Investment & Asset Management

I. Description

Investment & Asset Management spans the entire real estate cycle with a strong level of vertical expertise and is responsible for identifying investment opportunities in the different product lines, for constructing buildings from scratch, and for the strategic management of portfolios acquired in order to enhance their value and subsequently sell them. A thorough knowledge of each individual product ensures maximum focus on the specific needs of the different types of customers.

II. Results

(Euro/million)	01.01.2006/31.12.2006 INVESTMENT & ASSET MANAGEMENT				01.01.2005/31.12.2005 INVESTMENT & ASSET MANAGEMENT
	Residential	Commercial	Non Performing Loan	Total	Residential	Commercial	Non Performing Loan	Total

Total aggregate revenues	852.9	2,563.1	14.5	3,430.5	998.3	1,944.7	14.1	2,957.1
Pro-rata aggregate revenues	388.6	676.2	13.9	1,078.8	408.4	518.0	10.7	937.0
Consolidated revenues	201.3	87.1	13.7	302.2	46.3	246.4	9.3	302.0
EBIT including net income from investments (*)	40.4	126.0	11.6	178.0	37.9	100.7	3.0	141.6
Real estate sales	807.8	1,996.8	1.0	2,805.7	938.1	1,511.2	1.9	2,451.2
Real estate purchases completed in 2006	256.1	919.1	26.4	1,201.5	464.8	2,260.4	2.2	2,727.4
Loan portfolio purchases (Book Value)	0.0	0.0	977.3	977.3	0.0	0.0	456.3	456.3
Real estate purchases including DGAG and non performing loans (BV)				3,584.8				3,183.7

(*) Includes 5.1 million euro in income from funds and dividends from company participated by the Group for 4 million euro in 2006 and income from funds for 3.5 million euro in 2005.

Investment & Asset management reported total aggregate revenues of 3,430.5 million euro, an increase of 16% on the figure of 2,957.1 million euro reported in 2005.

Pro-rata aggregate revenues amounted to 1,078.8 million euro, on the figure of 937.0 million euro in 2005 (+15%).

EBIT including net income from investments amounted to 178.0 million euro, up 26% on last year’s figure of 141.6 million euro. This includes a major increase in EBIT from the NPL business, which jumped from 3 million euro in 2005 to 11.6 million euro in 2006.

Real estate sales were 14% higher at 2,805.7 million euro compared with 2,451.2 million euro in 2005; rental income amounted to 424.4 million euro, reporting a 15% on the 2005 figure of 369.5 million euro.

Gross capital gains for the year amounted to 718.2 million euro compared with 653.3 million euro in 2005; these gains do not take account of the fair value adjustment of assets in the Spazio Industriale fund, which was confirmed by the successful listing on October 18th, 2006 of Spazio Investment, the company which owns 100% of the fund’s units, on the London Stock Exchange’s Alternative Investment Market. The Pirelli RE share of these gains was around 32%.

Total purchases of both real estate and non performing loans rose to 3,584.8 million euro (3,183.7 million euro in 2005), thereby reaching the estimated acquisition target. The amount of total purchases also includes 1,406 million euro for the real estate portfolio of DGAG, Deutsche Grundvermogen, acquired in the early part of 2007 after signing a preliminary agreement in October 2006.

In detail, as far as fund management activities were concerned, you are reminded that in June 2006 Pirelli RE raised its interest in Pirelli RE SGR (which manages core/core plus portfolios) to 100% based on an overall valuation by Credit Suisse of some 315 million euro.

Following the launch of Hospitality & Leisure, Armilla, Portafogli Misti, Patrimonio Uffici, Progetto Uffici and Progetti Residenza, the number of real estate funds managed by Pirelli RE has risen to 16, of which 9 are ordinary and 7 speculative. The assets managed through the funds (including the portfolios of funds managed but not invested in by Pirelli RE) now have a market value of approximately 7.6 billion euro, of which 5.4 billion euro is classified as core-core plus and 2.2 billion euro as opportunistic-value added.