• On March 29th, 2006 Raissa Fondo Uffici, a fund for accredited investors, completed its second investment with the conferral of 201 properties by Olivetti Multiservices (Telecom Italia Group) worth 158.1 million euro. This followed on from the first transfer of properties completed on December 28th, 2005 valued at around 486 million euro.
  
  
• On June 28th, 2006 Pirelli RE, in partnership with Conwert Immobilien and Eco Business- Immobilien, won the bid to buy from Allianz a real estate portfolio in Austria for the sum of around 207 million euro (excluding closing costs and one property subject to preemption). The real estate assets concerned were mostly located in the cities of Vienna, Innsbruck and Salzburg and consisted (net of the pre-empted property) of 30 predominantly residential properties and 47 commercial properties for office and retail use. Pirelli RE subsequently realized the investment in the second half of the year after selling its related interest.
  
  
• On June 29th, 2006 Galatea, a property trading company, purchased 132 properties located in different Italian cities from Banca Intesa at an overall price of 83 million euro.
  
  
• On June 29th, 2006 Raissa Fondo Uffici, a fund for accredited investors, completed its third investment with the conferral of 57 properties by Olivetti Multiservices (Telecom Italia Group) worth approximately 47 million euro. This third contribution followed on from those previously carried out on December 28th, 2005 and March 29th, 2006.
  
  
• On July 28th, 2006 the Board of Directors of Pirelli RE SGR approved the management reports at June 30th, 2006 of Tecla Fondo Uffici, Berenice Fondo Uffici and Olinda Fondo Shops, voting as follows:
  
  - for Tecla Fondo Uffici, to distribute a dividend for the first half of 2006 of 25.14 euro per unit, representing a six-monthly yield of 5.4% and to return 21.73 euro to each unit by way of a partial repayment of capital;
  
  - for Berenice Fondo Uffici, to distribute a dividend for the first half of 2006 of 17.50 euro per unit, representing a six-monthly yield of 3.5% and to return 2.45 euro to each unit by way of a partial repayment of capital.
  
  
• On October 16th, 2006 Galatea purchased an additional 7 properties (previously subject to pre-emption) from Banca Intesa for the sum of 8.6 million euro.
  
  
• Armilla, an unlisted closed-end real estate fund reserved for accredited investors, was set up on September 29th, 2006. This new fund, run by Pirelli RE SGR, consists of 14 office properties contributed by Cloe Fondo Uffici on September 29th, 2006 worth around 225 million euro. The set up of this fund, whose assets comprise approximately 155,000 sqm in space, forms part of the strategy to specialize the risk/return profile of the Pirelli RE Group’s funds in the different segments of the real estate market.
  
  
• The Patrimonio Uffici fund, set up on November 15th, 2006 became operational on November 28th, 2006 after receiving real estate contributions mostly consisting of offices worth 785.5 million euro from different real estate investment companies belonging to the joint venture between Pirelli RE and Morgan Stanley. The units in this speculative fund managed by Pirelli RE Opportunities SGR have been subscribed by the joint venture between Pirelli RE and Morgan Stanley.
  
  
• The Portafogli Misti fund was set up on December 5th, 2006 as a speculative fund in which the Group has a 29% share. Pirelli RE Opportunities SGR will seek to enhance the value of the real estate portfolio contributed to this fund on December 6th, 2006 by Galatea, an invested Pirelli RE company by Pirelli RE Group.
  
  
• On December 14th, 2006 Olivetti Multiservices contributed 33 properties worth 29.7 million euro to Raissa Fondo Uffici. This contribution takes the number of properties conferred by the Telecom Group over the course of 2005 and 2006 to 852, with an overall value of more than 720 million euro.
  
  
• On December 22nd, 2006 Pirelli RE SGR formally won the bid to manage “Fondo Comune di Investimento Immobiliare Regione Siciliana”. Pirelli RE SGR’s goal will be to enhance the value of the 34 buildings conferred on the fund worth a total of 263 million euro. The set up of the fund and the related contribution performed on March 2007, as well described in the subsequent events section.
  
  
• The Progetto Uffici fund became operational on December 28th, 2006 after receiving real estate contributions worth 270.1 million euro from the Patrimonio Uffici fund and 21.5 million euro from Orione Immobiliare Prima. Pirelli RE Opportunities SGR will seek to enhance the value of this fund’s assets by selling properties on a block basis and individually through portfolio break-ups.
  
  

Retail

• On May 24th, 2006 Tamerice Immobiliare, a company 20% owned by Pirelli RE which owns the real estate assets of Rinascente, purchased the whole of Newtone1 RE, the owner of one property in Rome valued at over 89 million euro.
  
  
• On July 28th, 2006 the Board of Directors of Pirelli RE SGR approved the management reports at June 30th, 2006 of Olinda Fondo Shops voting to distribute a dividend for the first half of 2006 of 16.94 euro per unit, representing a six-monthly yield of 3.5% and to return 9.78 euro to each unit by way of a partial repayment of capital.
  
  
• On December 20th, 2006 Olinda Fondo Shops, a fund managed by Pirelli RE SGR, completed its first investment after its initial contribution stage, by purchasing the building housing the multi-screen cinema in Pioltello (Milan) for a figure of 13.4 million euro.
By purchasing this property, one of the largest multi-screen cinemas in Italy, the fund is implementing the strategy, announced at the time of placement, of reinvesting the resources generated from its operation in properties used for retail & entertainment purposes.

Industrial

• The year 2006 was a particularly significant one for Spazio Industriale II BV, the investment vehicle set up by Cypress Grove International and Pirelli RE, which has invested, through Spazio Investment, in the “Spazio Industriale” real estate fund, specializing in the sector of light industrial buildings and those used for logistics. The process of enhancing the long-term value of the fund’s assets was started during the period, involving the fair value measurement of its properties (IAS 40) to reflect the new strategy for and use of these assets, which had been previously stated at cost (IAS 2). This change in valuation method was needed for the purposes of listing Spazio Investment NV, owner of all the fund’s units, on the London Stock Exchange’s Alternative Investment Market in October 2006, as discussed below.

The fund itself carried out the following transactions during the year:

• On January 31st, 2006 the Spazio Industriale fund completed on the preliminary agreement signed on December 29th, 2005 by purchasing a complex mostly used for logistics and related warehousing in Pavia at a price of 19.5 million euro.
  
  
• On March 23rd, 2006 the Spazio Industriale fund purchased a site and three buildings with related land mainly for industrial use in Sesto San Giovanni (Milan) at a price of 15.4 million euro. On March 23rd, 2006 a preliminary agreement was made to purchase at a price of 24.5 million euro a large building to be constructed in the industrial park that would be built on the previously acquired site.
  
  
• On March 24th, 2006 the Spazio Industriale fund purchased a property for logistics, warehousing and office use in Bagni di Tivoli, Rome at a price of 9.5 million euro.
  
  
• On March 30th, 2006 Olivetti Multiservices (Telecom Italia Group) completed its second contribution of properties to the Spazio Industriale fund, consisting of 120 properties worth 70.8 million euro. This followed on from the first transfer of properties on December 29th, 2005 valued at around 177 million euro.
  
  
• On April 27th, 2006 a meeting of investors in the Spazio Industriale fund, classified as a closed-end real estate investment fund, approved the transfer of its management from Pirelli & C. Real Estate Opportunities SGR to Pirelli & C. Real Estate SGR, in view of the change in the fund’s nature from speculative to ordinary as a result of the new strategy to enhance the value of its assets over the long term.
  On August 22nd, 2006 the Bank of Italy gave its authorization to transform Spazio Industriale from a speculative into an ordinary fund, with a consequent change of manager and regulations which came into effect on October 18th, 2006.
  
  
• On June 26th, 2006 Olivetti Multiservices (Telecom Italia Group) completed its third contribution of properties to the Spazio Industriale fund, consisting of 54 properties worth approximately 42 million euro.
  
  
• On October 13th, 2006 Spazio Investment, a Dutch investment company owned on the listing date by Cypress Grove International (65%) and Pirelli Re (35%), was successfully listed on the London Stock Exchange’s Alternative Investment Market (AIM). The global offer of some 300 million euro, consisting of 256 million euro in new shares (85%) and 44 million euro in the sale of existing shares held by Cypress Grove International (15%), was subscribed at a 10% discount on NAV.
  
  The offer was oversubscribed, with over 95% of applications by leading international institutional investors, mostly from the USA and UK. The offer price was set at 12.5 euro per share; at December 31st, 2006 (last day of trading on December 29th) the company’s share price was 14.95 euro (+20%). After closing the offer Pirelli RE owned approximately 12% of Spazio Investment NV, while 88% was held by leading international investors, of whom ten with interests of over 3% (compulsory disclosure limit set by AIM); the main investors include Bank Julius Baer & Co., TIAA-CREF, Fidelity International, Lansdowne Partners, KDA Capital, New Star, Viking and Theorema, as well as Cypress Grove.
  
  
• On October 18th, 2006 Spazio Industriale 1, Spazio Industriale 2 and Spazio Industriale 3, subsidiaries of Spazio Industriale BV, a joint venture between Pirelli RE (25%) and Soros Real Estate Investors (75%) sold part of their real estate portfolio to the Spazio Industriale fund for the sum of 205.2 million euro. This portfolio consists of 18 properties formerly belonging to Enel and Prada plus a building being renovated in Milan Bicocca (Edificio 16).
  
  
• On December 20th, 2006 the Telecom Group completed its fourth contribution of properties to the Spazio Industriale fund worth 2.7 million euro. This contribution takes the number of properties conferred by the Telecom Group over the course of 2005 and 2006 to 427, with an overall value of some 292 million euro.
  
  
• On December 29th, 2006 the Spazio Industriale fund entered into a preliminary agreement to purchase 2 industrial properties located in Pordenone and Belluno at a price of 22 million euro.
  

Tourism

• On February 20th, 2006 Pirelli RE and Merrill Lynch signed a binding agreement to create a joint venture (35% Pirelli RE and 65% Merrill Lynch) with the objective of investing 1.5 billion euro in Italy’s hotel and tourism sector over the next 5 years. On June 22nd, 2006 Pirelli RE Opportunities SGR obtained clearance to start the Hospitality & Leisure fund, specializing in investment in the hotel-tourism sector. Its units were subscribed by the Pirelli RE - Merrill Lynch joint venture which made its first investment in 4 holiday villages in Pila, Nicotera, Marilleva and Ostuni contributed by Valtur and worth around 103 million euro. The plan is to enhance the value of these properties over the next two years by investing some 12 million euro.
  
  
• On July 31st, 2006 Fattoria Medicea, a company 40% owned by Pirelli RE, completed on the purchase of a site in the municipality of Prato for a figure of some 17.7 million euro. The plan is to build a hotel and leisure complex involving a total investment of around 42 million euro.

Public Sector

• On March 29th, 2006 the Pirelli RE Group won the tender to build the new St. Anna’s Hospital in Como. The project will cost an overall figure of 150 million euro. Pirelli RE is realizing its goal of expanding in this sector thanks to this project and another for building the Valpolcevera hospital in Genoa, the tender for which was won in 2005.