OTHER INFORMATION

Information on shares held by Directors, General Managers and Statutory Auditors

The chart below gives the information required by Art. 79 of Consob Resolution no. 11971 of May 14 1999 and subsequent amendments and additions.

SHARES HELD BY DIRECTORS, STATUTORY AUDITORS AND GENERAL MANAGERS

 (1)         Owned indirectly through COFIDE S.p.A.

(2)          At December 31 2010 the shares were held through the following companies:

CIR S.p.A.       220,775,235

ROMED S.p.A.              1,000

(3)          Owned indirectly through CIR S.p.A.

(4)          Owned indirectly through Siria S.r.l.

(5)          Owned indirectly through Alpa S.r.l. and Fiduciaria Biennebi S.p.A.

Incentive plans based on financial instruments

The CIR Group has put in place various share-based incentive plans for the management teams of the companies of the Group. Reference should be made to the explanatory Notes to the Financial Statements for further information on these plans.

Own shares

At December 31 2010 the Parent Company owned 43,074,000 of its own shares (equal to 5.44% of its capital). The Group does not own any more own shares other than those indicated above.

For further details on the subject of own shares held as treasury stock, reference should be made to the comment on equity in the Notes to the Financial Statements.

At December 31 2010 the Group did not possess any shares of its controlling company nor did it buy or sell any shares of the latter either directly or through a fiduciary or intermediary.

Transactions with companies of the Group and related parties

On October 28 2010 the Company adopted the Rules for Related Party Transactions contained in Consob Regulation issued with Resolution no. 17221 of March 12 2010 as subsequently amended and integrated by Resolution no. 17389 of June 23 2010. This procedure can be consulted on the website www.cirgroup.it in the section “Governance”.

The procedure has the aim of establishing principles of conduct that the Company is required to adopt in order to guarantee the correct management of related-party transaction and thus:

1.      It sets out the criteria and procedures for identifying the Company’s related parties;

2.      It gives the principles for identifying related-party transactions;

3.      It regulates the procedures for carrying out transactions with related parties;

4.      It establishes how the relative disclosure obligations will be complied with.

The Board of Directors has also appointed a Committee for Related-Party Transactions, establishing that its members will be the same as the members of the Internal Control Committee, except for the system of substitutes set out in the procedures.

During the year CIR S.p.A. provided management and strategic support services to its subsidiaries and affiliates which involved, among other things, supplying administrative and financial services, making loans, and issuing guarantees.

Transactions with the controlling parent company consisted of providing services of an administrative and financial nature and being supplied with management support and communication services. The main concern of CIR and its counterparties in relation to these services is to ensure quality and a high level of efficiency of the services rendered, which derive from CIR’s specific knowledge of the businesses of the Group.

Transactions between companies of the Group are settled at normal market conditions on the basis of the quality and the specific nature of the services rendered.

The most significant financial transactions between CIR and its subsidiaries are analysed in detail in the explanatory Notes to the separate financial statements, particularly under the item Sundry receivables, Other payables and Borrowings from subsidiaries in the Statement of Financial Position and under the items Sundry revenues and income, Financial expense and Dividends in the Income Statement.

For further details on related-party transactions, reference should be made to paragraph 26 “Other information”.

Regarding the main equity transactions reference should be made to the appropriate sections of the Notes to the Financial Statements.

It should be pointed out that the CIR Group did not enter into any transactions with related parties, according to Consob’s definition, or with entities other than related parties of a non-typical or unusual nature beyond normal business administration or such as to have any significant impact on the economic, financial or equity situation of the Group.

The code of conduct governing transactions with related parties was defined by the Board of Directors of the Company in September 2002.

National Tax Consolidation

The Income Tax Consolidation Act (TUIR) gives the possibility for companies belonging to the same group to determine a single total income figure corresponding in principle to the algebraic sum of the taxable incomes of the various companies (parent company and subsidiaries controlled directly and/or indirectly by more than 50% according to certain requisites) and thus to calculate a single tax figure for the income of the companies of the group. In 2004 the Boards of Directors of 28 companies belonging to the Espresso, Sorgenia, Sogefi and KOS (formerly HSS) subgroups voted to take part in the “CIR Tax Consolidation” for the three years 2004-2006, signing a general agreement (“General Rules of the CIR Tax Consolidation”), which set out the rights and obligations of CIR and its subsidiaries, resulting from their taking part in the tax consolidation.

In 2007 CIR and companies of the Espresso, Sorgenia, Sogefi, Kos and Jupiter subgroups renewed their participation  in the “CIR Tax Consolidation” for the three years 2007-2009.

In 2010 CIR and companies belonging to the Espresso, Sogefi, KOS and Jupiter sub-groups renewed their participation in the “CIR Tax Consolidation” for the three years 2010-2012. At December 31 2010 there were 20 companies taking part in the CIR Tax Consolidation.

Report on Corporate Governance

The CIR Group‘s model of corporate governance is based on the guidelines contained in the Code of Conduct prepared by the Corporate Governance Committee of the Italian Stock Exchange (Borsa Italiana) and published in March 2006 with the additions and adjustments made necessary by the nature of the Group.

In compliance with regulatory requirements, every year an “Annual Report on Corporate Governance” is prepared, which contains a general description of the system of corporate governance adopted by the Group and gives information on the ownership structure and on compliance with the Code of Conduct, including the main governance practices applied and the characteristics of the system of risk management and internal control in relation to the financial disclosure process.

It should be noted that the full text of the “Annual Report on Corporate Governance” for the year 2010 was approved – in its entirety – by the Board of Directors’ Meeting convened to approve the Financial Statements for the year ended December 31 2010.

The Annual Report on Corporate Governance will be available to anybody who requests it, according to the conditions stipulated by Borsa Italiana for publishing the same. The Report will also be available on the website of the Company (www.cirgroup.it) in the section "Governance”.

In relation to D.Lgs. 231/01, issued with the aim of bringing regulations on the subject of the administrative liability of entities into line with international agreements signed by Italy, on March 7 2003 the Board of Directors of the Company approved the adoption of a Code of Ethics of the CIR Group, published as an attachment to the “Annual Report on Corporate Governance”, which defines the values which the Group follows in the achievement of its objectives and establishes binding principles of conduct for its Directors, employees and those who have a relationship with the Group. Moreover, on September 5 2003, the Board of Directors of the company approved the “Organization Model – the Organizational and Management Model as defined by D.Lgs. no. 231/01”, in line with the instructions laid down in the decree which aimed to ensure correctness and transparency in the conduct of business and corporate activities.

The Organization and Management Model as per D.Lgs 231/01 is continually updated by the Board of Directors to take into account the broadening of the scope of the rules on the subject.

In relation to the obligations set out in Art. 2.6.2, paragraph 15 of the Rules of Borsa Italiana, taking into account the provisions of Articles 36 and 37 of Consob Resolution 16191, it is hereby confirmed that there are no conditions that could prevent the listing of CIR shares on the MTA market organized and managed by Borsa Italiana S.p.A. since the foreign subsidiaries not belonging to the European Union, which have particular significance for CIR, publish their own company bylaws and the composition and powers of their administrative bodies according to the legislation applicable to them or voluntarily, they provide the Company’s auditors with the information necessary to carry out the audit activity on the annual and interim accounts of CIR, and they have a suitable administrative and accounting system to provide the Company’s Management and its auditors with the economic, patrimonial and financial figures necessary for the preparation of the consolidated financial statements. Furthermore, in relation to the fact that the company is subject to management and coordination by its controlling company COFIDE- Gruppo De Benedetti S.p.A., the Company has fulfilled all the disclosure obligations required by Article 2497-bis of the Civil Code, it has the power to negotiate relationships with clients and suppliers independently, it has no centralized treasury function in common with COFIDE and the Board of Directors of the Company, out of a total of 14 members, has 7 who possess the requisites of independence and are thus sufficient to guarantee that their judgment has a significant weight in the decision-making process of the Board”.

Lastly it should be noted that the companies of the Group have complied with the provisions of Art. 2497-bis of the Civil Code.

Preparation of the “Security Policy Document (DPS)”

D.Lgs. no. 196/03, the Code on the subject on the protection of personal information, stipulates that by March 31 of each year the organization responsible for the treatment of personal information should draw up a formal security policy document containing, among other things, appropriate information regarding the following:

-          the list of the types of use of personal information made by the organization;

-          the distribution of responsibilities and tasks relating to the use of such information;

-          a description of the measures to be taken to guarantee the integrity and the availability of the information and the protection of the areas set aside for storing it and making it accessible;

-          the description of the criteria and the procedures for restoring access to the said information in the event of it being destroyed or damaged;

-          the description of the criteria to be adopted in order to guarantee that the minimum measures of security are followed when the treatment of personal information is entrusted, in conformity with the Civil Code, to someone outside the organization of the Officer Responsible.

Article 26 of the Technical Rules states that the preparation or amendment of the Security Policy Document must be mentioned in the Report on Operations accompanying the Financial Statements when appropriate.

The Security Policy Document was updated in conjunction with specialist consultants in this field who have been certified as BS7799 lead auditors by the British Standards Institute.

Research and development

During 2010, research and development activity at Group level was mainly focused on the utilities sector. In compliance with accounting standards, research costs are recognized to the income statement when they are incurred while development costs relating to specific projects are capitalized, when their future benefits are considered reasonably certain, and are amortized for the whole period during which the expected future benefits from the project will be generated.

During 2010, the Sorgenia’s contribution to the venture capital fund Noventi Ventures II LP (set up in 2006 with headquarters in Silicon Valley, California) made it possible to build and strengthen the industrial initiatives already selected. In line with the mission of the fund, investments are selected in new industrial initiatives the main objective of which is to develop convergence between innovative technologies and to safeguard the environment, through the generation of energy from renewable sources, saving energy and using it efficiently.

The research activity and definition of products in the field of renewable energies substantially boosted and extended the projects already in the portfolio, which are as follows:

-          Lumenergi with its dimming electronic ballast, a device that modulates the intensity of interior lighting in relation to various parameters that can be programmed, such as for example natural light;

-          HelioVolt with thin-film photovoltaic panels - CIGS technology – which have been certified by the US National Renewable Energy Laboratory (NREL ) as giving a yield of 11.8%;

-          Windspire Energy (formerly Mariah Power) which sells vertical axis micro wind turbines for residential use and for commercial buildings and which, thanks to their particular structure, can be used in urban environments too;

-          Aurora Algae (formerly Aurora Biofuel), which cultivates algae using advanced engineering and biological techniques for the production of biofuels without interfering with the food chain, and - more recently - of products that can be used even in sectors such as food, pharmaceuticals and sustainable agriculture.

In 2010 the collaboration continued with the Sardinian CRS4 Research Centre on the project for a thermodynamic solar power plant using concentrated technology which uses parabolic mirrors to concentrate sunlight on to pipes containing a fluid that heats up and drives steam turbines that generate electricity.

Lastly, in 2010 various collaborative projects were set up with the Department of Earth Sciences of the University of Pisa, with the Institute of Geosciences and Earth Resources of the CNR and with the Department of Earth Sciences of the University of Florence.

In June 2010 Sorgenia signed a letter of intent with Peugeot Italia to develop electric mobility in Italy. At the end of the year the French car manufacturer launched iOn, a wholly electric car, while Sorgenia is committed to the study and definition of infrastructure, commercial and service solutions to support the adoption of electric vehicles and charging systems.

Already for 2011 a commercial offer is being prepared for Sorgenia clients who intend to buy an electric car.

Sorgenia considers that entry into the sector of electric mobility is a new opportunity for developing its business and is a logical way of contributing to the protection of the environment and to the reduction of polluting emissions, especially in city centres.

Regarding investments made in the automotive components business in 2010, totalling € 20.2 million, the research and development of new products and processes were focused on the strategic issue of innovative materials to offer clients solutions for building vehicles that are ever lighter and more ecological. 

Other

The company CIR S.p.A. - Compagnie Industriali Riunite has its registered office in Via Ciovassino 1, Milan, Italy.

CIR shares have been quoted on the Milan Stock Exchange since 1973 (Reuter code: CIRX.MI, Bloomberg code CIR IM).

This Financial Report for the period January 1 – December 31 2010 was approved by the Board of Directors on March 10 2011.

CIR S.p.A. is subject to management and coordination by Cofide S.p.A..