

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

Shareholders General Meeting approved Cembre S.p.A. Financial Statements for the financial year ending 31 December 2007 and the documents annexed. Stating that the legal reserve had already reached an amount of 20% of Capital Stock, Shareholders General Meeting approved the allocation of the Company’s 2007 financial year net profit of €8,987,113,37 (rounded of to €8,987,113 in Fi-nancial Statements) as follows::

- dividend payments to shareholders, in the amount of €0.26 for each of the Company’s 17,000,000 outstanding shares € 4,420,000

- to the extraordinary reserve € 4,567,113

The dividend is payable from 22 May 2008 with a date of record of 19 May 2008.

The consolidated financial statement for the financial year ending 31 December 2007 and documents annexed have been presented to Shareholders General Meeting.

Via Serenissima, 9 - 25135 Brescia (Italy)Phone: 030 3692.1

Telefax: 030 3365766

www.cembre.comE-mail: [email protected]

2 0 0 7 - Cembre · Cembre is currently a group employing 525 persons, with a turnover in 2007...

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Transcript of 2 0 0 7 - Cembre · Cembre is currently a group employing 525 persons, with a turnover in 2007...