-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
 MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
 TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
 WnHMGVTHJ+2Dp8Pc0NTyrMuy57ydOuhTX3J83jo+UbcZhwqt3z/idg2WI5mvX+o3
 HutxXK/VNyOpaC5uuIk5Xg==

<SEC-DOCUMENT>0000950123-06-008461.txt : 20060630
<SEC-HEADER>0000950123-06-008461.hdr.sgml : 20060630
<ACCEPTANCE-DATETIME>20060630150119
ACCESSION NUMBER:		0000950123-06-008461
CONFORMED SUBMISSION TYPE:	20-F
PUBLIC DOCUMENT COUNT:		6
CONFORMED PERIOD OF REPORT:	20051231
FILED AS OF DATE:		20060630
DATE AS OF CHANGE:		20060630

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			NATUZZI S P A
		CENTRAL INDEX KEY:			0000900391
		STANDARD INDUSTRIAL CLASSIFICATION:	HOUSEHOLD FURNITURE [2510]
		IRS NUMBER:				000000000
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		20-F
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-11854
		FILM NUMBER:		06937297

	BUSINESS ADDRESS:	
		STREET 1:		VIA IAZZITIELLO 47
		CITY:			SANTERAMO ITALY
		STATE:			L6
		ZIP:			70029

	MAIL ADDRESS:	
		STREET 1:		VIA IAZZITIELLO 47
		CITY:			SANTERAMO ITALTY
		STATE:			L6
		ZIP:			999999999

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	NATUZZI INDUSTRIES SPA
		DATE OF NAME CHANGE:	19950823
</SEC-HEADER>
<DOCUMENT>
<TYPE>20-F
<SEQUENCE>1
<FILENAME>y22510e20vf.htm
<DESCRIPTION>FORM 20-F
<TEXT>
<HTML>
<HEAD>
<TITLE>FORM 20-F</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>




<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>UNITED STATES SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>Washington, D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B><DIV align="center"><DIV style="font-size: 3pt; margin-top: 6pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV></B>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 3pt"><B>FORM 20-F</B>
</DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) (g)&nbsp;OF THE
SECURITIES EXCHANGE ACT OF 1934 or</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#254;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 12%"><B>For the Fiscal Year Ended: <B>December&nbsp;31, 2005</B>
</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>or</B>

</DIV>
<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 12%"><B>For the Transition Period from &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>or</B>

</DIV>
<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15 (d)&nbsp;OF THE
SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Date of event requiring this shell company report <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><BR>
For the Transition Period from &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Commission file number: 1-11854</B>

</DIV>
<DIV align="center" style="font-size: 24pt; margin-top: 12pt"><B>NATUZZI S.p.A.</B>
</DIV>

<DIV align="center" style="font-size: 10pt">(Exact name of Registrant as specified in its charter)</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>NATUZZI S.p.A.</B><BR>
(Translation of Registrant&#146;s name into English)</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>Italy</B><BR>
(Jurisdiction of incorporation or organization)</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>Via Iazzitiello 47, 70029 Santeramo, Italy</B><BR>
(Address of principal executive offices)</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Securities registered or to be registered pursuant to Section&nbsp;12(b) of the Act:</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top">Name of each class
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Name of each exchange on which registered</TD>
</TR>
<TR style="font-size: 1px">
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><B>American Depositary Shares</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>New York Stock Exchange</B></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><B>Ordinary Shares with a par value of &#8364;1.0 each</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>New York Stock Exchange*</B></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>* <B>Not for trading, but only in connection with the registration of the American
Depositary Shares</B></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">-</TD>
    <TD>&nbsp;</TD>
    <TD>Securities registered or to be registered pursuant to Section&nbsp;12(g) of the Act: <B>None</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">-</TD>
    <TD>&nbsp;</TD>
    <TD>Securities for which there is a reporting obligation pursuant to Section&nbsp;15(d) of the Act: <B>None</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">-</TD>
    <TD>&nbsp;</TD>
    <TD>Outstanding shares of each of the issuer&#146;s classes of capital or common stock as of December&nbsp;31, 2005: <B>54,681,628 Ordinary
Shares</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act.
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 3pt">Yes <FONT face="Wingdings">&#111;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; No <FONT face="Wingdings">&#254;</FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this report is an annual or transition report, indicate by check mark if the registrant is
not required to file reports pursuant to Section&nbsp;13 or 15(d) of the Securities Act of 1934.
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 3pt">Yes <FONT face="Wingdings">&#111;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; No <FONT face="Wingdings">&#254;</FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Note &#150; Checking the box above will not relieve any registrant required to file reports
pursuant to Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under
those Sections.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark whether the registrant (1)&nbsp;has filed all reports required to be filed
by Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12&nbsp;months (or for such shorter period that the registrant was required to file such
reports), and (2)&nbsp;has been subject to such filing requirements for the past 90&nbsp;days.
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 3pt">Yes <FONT face="Wingdings">&#254;</FONT> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No <FONT face="Wingdings">&#111;</FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer. See definition of &#147;accelerated filer and large accelerated
filer&#148; in Rule&nbsp;12b-2 of the Exchange Act. (Check one):
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 3pt">Large accelerated filer <FONT face="Wingdings">&#111;</FONT> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accelerated filer <FONT face="Wingdings">&#254;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Non-accelerated filer <FONT face="Wingdings">&#111;</FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark which financial statement item the registrant has elected to follow.
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 3pt">Item&nbsp;17 <FONT face="Wingdings">&#111;</FONT> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Item&nbsp;18 <FONT face="Wingdings">&#254;</FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this is an annual report, indicate by check mark whether the registrant is a shell company
(as defined in Rule&nbsp;12b-2 of the Exchange Act).
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 3pt">Yes <FONT face="Wingdings">&#111;</FONT> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; No <FONT face="Wingdings">&#254;</FONT>
</DIV>


<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>





<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left">
<!-- TOC -->
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TABLE OF CONTENTS</B>
</DIV>

<DIV align="left">
<A name="tocpage"></A>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Page</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#101"><B>PART I</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#102">Item&nbsp;1. Identity of Directors, Senior Management and Advisers</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#103">Item&nbsp;2. Offer Statistics and Expected Timetable</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#104">Item&nbsp;3. Key Information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#105">Selected Financial Data</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#106">Exchange Rates</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#107">Risk Factors</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#108">Forward Looking Information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#109">Item&nbsp;4. Information on the Company</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#110">Introduction</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#111">Organizational Structure</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#112">Strategy</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#113">Manufacturing</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#114">Products</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#115">Markets</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#116">Incentive Programs and Tax Benefits</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#117">Management of Exchange Rate Risk</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#118">Trademarks and Patents</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#119">Regulation</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#120">Environmental Regulatory Compliance</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#121">Insurance</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#122">Description of Properties</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#123">Capital Expenditures</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#124">Item&nbsp;4. A Unresolved Staff Comments</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#125">Item&nbsp;5. Operating and Financial Review and Prospects</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#126">Critical Accounting Policies</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#127">Results of Operations</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#128">Liquidity and Capital Resources</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">i
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TABLE OF CONTENTS<BR>
(continued)</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Page</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#129">Contractual Obligations and Commitments</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#130">Related Party Transactions</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#131">Research and Development</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#132">Trend Information and Guidance</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#133">New
Accounting Standards under Italian and U.S. GAAP</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#134">Item&nbsp;6. Directors, Senior Management and Employees</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#135">Compensation of Directors and Officers</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#136">Share Ownership</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#137">Statutory Auditors</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#138">External Auditors</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#139">Employees</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#140">Item&nbsp;7. Major Shareholders and Related Party Transactions</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#141">Major Shareholders</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#142">Related Party Transactions</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#143">Item&nbsp;8. Financial Information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#144">Consolidated Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#145">Export Sales</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#146">Legal and Governmental Proceedings</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#147">Dividends</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#148">Item&nbsp;9. The Offer and Listing</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#149">Trading Markets and Share Prices</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#150">Item&nbsp;10. Additional Information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#151">By-laws</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#152">Certain Contracts</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#153">Exchange Controls</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#154">Taxation</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#155">Documents on Display</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#156">Item&nbsp;11. Quantitative and Qualitative Disclosures About Market Risk</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">ii
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TABLE OF CONTENTS<BR>
(continued)</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Page</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#157">Item&nbsp;12. Description of Securities Other than Equity Securities</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#158"><B>PART II</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#159">Item&nbsp;13. Defaults, Dividend Arrearages and Delinquencies</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#160">Item&nbsp;14. Material Modifications to the Rights of Security Holders and Use of Proceeds</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#161">Item&nbsp;15. Controls and Procedures</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#162">Item&nbsp;16. &#091;Reserved&#093;</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#163">Item&nbsp;16. A Audit committee financial expert</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#164">Item&nbsp;16. B Code of Ethics</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#165">Item&nbsp;16. C Principal Accountant Fees and Services</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#166">Item&nbsp;16. D Exemptions from the Listing Standards for Audit Committees</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#167">Item&nbsp;16. E Purchases of Equity Securities by the Issuer and Affiliated Purchasers</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#168"><B>PART III</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#169">Item&nbsp;17. Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#170">Item&nbsp;18. Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#171">Item&nbsp;19. Exhibits</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y22510exv1w1.htm">EX-1.1: BY-LAWS</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y22510exv8w1.htm">EX-8.1: LIST OF SIGNIFICANT SUBSIDIARIES</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y22510exv12w1.htm">EX-12.1: CERTIFICATION</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y22510exv12w2.htm">EX-12.2: CERTIFICATION</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y22510exv13w1.htm">EX-13.1: CERTIFICATIONS</A></FONT></TD></TR>
</TABLE>
</DIV>

<DIV align="left">
<!-- /TOC -->
</DIV>

<P align="center" style="font-size: 10pt">iii
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PRESENTATION OF FINANCIAL AND OTHER INFORMATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Beginning with the fiscal year ended December&nbsp;31, 2002, Natuzzi S.p.A. (the &#147;Company&#148; and,
together with its consolidated subsidiaries, the &#147;Group&#148;) has published its audited consolidated
financial statements (the &#147;Consolidated Financial Statements&#148;) in euro, the single currency
established for certain members of the European Union (including Italy) upon the commencement of
the third stage of the European Monetary Union (the &#147;EMU&#148;) on January&nbsp;1, 1999. For fiscal years
ending before December&nbsp;31, 2002, the audited Consolidated Financial Statements were published in
Italian lire, which was legal tender in Italy prior to March&nbsp;1, 2002. All amounts included in this
annual report for each period ending prior to January&nbsp;1, 2002 have been restated into euro amounts
using the official lira-euro exchange rate as of January&nbsp;1, 1999 (euro 1 is equal to lire
1,936.27).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In this annual report, references to &#147;&#8364;&#148; or &#147;euro&#148; are to the euro; references to &#147;lira&#148;,
&#147;lire&#148; or &#147;Lit.&#148; are to the Italian <I>lira </I>(singular)&nbsp;or to the Italian <I>lire </I>(plural); and references
to &#147;U.S. dollars&#148;, &#147;dollars&#148;, &#147;U.S.$&#148; or &#147;$&#148; are to United States dollars.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amounts stated in U.S. dollars, unless otherwise indicated, have been translated from the euro
amount by converting the euro amounts into U.S. dollars at the noon buying rate in New York City
for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve
Bank of New York (the &#147;Noon Buying Rate&#148;) for euros on December&nbsp;30, 2005 of U.S.$ 1.1842 per euro.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These foreign currency conversions in this annual report should not be taken as
representations that the foreign currency amounts actually represent the equivalent U.S. dollar
amounts or could be converted into U.S. dollars at the rates indicated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Consolidated Financial Statements included in Item&nbsp;18 of this annual report are prepared
in conformity with accounting principles established by the Italian accounting profession (&#147;Italian
GAAP&#148;). These principles vary in certain significant respects from generally accepted accounting
principles in the United States (&#147;U.S. GAAP&#148;). See Note 27 to the Consolidated Financial Statements
included in Item&nbsp;18 of this annual report. All discussions in this annual report are in
relation to Italian GAAP, unless otherwise indicated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In this annual report, the term &#147;seat&#148; is used as a unit of measurement. A sofa consists of
three seats; an armchair of one.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On June&nbsp;7, 2002 the Company changed its name from Industrie Natuzzi S.p.A. to Natuzzi S.p.A.
</DIV>

<P align="center" style="font-size: 10pt">1
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="101"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART I</B>
</DIV>

<DIV align="left">
<A name="102"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;1. Identity of Directors, Senior Management and Advisers</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>
<DIV align="left">
<A name="103"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;2. Offer Statistics and Expected Timetable</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>
<DIV align="left">
<A name="104"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;3. Key Information</B>
</DIV>

<DIV align="left">
<A name="105"></A>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Selected Financial Data</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth selected consolidated financial data for the periods indicated
and is qualified by reference to, and should be read in conjunction with, the Consolidated
Financial Statements and the notes thereto included in Item&nbsp;18 of this annual report and the
information presented under &#147;Operating and Financial Review and Prospects&#148; included in Item&nbsp;5 of
this annual report. The income statement and balance sheet data presented below have been derived
from the Consolidated Financial Statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Consolidated Financial Statements, from which the selected consolidated financial data set
forth below has been derived, were prepared in accordance with Italian GAAP, which differ in
certain respects from U.S. GAAP. For a discussion of the principal differences between Italian GAAP
and U.S. GAAP as they relate to the Group&#146;s consolidated net earnings and shareholders&#146; equity, see
Note 27 to the Consolidated Financial Statements included in Item&nbsp;18 of this annual report.
</DIV>

<P align="center" style="font-size: 10pt">2
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" colspan="22" style="border-bottom: 1px solid #000000"><B>Year Ended At December 31,</B></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2002</B></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2001</B></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(millions of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="18">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">dollars, except</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="18">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">per Ordinary</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="18">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Share)<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="18">(millions of euro, except for Ordinary Share)<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Income Statement Data:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><I>Amounts in accordance with Italian GAAP :</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net sales:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Leather- and fabric-upholstered furniture</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">704.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#8364;</TD>
    <TD align="right">594.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#8364;</TD>
    <TD align="right">665.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#8364;</TD>
    <TD align="right">674.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#8364;</TD>
    <TD align="right">734.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#8364;</TD>
    <TD align="right">714.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other(3) </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">87.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">793.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">669.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">753.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">769.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">805.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">786.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cost of sales </DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(544.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(459.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(484.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(508.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(517.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(520.1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gross profit </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">249.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">210.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">268.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">260.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">287.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">266.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Selling expenses </DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(215.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(182.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(188.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(179.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(145.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(134.8</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">General and administrative expenses </DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(50.9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(43.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(40.7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(39.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(40.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(33.5</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Operating income (loss) </DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(17.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14.7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">101.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other income (expense), net(4) (5) (6)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3.9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.2</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Earnings (loss)&nbsp;before taxes and minority interests</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13.9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11.7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">116.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income taxes </DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3.7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(17.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(25.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(21.9</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Earnings (loss)&nbsp;before minority interests </DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(17.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net earnings (loss) </DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(17.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net earnings (loss)&nbsp;per Ordinary Share </DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.32</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.27</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.67</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.37</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><I>Amounts in accordance with U.S. GAAP :</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net earnings (loss) </DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8.17</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6.9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">92.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net earnings (loss)&nbsp;per Ordinary Share (basic and
diluted)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.15</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&#8364;</TD>
    <TD align="right">(0.13</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#8364;</TD>
    <TD align="right">0.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#8364;</TD>
    <TD align="right">0.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#8364;</TD>
    <TD align="right">1.68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#8364;</TD>
    <TD align="right">1.29</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash dividend per Ordinary Share </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#8364;</TD>
    <TD align="right">0.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#8364;</TD>
    <TD align="right">0.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#8364;</TD>
    <TD align="right">0.14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#8364;</TD>
    <TD align="right">0.33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#8364;</TD>
    <TD align="right">0.29</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Weighted average number of Ordinary Shares
Outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,681,628</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,681,628</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,681,628</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,681,628</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,681,628</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,027,496</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance Sheet Data :</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><I>Amounts in accordance with Italian GAAP :</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current assets </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">455.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#8364;</TD>
    <TD align="right">384.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#8364;</TD>
    <TD align="right">389.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#8364;</TD>
    <TD align="right">383.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#8364;</TD>
    <TD align="right">402.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#8364;</TD>
    <TD align="right">491.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total assets </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">787.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">664.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">673.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">692.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">674.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">716.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current liabilities </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">161.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">136.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">131.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">125.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">128.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">252.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long-term debt </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Minority interest </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Shareholders&#146; equity </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">560.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">473.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">487.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">515.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">495.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">428.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><I>Amounts in accordance with U.S. GAAP :</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Shareholders&#146; equity </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">537.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#8364;</TD>
    <TD align="right">453.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#8364;</TD>
    <TD align="right">464.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#8364;</TD>
    <TD align="right">452.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#8364;</TD>
    <TD align="right">432.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&#8364;</TD>
    <TD align="right">364.4</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">1)</TD>
    <TD>&nbsp;</TD>
    <TD>All amounts in this annual report for the fiscal years ending before December&nbsp;31, 2002 have
been restated from lire to euro using the exchange rate of Lit. 1,936.27 per euro established in
connection with the commencement of the third stage of the EMU. The Consolidated Financial
Statements reported in euro depict the same trends as would have been presented if the Group had
continued to present its financial statements in lire.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">2)</TD>
    <TD>&nbsp;</TD>
    <TD>Amounts are translated into U.S. dollars by converting the euro amounts into U.S. dollars at the
Noon Buying Rate for euros on December&nbsp;30, 2005 of U.S.$ 1.1842 per euro.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">3)</TD>
    <TD>&nbsp;</TD>
    <TD>Sales included under &#147;Other&#148; principally consist of sales of polyurethane foam, living room
accessories and leather to third parties.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">4)</TD>
    <TD>&nbsp;</TD>
    <TD>Other income (expense), net is principally affected by gains and losses, as well as interest
income and expenses, resulting from measures adopted by the Group in an effort to reduce its
exposure to exchange rate risks. See Item&nbsp;5, &#147;Operating and Financial Review and Prospects &#151;
Results of Operations &#151; 2005 Compared to 2004&#148;, Item&nbsp;11, &#147;Quantitative and Qualitative Disclosures
about Market Risk&#148; and Notes 3, 24 and 25 to the Consolidated Financial Statements included in Item
18 of this annual report.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">5)</TD>
    <TD>&nbsp;</TD>
    <TD>Other income (expense), net, in 2005 was affected by the change in accounting principles for the
translation of foreign subsidiaries&#146; financial statements under Italian GAAP. See Note 3 (c)&nbsp;to the
Consolidated Financial Statements.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">6)</TD>
    <TD>&nbsp;</TD>
    <TD>Other income (expense), net, in 2005 was positively affected by revenues for capital grants. See
Note 24 to the Consolidated Financial Statements.</TD>
</TR>

</TABLE>



<P align="center" style="font-size: 10pt">3
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="106"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Exchange Rates</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fluctuations in the exchange rates between the euro and the U.S. dollar will affect the U.S.
dollar amounts received by owners of American Depositary Shares (&#147;ADSs&#148;) on conversion by the
Depositary (as defined below) of dividends paid in euro on the Ordinary Shares represented by the
ADSs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, most of the Group&#146;s costs are denominated in euro, while a substantial portion of
its revenues is denominated in currencies other than the euro, including the U.S. dollar in
particular. Accordingly, in order to protect the euro value of its foreign currency revenues, the
Group engages in transactions designed to reduce its exposure to fluctuations in the exchange rate
between the euro and such foreign currencies. See Item&nbsp;5, &#147;Operating and Financial Review and
Prospects &#151; Results of Operations &#151; 2005 Compared to 2004&#148; and Item&nbsp;11, &#147;Quantitative and
Qualitative Disclosures about Market Risk&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the Noon Buying Rate for the euro expressed in U.S. dollars per
euro.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Year:</B></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Average</B><SUP style="font-size: 85%; vertical-align: text-top"><B>(1)</B></SUP></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>At Period End</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.8909</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.8901</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.9495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.0485</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.1411</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2597</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2478</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.3538</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.1842</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Month ending:</B></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>High</B></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Low</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2041</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.1699</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">January&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2287</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.1980</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">February&nbsp;28, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.1860</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">March&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2197</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.1886</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">April&nbsp;30, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2624</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2091</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">May&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2888</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2607</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>The average of the Noon Buying Rates for the relevant period, calculated using
the average of the Noon Buying Rates on the last business day of each month during the
period.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The effective Noon Buying Rate on June&nbsp;19, 2006 was 1.2577.
</DIV>
<DIV align="left">
<A name="107"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Risk Factors</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investing in the Company&#146;s ADSs involves certain risks. You should carefully consider each of
the following risks and all of the information included in this annual report.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>The Group has a recent history of losses; the Group&#146;s future profitability and financial
condition depend on the successful implementation of its restructuring plan &#151; </B>The Group experienced
a 50.7% decrease in earnings in 2004, and net losses totaling &#8364;14.6&nbsp;million in the fiscal year
ended December&nbsp;31, 2005. The Group attributes this downward trend to price competition from
low-cost manufacturers, recurring unfavorable currency
</DIV>

<P align="center" style="font-size: 10pt">4
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">conditions, and a generally unfavorable
economy in Italy end Europe, as well as negative results achieved by some non-performing foreign
retail units, particularly in the United Kingdom, specific inefficiencies in the Group&#146;s
manufacturing operations and the higher impact of fixed costs resulting from a decrease in net
sales. There is no guarantee that the Group will be able to achieve or maintain profitability in
the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group&#146;s future operating and financial performance and business prospects will depend in
large part on the successful implementation of the restructuring plan approved by the Group&#146;s Board
of Directors on May&nbsp;18, 2005, after the Group&#146;s first quarter 2005 results showed a continuing
negative trend. The goals of the restructuring plan are recovering the Group&#146;s profitability and
increasing its competitiveness by reducing manufacturing costs in Italy in order to create a more
streamlined cost structure, increasing overall efficiencies, and closing non-performing retail
units. The Plan is also aimed at regaining the Group&#146;s market share, especially in the medium-high
end of the market, by differentiating the Group&#146;s brands from the competition and strengthening its
market reputation. If the restructuring plan is
not successful, there
could be a material adverse effect on the Group&#146;s financial condition, results of operations and
business prospects.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Demand for furniture is cyclical and may fall in the future &#151; </B>Historically, the furniture
industry has been cyclical, fluctuating with economic cycles, and sensitive to general economic
conditions, housing starts, interest rate levels, credit availability and other factors that affect
consumer spending habits. Due to the discretionary nature of most furniture purchases and the fact
that they often represent a significant expenditure to the average consumer, such purchases may be
deferred during times of economic uncertainty.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2005, the Group derived 40.6% of its leather- and fabric-upholstered furniture net sales
from the United States and the Americas and 52.7% from Europe. A prolonged economic slowdown in
the United States and Europe may have a material adverse effect on the Group&#146;s results of
operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>The Group operates principally in a niche area of the furniture market </B>- The Group is a leader
in the production of leather-upholstered furniture, with 83.9% of net sales of upholstered
furniture in 2005 being derived from the sale of leather-upholstered furniture.
Leather-upholstered furniture represents a limited, but growing, portion of the market for
upholstered furniture. Consumers have the choice of purchasing upholstered furniture in a wide
variety of styles, and consumer preferences may change. There can be no assurance that the current
market for leather-upholstered furniture will not decrease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>The furniture market is highly competitive &#151; </B>The Group operates in a highly competitive
industry that includes a large number of manufacturers. No single company has a dominant position
in the industry. Competition is generally based on product quality, brand name recognition, price
and service.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group principally competes in the upholstered furniture sub-segment of the furniture
market. In Europe, the upholstered furniture market is highly fragmented. In the United States,
the upholstered furniture market includes a number of relatively large companies, some of which are
larger and have greater financial resources than the Group.
</DIV>

<P align="center" style="font-size: 10pt">5
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Some of the Group&#146;s competitors offer extensively
advertised, well-recognized branded products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Competition has increased significantly in recent years as foreign producers from countries
with lower manufacturing costs have begun to play an important role in the upholstered furniture
market. Such manufacturers are often able to offer their products at lower selling prices, which
increases price competition in the industry. In particular, manufacturers in countries like China
and the countries of Eastern Europe and South America have increased competition in the promotional
or lower-priced segment of the market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result of the actions and strength of the Group&#146;s competitors and the inherent
fragmentation in some markets in which it competes, the Group is continually subject to the risk of
losing market share, which may lower its sales and profits. Market competition may also force the
Group to reduce prices and margins, thereby reducing its cash flows.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Fluctuations in currency exchange rates may adversely affect the Group&#146;s results &#151; </B>The Group
conducts a substantial part of its business outside of the euro zone. A rise in the value of the
euro relative to other currencies used in the countries in which the Group operates will reduce the
relative value of the revenues from its operations in those countries, and therefore may adversely
affect its operating results or financial position, which are reported in euro. In addition to
this translation risk, the Group is subject to currency exchange rate risk to the extent that its
costs are denominated in currencies other than those in which it earns revenues. In 2005,
approximately 58% of the Group&#146;s net sales, but only approximately 44% of its costs, were
denominated in currencies other than the euro. The Group is therefore exposed to the risk that
fluctuations in currency exchange rates may adversely affect its results. For more information,
see Item&nbsp;11, &#147;Quantitative and Qualitative Disclosures about Market Risk.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>The Group faces risks associated with its international operations &#151; </B>The Group is exposed to
risks that arise from its international operations, including changes in governmental regulations,
tariffs or taxes and other trade barriers, price, wage and exchange controls, political, social,
and economic instability in the
countries where the Group operates, inflation and interest rate fluctuations. Any of these
factors could have a material adverse effect on the Group&#146;s results.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>The price of the Group&#146;s principal raw material is difficult to predict </B>- Leather is used in
approximately 79% of the Group&#146;s upholstered furniture production, and the acquisition of cattle
hides represents approximately 35% of total cost of goods sold. The raw hides market&#146;s dynamics
are dependent on the consumption of beef, the levels of worldwide slaughtering, worldwide weather
conditions and on the level of demand in a number of different sectors, including the footwear,
leather, automotive, furniture and clothing sectors. The Group&#146;s ability to increase product
prices following increases in raw material costs is limited by market forces, and therefore the
Group may not be able to maintain its margins during periods of significant increases in raw
material costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>The Group&#146;s past results and operations have significantly benefited from government incentive
programs which may not be available in the future </B>- Historically, the Group has derived significant
benefits from the Italian Government&#146;s investment incentive programs for under-industrialized
regions in Southern Italy, including tax benefits, subsidized
</DIV>

<P align="center" style="font-size: 10pt">6
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">loans and capital grants. See Item
4, &#147;Information on the Company &#150;Incentive Programs and Tax Benefits.&#148; The Italian Parliament has
replaced these incentive programs with a new investment incentive program for all
under-industrialized regions in Italy, which is currently being implemented through grants,
research and development benefits. There can be no assurance that the Group will continue to be
eligible for such grants, benefits or tax credits for its current or future investments in Italy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In recent years, the Group has opened manufacturing operations in China, Brazil and Romania
that have been granted tax benefits and export incentives. There can be no assurance that these tax
benefits and export incentives will continue to be available to the Group in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>The Group is dependent on qualified personnel </B>- The Group&#146;s ability to maintain its
competitive position will depend to some degree upon its ability to continue to attract and
maintain highly qualified managerial, manufacturing and sales and marketing personnel. There can be
no assurance that the Group will be able to continue to recruit and retain such personnel. In
particular, the Group has been dependent on certain key management personnel in the past, and there can be no assurance
that the loss of key personnel would not have a material adverse effect on the Group&#146;s results of
operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Investors may face difficulties in protecting their rights as shareholders or holders of ADSs</B>
- - The Company is incorporated under the laws of the Republic of Italy. As a result, the rights and
obligations of its shareholders and certain rights and obligations of holders of its ADSs are
governed by Italian law and the Company&#146;s <I>Statuto </I>(or By-laws). These rights and obligations are
different from those that apply to U.S. corporations. Furthermore, under Italian law, holders of
ADSs have no right to vote the shares underlying their ADSs, although under the Deposit Agreement,
ADS holders have the right to give instructions to The Bank of New York, the ADS depositary, as to
how they wish such shares to be voted. For these reasons, the Company&#146;s ADS holders may find it
more difficult to protect their interests against actions of the Company&#146;s management, board of
directors or shareholders than they would as shareholders of a corporation incorporated in the
United States.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Control of the Company &#151; </B>Mr.&nbsp;Pasquale Natuzzi, who founded the Company and is currently
Chairman of the Board of Directors, owns 47.6% of the issued and outstanding Ordinary Shares of the
Company (52.8% of the Ordinary Shares if the Ordinary Shares owned by members of Mr.&nbsp;Natuzzi&#146;s
immediate family (the &#147;Natuzzi Family&#148;) are aggregated). As a result, Mr.&nbsp;Natuzzi controls the
Company, including its management and the selection of its Board of Directors. Since December&nbsp;16,
2003, Mr.&nbsp;Natuzzi has held his entire beneficial ownership of Natuzzi S.p.A. shares (other than 196
ADSs) through INVEST 2003 S.r.l., an Italian holding company (having its registered office at Via
Gobetti 8, Taranto, Italy) wholly-owned by Mr.&nbsp;Natuzzi.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, the Natuzzi Family has a right of first refusal to purchase all the rights,
warrants or other instruments which The Bank of New York, as Depositary under the Deposit Agreement
dated as of May&nbsp;15, 1993, as amended and restated as of December&nbsp;31, 2001 (the &#147;Deposit
Agreement&#148;), among the Company, The Bank of New York, as Depositary (the &#147;Depositary&#148;), and owners
and beneficial owners of American Depositary Receipts (&#147;ADRs&#148;), determines may
not lawfully or feasibly be made available to owners of ADSs in connection with each rights
offering, if any, made to holders of Ordinary Shares.
</DIV>

<P align="center" style="font-size: 10pt">7
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because a change of control of the Company would be difficult to achieve without the
cooperation of Mr.&nbsp;Natuzzi and the Natuzzi Family, the holders of the Ordinary Shares and the ADSs
may be less likely to receive a premium for their shares upon a change of control of the Company.
</DIV>
<DIV align="left">
<A name="108"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Forward Looking Information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Natuzzi makes forward-looking statements in this annual report. Statements that are not
historical facts, including statements about the Group&#146;s beliefs and expectations, are
forward-looking statements. Words such as &#147;believe&#148;, &#147;expect&#148;, &#147;intend&#148;, &#147;plan&#148; and &#147;anticipate&#148;
and similar expressions are intended to identify forward-looking statements but are not exclusive
means of identifying such statements. These statements are based on current plans, estimates and
projections, and therefore readers should not place undue reliance on them. Forward-looking
statements speak only as of the dates they were made, and the Company undertakes no obligation to
update or revise any of them, whether as a result of new information, future events or otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Forward-looking statements involve inherent risks and uncertainties. The Company cautions
readers that a number of important factors could cause actual results to differ materially from
those contained in any forward-looking statement. Such factors include, but are not limited to:
effects on the Group from competition with other furniture producers, material changes in consumer
demand or preferences, significant economic developments in the Group&#146;s primary markets,
significant changes in labor, material and other costs affecting the construction of new plants,
significant changes in the costs of principal raw materials, significant exchange rate movements or
changes in the Group&#146;s legal and regulatory environment, including developments related to the
Italian Government&#146;s investment incentive or similar programs. Natuzzi cautions readers that the
foregoing list of important factors is not exhaustive. When relying on forward-looking statements
to make decisions with respect to the Company, investors and
others should carefully consider the foregoing factors and other uncertainties and events.
</DIV>
<DIV align="left">
<A name="109"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;4. Information on the Company</B>
</DIV>

<DIV align="left">
<A name="110"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Introduction</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group is primarily engaged in the design, manufacture and marketing of contemporary and
traditional leather- and fabric-upholstered furniture, principally sofas, loveseats, armchairs,
sectional furniture, motion furniture and sofa beds, and living room
accessories. The group aims to position the Natuzzi brand at the high
end of the upholstered furniture market. The Group has structured its
product portfolio around three distinct collections: Natuzzi products in the medium-high segment of the
market, the Pasquale Natuzzi collection covering the high-end segment
and the Italsofa line the lower-end.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group is the world&#146;s leader in the production of leather-upholstered furniture and has a
leading share of the market for leather-upholstered furniture in the United States and Europe (as
reported by CSIL (&#147;CSIL&#148;), an Italian market research firm, with reference to market information
related to the year 2005). In 2000, the Company launched &#147;Italsofa&#148;, a new promotional brand aimed
at the lower-priced segment of the upholstery market, while in January&nbsp;2002, the Company introduced
the new logo for the &#147;Natuzzi&#148; brand, which is
</DIV>

<P align="center" style="font-size: 10pt">8
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">aimed at identifying the Company&#146;s medium to high
end of the market products. The Group currently designs 100% of its products and manufactures,
directly or through third parties, approximately 53% of its products in Italy. Production outside
of Italy is mainly for the Italsofa brand. Within Italy, the Group sells its furniture principally
through franchised <I>Divani &#038; Divani by Natuzzi </I>furniture stores. As at April&nbsp;30, 2006, 130 <I>Divani &#038;
Divani by Natuzzi </I>stores and 1 <I>Natuzzi Store </I>were located in Italy. Outside of Italy, the Group
sells its furniture principally on a wholesale basis to major retailers and, as at April&nbsp;30, 2006,
through 149 &#147;<I>Natuzzi</I>&#148; and &#147;<I>Divani &#038; Divani by Natuzzi</I>&#148; stores.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On June&nbsp;7, 2002 the Company changed its name from <I>Industrie Natuzzi S.p.A. </I>to <I>Natuzzi S.p.A.</I>
The <I>Statuto</I>, or by-laws, of the Company provide that the duration of the Company is until December&nbsp;31, 2050. The Company, which operates under the
trademark &#147;Natuzzi&#148;, is a <I>societ&#224; per azioni </I>(stock company) organized under the laws of the
Republic of Italy and was established in 1959 by Mr.&nbsp;Pasquale Natuzzi, who is currently Chairman of
the Board of Directors and controlling shareholder of the Company. Substantially all of the
Company&#146;s operations are carried out through various subsidiaries that individually conduct a
specialized activity, such as leather processing, foam production and shaping, furniture
manufacturing, marketing or administration.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In an effort to maximize the efficiency of the Group&#146;s organizational structure, at an
extraordinary general meeting held on November&nbsp;21, 2003, the Company&#146;s shareholders approved the
merger of Style &#038; Comfort S.r.l into the Company (the Company owned 100% of the capital stock of
Style &#038; Comfort S.r.l. prior to the merger). The merger became effective on January&nbsp;1, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s principal executive offices are located at Via Iazzitiello 47, 70029 Santeramo,
Italy, which is approximately 25 miles from Bari, in Southern Italy. The Company&#146;s telephone number
is: &#043;39 080 8820-111. The Company&#146;s distribution subsidiary in the United States is Natuzzi
Americas, Inc. (&#147;Natuzzi Americas&#148;), located at 130 West Commerce Avenue, High Point, North
Carolina 27260 (telephone number &#043;1 336 888-0351).
</DIV>

<DIV align="left">
<A name="111"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Organizational Structure</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As at April&nbsp;30, 2006, the Company&#146;s principal operating subsidiaries are:
</DIV>

<P align="center" style="font-size: 10pt">9
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="29%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>Percentage of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>ownership</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Registered office</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Activity</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Italsofa Bahia Ltd
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">97.99</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bahia, Brazil
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(1</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Minuano Nordeste S.A.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Pojuca, Brazil
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(1</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Italsofa Shanghai Ltd
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Shanghai, China
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(1</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Softaly Shanghai Ltd
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Shanghai, China
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(1</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Italsofa Romania
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Baia Mare, Romania
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(1</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Natco S.p.A.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">99.99</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bari, Italy
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(2</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">I.M.P.E. S.p.A.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">90.83</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Qualiano,Italy
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(3</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Divani Due S.r.l.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Verona, Italy
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(4</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Koine&#233; S.r.l.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Montesilvano, Italy
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(4</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Nacon S.p.A.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bari, Italy
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(4</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Natuzzi Americas Inc.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">High Point, NC, USA
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(4</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Natuzzi Iberica S.A.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Madrid, Spain
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(4</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Natuzzi Switzerland AG
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">97.00</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Kaltbrunn, Switzerland
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(4</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Natuzzi Nordic
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Copenaghen, Denmark
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(4</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Natuzzi Benelux S.A.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Geel, Belgium
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(4</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Natuzzi Germany Gmbh
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Dusseldorf, Germany
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(4</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Natuzzi Sweden AB
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Stockholm, Sweden
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(4</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Natuzzi Japan KK
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Tokyo, Japan
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(4</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Natuzzi Services Limited
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">London, UK
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(4</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">La Galleria Limited
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">London, UK
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(4</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Kingdom of Leather Trustees Limited
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">London, UK
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(5</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Natuzzi Netherlands Holding
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amsterdam, Holland
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(5</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Natuzzi United Kingdom Limited
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">London, UK
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(5</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Natuzzi Trade Service S.r.l.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bari, Italy
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(6</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Kingdom of Leather Limited
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">London, UK
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(7</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Italholding S.r.l.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bari, Italy
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(7</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Lagene S.r.l.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bari, Italy
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(7</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Natuzzi Asia Ltd
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Hong-Kong, China
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(7</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Manufacture and distribution</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Intragroup leather dyeing and finishing</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Production and distribution of polyurethane foam</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>Distribution</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD>Investment holding</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(6)</TD>
    <TD>&nbsp;</TD>
    <TD>Transportation services</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(7)</TD>
    <TD>&nbsp;</TD>
    <TD>Not operational</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See Note 1 to the Consolidated Financial Statements for further information on the Company&#146;s
subsidiaries.
</DIV>

<P align="center" style="font-size: 10pt">10
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="112"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Strategy</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group&#146;s primary objective is to expand and strengthen its presence in the global
upholstered furniture market in terms of sales and production, while at the same time increasing
the Group&#146;s profit and efficiency. To achieve these objectives, the Group&#146;s principal strategic
objectives include:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Improving efficiency and reducing operating costs </B>- Due to recurring unfavorable currency
conditions, pricing pressure especially in the U.S. and general economic conditions that have
negatively affected order flows for Natuzzi-branded products, and as part of the Group&#146;s ongoing
efforts to become more efficient and competitive, on May&nbsp;18, 2005, the Group&#146;s Board of Directors
approved a new restructuring plan. The plan is aimed at reducing manufacturing costs in Italy,
increasing overall efficiencies so that the Group may become more competitive, recovering
profitability through the closing of non-performing retail units and regaining market share
especially in the medium-high end of the market, where the Group continues to invest in the Natuzzi
brand.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At the time of its inception, the restructuring plan provided for, among other measures, a
temporary work force reduction (&#147;<I>Cassa Integrazione Guadagni </I>- CIG&#148;) of 1,320 positions by the end
of 2005 in all departments across the Company, in order to reduce manufacturing costs in Italy.
However, due to the accumulation of orders during the summer, and in order to provide for the
seasonal increase in order flow reported beginning in the second quarter of 2005, in September&nbsp;2005
the Group decided to call back about 90% of the workers that were temporarily laid off at the
Italian factories. Recently the Group obtained an extension of the
temporary work force reduction to cover the period June 2006 - June
2008 to allow the Group to complete all the initiatives and
investments to recover profitability and efficiency specifically in
the Italian plants. The Group has agreed with the Italian Unions that
the number of positions that will be affected by the temporary
workforce reduction during the period will not be more than 508.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Geographical expansion </B>- The Group first targeted the United States market in 1983 and
subsequently began diversifying its geographic markets, particularly in the highly fragmented
European markets (outside of Italy).
According to the most recent data available for the year 2005 (source CSIL), the Group is the
leader in the leather-upholstered furniture segment in the United States, with a 8.1% market share,
and in Europe, with 6.5%. The Group continues to focus on sales and to expand its retail presence
outside of its core markets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Retail program and brand development </B>- The Group has made significant investments to improve
its existing distribution network and strengthen its brand, primarily through the establishment of
new distribution subsidiaries, the acquisition of companies with existing networks of retail
stores, and an increase in the number of Natuzzi stores and Natuzzi
</DIV>

<P align="center" style="font-size: 10pt">11
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Galleries worldwide. See
&#147;&#151;Markets&#148;. As of April&nbsp;30, 2006, there were 280 <I>Natuzzi </I>stores worldwide, including <I>Divani and
Divani by Natuzzi </I>stores. The Natuzzi Galleries program was launched in 2002 and the number of
galleries worldwide reached 594 as of April&nbsp;30, 2006. By using the same creative concepts and
internal decorations in Natuzzi stores and Natuzzi Galleries, the Group has created a coherent
identity for the Natuzzi brand. The Group plans to open additional Natuzzi Stores and Galleries in
strategic geographical locations to strengthen its presence in Italy and abroad and is committed to
making the marketing investments necessary to increase brand recognition in these markets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Product diversification &#151; </B>The Group has taken a number of steps to broaden its product lines,
including the development of new models, such as motion furniture, and the introduction of new
materials and colors, including select fabrics and microfibers. See &#147;&#151;Manufacturing&#151;Raw Materials&#148;
The Group also strives to expand and add value to its product offerings through its &#147;<I>Decorator</I>&#148;
concept, which provides customers with &#147;total look room package solutions.&#148; See &#147;&#151; Products.&#148; The
Group believes that this approach will also strengthen its relationships with the world&#146;s leading
distribution chains, which are interested in offering branded propositions. The Group has invested
in Natuzzi Style Centers in Santeramo to serve as a creative hub for the Group&#146;s design activities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Expansion in all price segments </B>- The Group is expanding in all price segments of the leather
and non-leather upholstered furniture market. The Italsofa lower-priced brand, launched in October
2000, competes in the lower end of the upholstered furniture market and represented about 48.4% of
total seats sold by
the Group in 2005. Faced with increased competition in this price range, the Group has
increased its production capacity and efficiency by investing in production facilities in Brazil,
China and Romania, while continuing to emphasize the style and quality associated with the Natuzzi
brand. The &#147;Pasquale Natuzzi Collection&#148; competes in the higher end of the upholstered furniture
market and offers customers products that are of the highest quality and distinctive in terms of
design, materials and project development.
</DIV>
<DIV align="left">
<A name="113"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Manufacturing</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As at April&nbsp;30, 2006, the Group manufactured its products in 11 production facilities located
in Italy. Eight of the facilities are engaged in upholstery cutting and sewing and assembly of
finished and semi-finished products, and employed 2,579 workers, as at April&nbsp;30, 2006, 35.2% of
whom are not directly involved in production. The Group&#146;s production facilities are located either
in, or within a 25-mile radius of, Santeramo, where the Group&#146;s headquarters are located. The
assembly operations carried out at the Group production facilities also include the attaching of
the foam and covering to the frames.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These operations retain many characteristics of production by hand and are coordinated at the
production facilities through the use of a management information system that identifies by number
(by means of a bar-code system) each component of every piece of furniture, and facilitates its
transit through the different production phases up to the storehouse. As part of an effort to
decrease costs through increased productivity and flexibility, automatic guided vehicles supervised
by a central computer have been installed at one of the Group&#146;s principal assembly facilities to
move products through the production chain. In other facilities, materials are currently moved by
hand or conveyor belt. Operations
</DIV>

<P align="center" style="font-size: 10pt">12
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">at all of the Group&#146;s production facilities are normally
conducted Monday through Friday with two eight-hour shifts per day.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Two of the Group&#146;s production facilities are involved in the processing of leather hides to be
used as upholstery. One of the facilities is a leather dyeing and finishing plant located near
Udine. The Udine facility receives both raw and tanned cattle hides, sends raw cattle hides to
subcontractors for tanning, and then
dyes and finishes the hides. The other facility, located near Vicenza, is a warehouse that
receives semi-finished hides and sends them to various subcontractors for processing, drying and
finishing, and then arranges for the finished leather to be shipped to the Group&#146;s assembly
facilities. Hides are tanned, dyed and finished on the basis of orders given by the Group&#146;s central
office in accordance with the Group&#146;s &#147;on demand&#148; planning system, as well as on the basis of
estimates of future requirements. The movement of hides through the various stages of processing is
monitored through the management information system. See &#147;&#151; &#145;Supply-Chain Management&#146;&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group produces, directly and by subcontracting, 10 grades of leather in approximately 40
finishes and 274 colors. The hides, after being tanned, are split and shaved to obtain uniform
thickness and separated into &#147;top grain&#148; and &#147;split&#148; (top grain leather is used, in varying
quantities, in the manufacture of all Natuzzi-branded leather products, while split leather is used
in addition to top grain leather in some of the Group&#146;s lower -priced products). The hides are
then colored with dyes and treated with fat liquors to soften and smooth the leather, after which
they are dried. Finally, the semi-processed hides are treated to improve the appearance and
strength of the leather and to provide the desired finish. The Group also purchases finished hides
from third parties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;One of the Group&#146;s production facilities, which is located near Naples and employed 60 workers
as at April&nbsp;30, 2006, is engaged in the production of flexible polyurethane foam and, because the
facility&#146;s production capacity is in excess of the Group&#146;s needs, also sells foam to third parties.
The foam produced at the Naples facility pursuant to a patented process results in a high-quality
material without using any auxiliary blowing agent and is sold under the &#147;Eco-Flex<SUP style="font-size: 85%; vertical-align: text-top">TM</SUP>&#148;
trade name. A material specially designed for mattresses is also produced and sold under the
&#147;Greenflex<SUP style="font-size: 85%; vertical-align: text-top">TM</SUP>&#148; trade name. As a result of intensive R&#038;D activity, the Company has
developed a new family of high resilient materials. The different polymer matrix is safer because
of its improved flame resistance, and more environmentally-friendly because it can be disposed of
without harmful by-products and because the raw materials used to make it create less harmful
environmental impact during handling and storage.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group owns the land and buildings for its principal assembly facilities located in
Santeramo, Matera and Altamura, its leather dyeing and finishing facility located near Udine, its
foam-production facility located near Naples and its facilities located in Ginosa, Laterza, Brazil,
Romania and the new plant in China (for the use of which the land is franchised by the Government
for 50&nbsp;years), while the land and buildings of the remaining production facilities are leased from
lessors, with several of whom the Group enjoys long-term relationships. Although the lease terms
are of varying lengths, Italian law provides that any such lease must have a minimum term of six
years. This minimum term, however, is enforceable only by the lessee. The lease agreements
provide for rents that generally increase each year in line with inflation. Management believes
that the prospects are good for renewing the agreements on acceptable terms when they expire. The
Group owns substantially all the equipment used in its facilities.
</DIV>

<P align="center" style="font-size: 10pt">13
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2000, the Group announced the launch of a new, lower-priced upholstered furniture
collection, known as Italsofa. The Group currently manufactures the Italsofa Collection outside
Italy at plants located in Brazil, China and Romania; if orders exceed production capacity at these
other plants, Italsofa products are also manufactured in the Company&#146;s Italian plants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Historically, the Group has entrusted some of its production work relating to the assembly of
finished products from raw materials and finished parts to subcontractors located within a 20-mile
radius of Santeramo (about 14% of Natuzzi&#146;s production during the year ended on December&nbsp;31, 2005).
The Group&#146;s contracts with these subcontractors provide that the Group will supply to each
subcontractor product designs, finished leather, pre-cut cushions, wooden frames and other assembly
materials. The subcontractors are required to assemble these materials into finished products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The furniture is assembled at a fixed cost per unit that is set to increase annually in line
with inflation. These contracts have an indefinite term, subject to termination by either party
with prior notice (generally one month).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Raw Materials </B>- The principal raw materials used in the manufacture of the Group&#146;s products
are cattle hides, polyurethane foam, polyester fiber, wood and wood products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group purchases hides from slaughterhouses and tanneries located mainly in Italy, Brazil,
Colombia, Australia, Germany, Uruguay, Scandinavian countries, the United States, and Eastern
Europe. The hides purchased by the Group are divided into several categories, with hides in the
lowest categories being purchased mainly in Brazil, Colombia, and Ukraine; those in the middle
categories being purchased mainly in Australia, Uruguay, Italy and the United States and those in
the highest categories being purchased in Germany and Scandinavian countries. A significant number
of hides in the lowest categories are purchased at the &#147;wet blue&#148; stage &#151; <I>i.e</I>., after tanning &#151;
while some hides purchased in the middle and highest categories are unprocessed. The Group has
implemented a leather purchasing policy according to which a percentage of leather is purchased at
a finished or semi-finished stage. Therefore, the Group has had a smaller inventory of &#147;split
leather&#148; to sell to third parties. Approximately 80% of the Group&#146;s hides are purchased from 20
suppliers, with whom the Group enjoys long-term and stable relationships. Hides are generally
purchased from the suppliers pursuant to orders given every one to two months specifying the number
of hides, the purchase price and the delivery date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Hides purchased from Europe are delivered directly by the suppliers to the Group&#146;s leather
facilities near Udine and Vicenza, while those purchased overseas are inspected overseas by
technicians of the Group, delivered to an Italian port and then sent by the Group to the Udine
facility and subcontractors. Management believes that the Group is able to purchase leather hides
from its suppliers at reasonable prices as a result of the volume of its orders, and that
alternative sources of supply of hides in any category could be found quickly at an acceptable cost
if the supply of hides in such category from one or several of the Group&#146;s current suppliers ceased
to be available or was no longer available on acceptable terms. The supply of raw cattle hides is
principally dependent upon the consumption of beef, rather than on the demand for leather.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During most of 2005, the prices paid by the Group remained stable, but during the last quarter
of the year prices have increased, especially on the Brazilian market. The factors
</DIV>

<P align="center" style="font-size: 10pt">14
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">influencing the
leather prices increasing in the last quarter of the year were due to a reduction in red meat
consumption and the exchange rate of the currencies in the markets where we operate. The Group
believes that these
same conditions will influence the price of cattle hides in 2006 more significantly than in
2005 and is continuing to research new suppliers and sources of cattle hides.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group also purchases fibers and microfibers for use in coverings. Both kinds of coverings
are divided into several price categories: most fabrics are in the highest price categories, while
the most inexpensive of the microfibers are in the lowest price categories. Fabrics are purchased
exclusively in Italy from six suppliers who provide the product at the finished stage. Microfibers
are purchased in Italy, South Korea, Taiwan and Japan from four suppliers who provide them at the
finished stage. Microfibers purchased from the Group&#146;s Italian supplier are in some cases imported
by the supplier at the greige or semi-finished stage and then finished (dyed and bonded) in Italy.
The microfibers purchased from the Group&#146;s Japanese supplier are the only microfibers the Group
purchases in the highest price category. Fabrics and microfibers are generally purchased from the
suppliers pursuant to orders given every week specifying the quantity (in linear meters) and the
delivery date. The price is determined before the fiber or microfiber is introduced into the
collection.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fabrics and microfibers purchased from the Italian suppliers are delivered directly by the
suppliers to the Group&#146;s facility in Matera, while those purchased overseas are delivered to an
Italian port and then sent to the Matera facility. Only microfibers purchased in Taiwan and South
Korea are delivered directly by the suppliers to Chinese and Brazilian ports and then sent to the
Shanghai, Salvador de Bahia and Pojuca facilities. The Group is able to purchase such products at
reasonable prices as a result of the volume of its orders. The Group continuously searches for
alternative supply sources in order to obtain always the best product at the best price.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Price performance of fabrics is quite different from that of microfibers. Because fabrics are
purchased exclusively in Italy and are composed of natural fibers, their prices are influenced by
the cost of labor and the quality of the product. During 2005, fabric prices were stable due to
long-term relationships with suppliers and the large volumes purchased by the Group, despite the
increases in the cost of raw materials and oil. Microfiber prices have decreased due to the
introduction of new suppliers and the renegotiation of prices with current suppliers. The
price of microfibers is mainly influenced by the international availability of high-quality
products and raw materials at low costs especially from Asian markets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group obtains the chemicals required for the production of polyurethane foam from major
chemical companies located in Europe (including Germany, Italy and the United Kingdom) and the
polyester fiber filling for its polyester fiber-filled cushions from several suppliers, located
mainly in Korea, China and Taiwan. The chemical components of polyurethane foam are
petroleum-based commodities, and the prices for such components are therefore subject to, among
other things, fluctuations in the price of crude oil. The Group obtains wood and wood products for
its wooden frames from suppliers in Italy and Eastern Europe. Through its plants located in
Romania, the Group has begun engaging directly in the cutting and transformation of wood from
Romanian forests.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With regard to the Group&#146;s collection of home furnishing accessories (tables, lamps, carpets,
home accessories in different materials), most of the suppliers are located in Italy and
</DIV>


<P align="center" style="font-size: 10pt">15
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">other European countries, while some hand-made products (such as carpets) are made in India.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;Supply-chain Management&#148;</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Organization. </I></B>In order to speed up the processing of information and material, the Group has
set up a new organization. Starting in June&nbsp;2004, all functions of the supply chain have been
aggregated in the HQ Logistics Department according to modern models of Supply Chain Organizations.
This type of organization ensures that information and material flows are organized, synchronized
and efficient, and consequently it also improves customer service as well.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Planning (order management, production, procurement). </I></B>The Group schedules its manufacture and
procurement of raw materials and components &#147;on demand&#148;. This system allows the Group to manage a
high number of product combinations (in terms of number of models, versions and covering codes)
that are offered to customers around the world while maintaining a high level of customer service
and low inventory. &#147;On demand&#148; planning reduces the risk of obsolescence even if the products have
short lifespans. The Group&#146;s material flow policies, which are defined by the Group&#146;s Logistics
Director, have reduced all lead times (except those due to orderbooking backlog, a process that is
not managed by the Group&#146;s Logistics Department) to five weeks (average of all orders). Special
programs with three-week lead times are provided for a limited number of customers and limited
collections and product combinations. The lead times can be longer than described above when an
unusually high level of orders are made. The time required for the delivery to the customer varies
depending on where the customer is located (transport lead times vary widely depending on the
distance between the final destination and the production units).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All planning activities (finished goods load optimization, customer order acknowledgement,
production and suppliers&#146; planning) are synchronized in order to guarantee that during the
production process, the correct materials are located in the right place at the right time, thereby
achieving a maximum level of service as well as minimum handling and transportation costs. This
system is used for all products and markets in which the Group sells its goods. For example, in the
case of furniture being purchased by a U.S. customer, as soon as an order is sent to the Group&#146;s
sales office in the United States (High Point, North Carolina), the data is entered directly into
the Group&#146;s central computer system, thus saving administrative lead time and allowing the Group to
operate more efficiently.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order to incur the lowest costs and achieve the best product quality, the Group attains the
optimum load level for shipping through the use of &#147;tailor made&#148; software. Since the prices quoted
to customers are based on shipments of full containers, if a customer&#146;s order does not represent
optimal use of container space, revisions to the customer&#146;s order will be suggested. Upon
finalization of the customer&#146;s order, the computer system generates an order proposal that is
reviewed to determine feasibility in terms of the types of products, quantity and timing. In order
to improve and adapt the above mentioned software to Natuzzi needs, a new research project has been
launched in cooperation with the University of Bari and the University of Copenhagen. The expected
result is a reduction in transportation costs in the medium- to long-term future.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This planning process allows for the optimum use of the available technology, capacity and
human resources, while minimizing costs and achieving
high quality. Once
</DIV>


<P align="center" style="font-size: 10pt">16
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">production is scheduled, the Group&#146;s &#147;Material Requirement Planning
Information System&#148; produces a proposed list of raw materials and components to be ordered. This
list is analyzed, reviewed and combined with the Group&#146;s global procurement scheduling. All
purchases from suppliers are then planned. Procurement lead times are relatively short; leather is
generally available within three weeks of ordering and certain components are supplied by a &#147;ready
from stock&#148; service. The Group strives to achieve optimum levels of service while keeping
inventory low, and to that end the Group constantly seeks, through a synergic collaboration between
the Sales and Logistics departments, to improve its capacity to forecast future demand.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Transportation. </I></B>The Group delivers goods to customers by common carriers. Those goods
destined for the Americas and other markets outside Europe are transported by sea in 40&#146; high cube
containers, while those produced for the European market are generally delivered by truck and, in
some cases, by railway. In 2005, the Group shipped 13,327 containers (40&#146;hc) to overseas countries
and approximately 8,465 full load mega-trailer trucks to European destinations. In order to
guarantee the best price and quality of transportation services, the Group deals directly with
shipping companies and logistic operators without resorting to the use of intermediaries.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group relies principally on several shipping and trucking companies operating under
&#147;time-volume&#148; service contracts to deliver its products to customers and to transport raw materials
to the Group&#146;s plants and processed materials from one plant to another. In general, the Group
prices its products to cover its door-to-door shipping costs, including all customs duties and
insurance premiums. Some of the Group&#146;s overseas suppliers are responsible for delivering raw
materials to the port of departure, therefore transportation costs for these materials are
generally under the Group&#146;s control.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since September&nbsp;2003 the Group has operated an on-line Transportation Portal to enable
transportation suppliers to provide the Group and its sales force, as well as some customers , an
order status report on their assigned shipment, which includes rail station /port arrival,
re-shipment and final delivery.
</DIV>

<DIV align="left">
<A name="114"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Products</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group produces a vast range of upholstered furniture in both leather and fabric in three
different styles that reflect the different tastes and lifestyles of our customers: Casual, Urban
and Vintage.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Through this subdivision of three stylistic worlds, where each is characterized by particular
colors, ambiance and emotions, the Group is able to establish an immediate connection with
different target groups, offering them the best living solution.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group&#146;s product range falls within five broad categories of furniture: stationary
furniture (sofas, loveseats and armchairs); sectional furniture; motion furniture; sofa beds and
occasional chairs (including recliners and body massage chairs). The Group offers its
</DIV>


<P align="center" style="font-size: 10pt">17
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">products in 375 different models, 10 leather grades, 31 leather finishes and 230 colors; 7 fabric grades, 23 fabric finishes and 127 colors; and 3
microfiber grades, 4 microfiber finishes and 62 colors. Each of the Group&#146;s models is generally
offered in various forms (e.g., sofa, loveseat, armchair, ottoman, sectional components, motion
mechanism and body massage chairs). Each model is offered at prices that vary depending
principally on the quality and finish of the leather (including whether it is top grain only
leather or top grain with split) and the quality of the cushions (including whether they are foam,
polyester fiber or feather).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to the main collection, the Group offers two specialized product lines. The
Pasquale Natuzzi Collection includes all three lifestyles mentioned above and represents the
highest segment of the Natuzzi brand. It is characterized by a clear elegance achieved through
materials and stylistic details that bring out the uniqueness of each creation in this collection.
The Italsofa Collection, the Group&#146;s promotional line launched in October&nbsp;2000, has been successful
beyond all predictions, achieving the difficult balance between lower sales prices and Italian
style and high quality. Currently there are 104 models in this collection. Based on the results
of this collection, the Group offers different coverings for Italsofa products in the Group&#146;s
different markets. For the Americas and the Asia Pacific market, leather coverings are offered in
4 grades, 12 finishes and 88 colors, and microfiber coverings are offered in 3 grades, 3 finishes
and 34 colors. By contrast, in EMEA (Europe, Middle East and Africa), leather coverings are
offered in 4 grades, 12 finishes and 82 colors and microfiber coverings are offered in 3 grades, 4
finishes and 42 colors.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group&#146;s strategy has been to reduce the number of models offered while increasing the
available number of versions. This reduction in complexity provides a clearer, more
customer-oriented vision for the whole organization. The high degree of personalization offered
within each of the lifestyle lines allows the Group to satisfy a wide range of customer tastes and
preferences. In addition, by observing consumer choices about product personalization, the Group&#146;s
Research and Development department is able to monitor trends and respond to changes in consumer
preferences in a timely and focused manner.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Beyond its upholstered furniture offerings, the Group is committed to developing innovative
enhancements to more traditional living room sets (composed of 3-seater/2-seater/chair solutions)
through the introduction of accessory furnishings such as coffee tables, lamps, rugs, and wall
units. The Group has thus diversified its product line with a new collection of occasional
furniture and accessories. The Group aims to keep this collection small, while offering a complete
selection to satisfy the different living space needs and tastes of its customers.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group creates new items in response to market demand, concentrating on style, price and
dimension. The Group performs extensive and meticulous market analysis of the market segments in
which the Group operates, which is generally highly accurate.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The marketing strategy of the Group is based on offering new models and products with a
certain regularity. In the design and creation phase of the new models, the designers&#146; group is
completely dedicated to the study and definition of trends and innovative designs, while keeping in
mind the price point objectives indicated by the Group&#146;s market analysis. Only occasionally do the
Group&#146;s designers project new models at the specific request of large customers.
</DIV>


<P align="center" style="font-size: 10pt">18
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;One of the most important tasks on which the Research and Development department focuses is
ensuring that the &#147;points of sale&#148; for Natuzzi products are consistent with the Natuzzi brand image
and well-adapted to the targeted market segment. The Group&#146;s store-level marketing communication
system has been completely re-designed with the aim of reaching customers more directly and
incisively. The Group believes that this service simplifies the work of its retailers, which
otherwise are forced to put together single elements coming from different suppliers and to have
interior decorators dedicated to offering decorating solutions to customers. We believe that the
Group is uniquely capable of offering customers complete furnishing solutions.
</DIV>

<DIV align="left">
<A name="115"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Markets</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group markets its products internationally as well as in Italy. Outside Italy, the Group
sells its leather furniture principally on a wholesale basis to major retailers and furniture
stores. In 1990, the Group began selling its leather-upholstered products in Italy and abroad
through franchised Divani &#038; Divani by Natuzzi and Natuzzi furniture stores. Since 2001 the Group
has also sold its furniture through directly owned Divani &#038; Divani by Natuzzi and Natuzzi stores.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2005 the Group derived 40.6<B>% </B>of its leather- and fabric-upholstered furniture net sales
from the United States and the Americas, 52.7% from Europe and 6.7% from the rest of the world
(mainly Australia and Japan). See &#147;&#151; Strategy.&#148;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following tables show the leather- and fabric-upholstered furniture net sales and unit
sales (in seats) of the Group broken down by geographic market for each of the years indicated<B>:</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="39" style="border-bottom: 1px solid #000000"><B>Leather- and Fabric-Upholstered Furniture Net Sales (millions of euro)</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>2002</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>2001</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap><DIV style="margin-left:15px; text-indent:-15px">U.S. and the Americas<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">241.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">40.6</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">279.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">42.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">320.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">47.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">366.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">49.9</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">356.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">49.9</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Europe </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">313.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">52.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">340.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">51.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">313.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">46.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">326.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">44.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">317.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">44.5</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Rest of the World </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">6.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">6.9</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">6.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">5.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">5.6</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">594.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">665.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">674.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">734.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">714.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="39" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="39" style="border-bottom: 1px solid #000000"><B>Leather- and Fabric-Upholstered Furniture Net Sales (in seats)(2)</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>2002</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>2001</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap><DIV style="margin-left:15px; text-indent:-15px">U.S. and the Americas<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,386,329</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">49.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,564,901</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">51.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,699,160</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">55.6</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,572,879</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">52.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,376,818</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">47.9</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Europe </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,262,887</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">44.9</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,319,740</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">43.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,181,566</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">38.6</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,278,296</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">42.2</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,323,736</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">46.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Rest of the World </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">162,523</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">5.8</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">186,330</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">6.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">178,109</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">5.8</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">176,483</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">5.8</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">175,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">6.1</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,811,739</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,070,971</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,058,835</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,027,658</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,876,258</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="39" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 12pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Outside the United States, the Group also sells its products to customers in Canada and
Central and South America (collectively, the &#147;Americas&#148;).</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes seats produced at Group-owned facilities and by subcontractors. Seats are a unit
measurement. A sofa consists of three seats; an armchair of one.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>1 United States and the Americas. </B>In 2005, net sales of leather- and
fabric-upholstered furniture in the United States and the Americas decreased 13.5% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>241.7
</DIV>


<P align="center" style="font-size: 10pt">19
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">million, compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>279.4&nbsp;million in 2004, and the number of seats sold decreased 11.4% to
1,386,329, compared to 1,564,901 in 2004.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group&#146;s sales in the United States and the Americas are handled by Natuzzi Americas, the
Group&#146;s distribution subsidiary for North and Latin America, which maintains offices in High Point,
North Carolina, the heart of the most important furniture manufacturing and distributing region in
the United States. The staff at High Point provides customer service, marketing and logistics,
handles finance and collections, and generally acts as the customers&#146; contact for the Group. As at
April&nbsp;30, 2006, the High Point operation had 65 employees.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Natuzzi Americas has 55 independent sales representatives and sub-representatives in the
United States and the Americas. They are supervised by three regional sales and marketing managers,
one for each of the U.S. Eastern Region, U.S. Western Region/Latin America and Canada.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group&#146;s principal customers are major retailers. The Group advertises its products to
retailers and, recently, to consumers in the United States and the Americas directly and through
the use of various marketing tools. The Group also relies on its network of sales representatives
and on the furniture fairs held at High Point each April and October to promote its products. Many
of the Group&#146;s larger customers review part of the new offering of models during an informal
&#147;pre-market&#148; period one month prior to each High Point fair.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2 Europe</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.1 Europe (excluding Italy). </B>In 2005, economic conditions throughout Europe continued to be
difficult. In the United Kingdom alone, over 400 furniture stores were
closed.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2005, net sales of leather- and fabric-upholstered furniture in Europe (excluding
Italy) decreased by 7.8% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>246.2&nbsp;million, compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>267.1&nbsp;million in 2004, and seats sold
decreased by 2.8% to 1,015,683.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Furniture retailers are generally smaller in Europe than in the United States. In Europe
(outside Italy), the Group generally deals with buying groups and chains representing 50 to 100
retailers, as well as with independent retailers. While the buying groups place the orders,
thereby obtaining the benefits of volume-driven commercial conditions, the Group delivers the
products directly to the particular members of the buying groups on whose behalf the orders are
placed. In some cases, the Group invoices the buying group. In others, the Group invoices the
individual member to whom the products are delivered.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As in the United States, the Group advertises its products in Europe (outside Italy) to
consumers and to retailers directly and through the use of various marketing tools. The Group also
promotes its products in Europe through six subsidiaries in Belgium, Denmark, Sweden, Germany,
United Kingdom, Switzerland and Spain, as well as through a network of sales agents. The Group
also participates in furniture fairs in the most important markets. As at December&nbsp;31, 2005, the
Group had 9 sales agents and sub-agents in Europe. These sales agents are paid on a commission
basis.
</DIV>


<P align="center" style="font-size: 10pt">20
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Outside Italy, the Company uses franchised or directly owned stores to penetrate markets and
implement brand strategies. As of April&nbsp;30, 2006, 54 franchised single-brand stores were operating
in southwest Europe (outside Italy): 27 under the Divani &#038; Divani by Natuzzi name (13 in Greece, 14
in Portugal) and 27 under the Natuzzi name (21 in France, 2 in Malta, 2 in Cyprus and one in each
of the United Kingdom and Iceland). As of April&nbsp;30, 2006, there were 39 directly owned stores in
southwest Europe (outside Italy): 8 in Switzerland, 28 in Spain and
2 in United Kingdom under the Natuzzi name. In the United Kingdom, the Group also operated a
concession (store-in-store) inside Selfridges Department Store &#150; in London.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
February of 2006, the Group started the process of liquidating
Natuzzi&#146;s subsidiaries in the United Kingdom. The Group
intends to retain 2 of the original group of stores (see note 1 to the consolidated financial
statement). This decision was driven both by the desire to more precisely position the Natuzzi
brand in the medium to high end of the UK market, as well as by the
negative performance of most of these stores.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In Eastern Europe, during 2005 the Group opened 9 new galleries in addition to the 13 already
existing.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Seven of these new galleries were opened in emerging markets like Macedonia, Moldova, Ukraine,
Hungary and the Czech Republic where two galleries operate alongside two stores. During 2005 the
Group worked toward the conclusion of two important projects: the opening of its first store in
Moscow (Russia) and its first store in Warsaw (Poland). These stores were opened in the first
months of year 2006.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.2 Italy</B>. In 2005, sales of leather- and fabric-upholstered furniture in Italy decreased of
8.20% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>67.0&nbsp;million, compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>73.0&nbsp;million in 2004, and seats sold decreased by 9.9% to
247,203.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since 1990, the Group has sold its upholstered products within Italy principally through
franchised Divani &#038; Divani furniture stores (now <I>Divani &#038; Divani by Natuzzi</I>). As of April&nbsp;30,
2006, 130 <I>Divani &#038; Divani by Natuzzi </I>stores and 1 Natuzzi store were located in Italy, 20 of which
were directly owned.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In April&nbsp;2005, the Company acquired  Koine&#232; S.r.l. (Koine&#232;), an
Italian enterprise that was operating seven &#147;Divani &#038;
Divani by Natuzzi&#148; stores. The stores are located in the Abruzzo and Marche regions of Italy. In
November&nbsp;2005, the Company acquired a network of seven stores &#147;Divani &#038; Divani by Natuzzi&#148; located
in Rome. On April&nbsp;5, 2006 the Group opened a store  in the center of Milan&#146;s main shopping
and commercial area. The primary reason for these acquisitions is the
opportunity to maintain and expand the
market presence in the aforementioned regions and cities.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>3 Rest of the World</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>3.1 Asia-Pacific</B>. Overall sales in the Asia-Pacific market decreased by 13.2% in 2005 to
<FONT face="'Times New Roman',times,serif">&#128;</FONT>39.9&nbsp;million, compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>46.0&nbsp;million in 2004. In 2005, sales in Australia were <FONT face="'Times New Roman',times,serif">&#128;</FONT>16.5&nbsp;million
(down 14.9% from 2004), and sales in Japan were <FONT face="'Times New Roman',times,serif">&#128;</FONT>4.2&nbsp;million (down 43.2% compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>7.4&nbsp;million
in 2004). This decrease was mainly due to the termination of our distributorship agreement in the
market and our decision to directly manage our operations through the establishment of a local
operating subsidiary.
</DIV>


<P align="center" style="font-size: 10pt">21
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to the operating subsidiary in Japan, the Group manages its Asia-Pacific sales
through a commercial office placed within its operating subsidiary, Italsofa Shanghai Ltd, and
three agencies located in Australia, Korea and New Zealand.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of April&nbsp;30, 2006, 29 franchised single-brand stores were operating in the Asia Pacific
market: 16 in Australia, 10 in China, one in Singapore and two in
New Zealand. The 16 stores in Australia operate alongside 29 galleries in David Jones
Department Stores.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>3.2 Middle East</B>. 2005 has been an important year for the development of the Natuzzi brand
strategy in this area. During the year 4 stores have been opened: one in Lebanon, two in the
United Arab Emirates and one in Saudi Arabia, as well as one gallery in Bahrain.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Customer Credit Management </B>- The Group maintains an active credit management program. The
Group evaluates the creditworthiness of its customers on a case-by-case basis according to each
customer&#146;s credit history and information available to the Group. Throughout the world, the Group
utilizes &#147;open terms&#148; in 81% of its sales and obtains credit insurance for almost 82% of this
amount; 16.5% of the Group&#146;s remaining sales are commonly made to customers on a &#147;cash against
documents&#148; and &#147;cash on delivery&#148; basis; and lastly 2.5% of the Group&#146;s sales are supported by a
&#147;letter of credit&#148; or &#147;payment in advance&#148;.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Advertising &#151; </B>The Group uses the Natuzzi brand for its medium- to higher-priced product line.
In January&nbsp;2002, during the Cologne Furniture Fair, the Group launched the new Natuzzi &#147;visual
identity&#148;, through which the brand name has taken on a new aesthetic and strategic meaning.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Natuzzi Communication System was developed to regulate all methods used in each market to
advertise the brand name, and operates transversally on different levels: the &#147;brand-building
level&#148; establishes the brand&#146;s philosophy, while the &#147;traffic-building level&#148; aims to attract
consumers to points of sale using various kinds of initiatives, such as presentations of new
collections, new store openings and promotional activities.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Advertising in the galleries is carried out with the help of the &#147;Retail Advertising Kit&#148;, a
collection of templates that enable advertising of the Natuzzi brand in conjunction with the
retailer&#146;s brand.
</DIV>

<DIV align="left">
<A name="116"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Incentive Programs and Tax Benefits</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Historically, the Group derived benefits from the Italian Government&#146;s investment incentive
program for under-industrialized regions in Southern Italy (the &#147;Mezzogiorno Program&#148;), which
includes the area that serves as the center of the Group&#146;s operations. The Mezzogiorno Program
provided tax benefits, capital grants and subsidized loans. In particular, a substantial portion
of the Group&#146;s earnings before taxes and minority interest from 1994 to 2003 was derived from
companies entitled to some extent to such tax exemptions. All tax exemptions expired between 1996
and 2003. The last tax exemption was related to the subsidiary &#147;Style &#038; Comfort S.r.l.&#148; and
expired on December&nbsp;27, 2003.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 1992, the Italian Parliament instructed the Government to replace the Mezzogiorno Program
with a new investment incentive program in favor of all under-industrialized regions of Italy. In
1993, the Government confirmed the expiration of the
</DIV>



<P align="center" style="font-size: 10pt">22
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Mezzogiorno Program by legislative decree and
disclosed the broad outlines of the new program, to be defined by subsequent government
resolutions. The Parliament has provided the Government with certain funds to honor existing
commitments under the Mezzogiorno Program relating to capital grants and subsidized loans. There
can be no assurance, however, that the Group will be able to obtain all the capital grant or subsidy benefits to which it may be entitled
under such Program.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The government resolutions adopted thus far to implement the new investment incentive program
state that companies making investments in the construction, enlargement, restructuring,
conversion, reactivation or relocation of industrial plants may receive a grant based on the total
cost of the project. The grant (calculated in terms of the <I>Equivalente Sovvenzione Netto </I>formula)
will be approximately 40% of the investment cost for the Mezzogiorno areas in which Natuzzi
currently operates. The program also provides for research and development benefits which may not
exceed 60% of the investment cost (calculated in terms of the <I>Equivalente Sovvenzione Lordo</I>
formula).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;1996, the Company and the &#147;Contract Planning Service&#148; of the Italian Ministry of
the Industrial Activities signed a &#147;Program Agreement&#148; with respect to the &#147;Natuzzi 2000 project&#148;.
In connection with this project, Natuzzi Group prepared a multi-faceted program of industrial
investments for the increase of the production capacity of leather and fabric upholstered furniture
in the area close to its headquarters in Italy. According to this &#147;Program Agreement&#148;, Natuzzi
should have realized investments for <FONT face="'Times New Roman',times,serif">&#128;</FONT>295.2&nbsp;million and at the same time the Italian government
should have contributed in the form of capital grants for <FONT face="'Times New Roman',times,serif">&#128;</FONT>145.5&nbsp;million. During 2003 Natuzzi
revised its growth and production strategy due to the strong competition of products realized by
competitors in countries like China and Brazil. Therefore, as a consequence of this change in the
economic environment in 2003 Natuzzi requested to the Italian Ministry of the Industrial Activities
the revision of the original &#147;Program Agreement&#148; as follows: reduction of the investment to be
realized from <FONT face="'Times New Roman',times,serif">&#128;</FONT>295.2&nbsp;million to <FONT face="'Times New Roman',times,serif">&#128;</FONT>69.8&nbsp;million, and reduction of the related capital grants from
<FONT face="'Times New Roman',times,serif">&#128;</FONT>145.5&nbsp;million to <FONT face="'Times New Roman',times,serif">&#128;</FONT>35.0&nbsp;million. During April&nbsp;2005 the Company received from the Italian Government
the final approval of the &#147;Program Agreement&#148; confirming these revisions. Natuzzi received under
the aforementioned project capital grants in 1997 and 2005 for <FONT face="'Times New Roman',times,serif">&#128;</FONT>27.1&nbsp;million and <FONT face="'Times New Roman',times,serif">&#128;</FONT>7.9&nbsp;million,
respectively. A committee has been appointed by the Ministry of Industrial Activities to prepare
the final technical report for the disbursement of the remaining capital grants of approximately
<FONT face="'Times New Roman',times,serif">&#128;</FONT>10.8&nbsp;million.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;27, 2004, the Technical-Scientific Committee of the Italian Education, University and
Research Ministry approved a four-year research project presented by the Company in February&nbsp;2002
related to improvement and development in leather manufacturing and processing. The Committee has
approved a maximum capital grant of <FONT face="'Times New Roman',times,serif">&#128;</FONT>2.4&nbsp;million and a 10-year subsidized loan for a maximum amount
of <FONT face="'Times New Roman',times,serif">&#128;</FONT>3.7&nbsp;million at a subsidized interest rate of 0.5% to be used in connection with industrial
research expenses and prototype developments (as published on August&nbsp;20, 2004, in the Italian
Official Gazette (<I>Gazzetta Ufficiale della Repubblica Italiana</I>) n&#176; 195). Industrial research and
prototype developments planned as part of the project are already underway thanks to the
collaborative efforts of specialized in-house personnel and university researchers from the
University of Lecce and the Polytechnic University of Bari.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
2006, Natuzzi entered into an agreement with the Italian Ministry for
the incentive program denominated &#147;Integrated Package Benefits &#151;
Innovation of the working national program 'Developing Local
Entrepreneurs'&#148; for the creation of a centralised information system in
Santeramo in Colle that will be utilized by all Natizzi
points-of-sale around the world. </DIV>


<P align="center" style="font-size: 10pt">23
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">This
agreement
acknowledges costs of <FONT face="'Times New Roman',times,serif">&#128;</FONT>7.2&nbsp;million and <FONT face="'Times New Roman',times,serif">&#128;</FONT>1.9&nbsp;million for the development and industrialization
program, respectively.</div>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;20, 2006, the Italian Industrial Ministry issued a concession decree providing for a
provisional grant of <FONT face="'Times New Roman',times,serif">&#128;</FONT>2.8&nbsp;million and a loan of <FONT face="'Times New Roman',times,serif">&#128;</FONT>4.3&nbsp;million, to be repaid at a rate of 0.7% over
10&nbsp;years.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain of the Group&#146;s foreign subsidiaries, including Italsofa (Shanghai) Co. Ltd, Italsofa
Bahia Ltda, Minuano Nordeste S.A. and SC Italsofa Romania S.r.l. enjoy significant tax benefits,
such as corporate income tax exemptions or reductions of the applicable corporate income tax rates.
</DIV>

<DIV align="left">
<A name="117"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Management of Exchange Rate Risk</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group is subject to currency exchange rate risk in the ordinary course of its business to
the extent that its costs are denominated in currencies other than those in which it earns
revenues. Exchange rate fluctuations also affect the Group&#146;s operating results because it
recognizes revenues and costs in currencies other than euro but publishes its financial statements
in euro. The Group&#146;s sales and results may be materially affected by exchange rate fluctuations.
For more information, see Item&nbsp;11, &#147;Quantitative and Qualitative Disclosures about Market Risk&#148;.
</DIV>

<DIV align="left">
<A name="118"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Trademarks and Patents</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group&#146;s products are sold under the &#147;Natuzzi&#148; and &#147;Italsofa&#148; names. These names and
certain other trademarks, such as &#147;Divani &#038; Divani by Natuzzi&#148;, have been registered as such in
Italy, in the European Union, in the United States and elsewhere. In order to protect its
investments in new product development, the Group has also undertaken a practice of registering
certain new designs in most of the countries in which such designs are sold. The Group currently
has more than 1,500 design patents and patents pending. Applications are made with respect to new
product introductions which the Group believes will enjoy commercial success and have a high
likelihood of being copied.
</DIV>

<DIV align="left">
<A name="119"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Regulation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company is incorporated under the laws of the Republic of Italy. The principal laws and
regulations that apply to the operations of the Company &#151; those of Italy and the European Union &#151;
are different from those of the United States. Such non-United States laws and regulations may be
subject to varying interpretations or may be changed, and new laws and regulations may be adopted,
from time to time. While management believes that the Group is currently in compliance in all
material respects with such laws and regulations (including Italian Legislative Decree no. 6 of
2003 and rules with respect to environmental matters), there can be no assurance that any
subsequent official interpretation of such laws or regulations by the relevant governmental
authorities that differs from that of the Company, or any such change or adoption, would not have
an adverse effect on the results of operations of the Group or the rights of holders of the
Ordinary Shares or the owners of the Company&#146;s ADSs. See &#147;&#151; Environmental Regulatory Compliance&#148;,
Item&nbsp;10,
</DIV>



<P align="center" style="font-size: 10pt">24
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&#147;Additional Information &#151; Exchange Controls&#148; and Item&nbsp;10, &#147;Additional Information &#151;
Taxation&#148;.
</DIV>

<DIV align="left">
<A name="120"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Environmental Regulatory Compliance</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group operates its own tannery in the province of Udine and another facility for the foam
production in Naples.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The activities of these two facilities are subject to both Italian and European laws and
regulations. The Group believes that it operates these and other facilities in compliance with all
applicable laws and regulations.
</DIV>

<DIV align="left">
<A name="121"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Insurance</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group maintains insurance against a number of risks. The Group insures against loss or
damage to its facilities, loss or damage to its products while in transit to customers, failure to
recover receivables, certain potential environmental liabilities and product liability claims.
While the Group&#146;s insurance does not cover 100% of these risks, management believes that the
Group&#146;s present level of insurance is adequate in light of past experience.
</DIV>

<DIV align="left">
<A name="122"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Description of Properties</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The location, approximate size and function of the principal physical properties used by the
Group as at April&nbsp;30, 2006 are set forth below:
</DIV>



<P align="center" style="font-size: 10pt">25
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="51%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Size</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(approximate</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">square</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Location</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">meters)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Function</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Santeramo in Colle (BA) &#150; Italy
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">29,000</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Headquarters, prototyping, manufacturing of wooden
frames, leather cutting, sewing and product
assembly, showroom (Owned)</TD>
</TR>
<TR valign="bottom">
    <TD valign="bottom"><DIV style="margin-left:0px; text-indent:-0px">Santeramo in Colle, Iesce (BA) &#150; Italy
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">27,500</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Leather cutting, sewing and product assembly (Owned)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="bottom"><DIV style="margin-left:0px; text-indent:-0px">Matera la martella &#150; Italy
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">38,000</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Fabric cutting, sewing and product assembly (Owned)</TD>
</TR>
<TR valign="bottom">
    <TD valign="bottom"><DIV style="margin-left:0px; text-indent:-0px">Matera Iesce &#150; Italy
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">12,500</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Leather cutting, sewing and product assembly (Owned)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="bottom"><DIV style="margin-left:0px; text-indent:-0px">Altamura (BA)&nbsp;via dell&#146;Avena &#150; Italy
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">5,800</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Leather cutting, sewing (Owned)</TD>
</TR>
<TR valign="bottom">
    <TD valign="bottom"><DIV style="margin-left:0px; text-indent:-0px">Altamura (BA)&nbsp;via Graviscella &#150; Italy
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">8,500</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Product assembly (Owned)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="bottom"><DIV style="margin-left:0px; text-indent:-0px">Altamura (BA)&nbsp;c.da Fornello&#150; Italy
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">7,000</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Warehouse (Owned)</TD>
</TR>
<TR valign="bottom">
    <TD valign="bottom"><DIV style="margin-left:0px; text-indent:-0px">Altamura (BA)&nbsp;via della Paglia &#150; Italy
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">3,300</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Training school, warehouse (Owned)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="bottom"><DIV style="margin-left:0px; text-indent:-0px">Altamura (BA)&nbsp;NDS &#150; Italy
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">3,700</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Accessory Furnishings warehouse (Owned)</TD>
</TR>
<TR valign="bottom">
    <TD valign="bottom"><DIV style="margin-left:0px; text-indent:-0px">Ginosa (TA) &#150; Italy
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">14,500</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Leather cutting, sewing and product assembly (Owned)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="bottom"><DIV style="margin-left:0px; text-indent:-0px">Laterza (TA) &#150; Italy
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">10,000</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Leather cutting, sewing and product assembly (Owned)</TD>
</TR>
<TR valign="bottom">
    <TD valign="bottom"><DIV style="margin-left:0px; text-indent:-0px">Laterza (TA) &#150; Italy
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">13,000</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Leather cutting, leather warehouse (Owned)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="bottom"><DIV style="margin-left:0px; text-indent:-0px">Laterza (TA) &#150; Italy
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">20,000</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Leather cutting, leather warehouse (Owned)</TD>
</TR>
<TR valign="bottom">
    <TD valign="bottom"><DIV style="margin-left:0px; text-indent:-0px">Qualiano (NA) &#150; Italy
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">12,000</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Polyurethane foam production (Owned)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="bottom"><DIV style="margin-left:0px; text-indent:-0px">Pozzuolo del Friuli (UD) &#150; Italy
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">20,000</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Leather dyeing and finishing (Owned)</TD>
</TR>
<TR valign="bottom">
    <TD valign="bottom"><DIV style="margin-left:0px; text-indent:-0px">Montebello (VI) &#150; Italy
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">5,500</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Leather warehouse (Leased)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="bottom"><DIV style="margin-left:0px; text-indent:-0px">High Point &#151; North Carolina &#151; U.S.A.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">10,000</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Office and showroom for Natuzzi Americas (Owned)</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Baia Mare &#150; Romania
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">70,200</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Leather cutting, sewing and product assembly,
manufacturing of wooden frames, polyurethane foam
shaping, fiberfill production and wood and wooden
product manufacturing (Owned)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Shanghai &#150; China
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">43,500</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Leather cutting, sewing and product assembly,
manufacturing of wooden frames, polyurethane foam
shaping, fiberfill production (Owned)</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Shanghai &#150; China
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">15,000</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Leather cutting, sewing and product assembly,
manufacturing of wooden frames, polyurethane foam
shaping, fiberfill production (Leased)</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Salvador de Bahia (Bahia) &#150; Brazil
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">28,000</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Leather cutting, sewing and product assembly,
manufacturing of wooden frames, polyurethane foam
shaping, fiberfill production (Owned)</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Pojuca (Bahia) &#150; Brazil
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="top">30,000</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Leather cutting, sewing and product assembly,
manufacturing of wooden frames, polyurethane foam
shaping, fiberfill production (Owned)</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">26
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group believes that its production facilities are suitable for its production needs
and are well maintained. The Group&#146;s production facilities are operated utilizing close to 100% of their production capacity. Operations at all of the
Group&#146;s production facilities are normally conducted Monday through Friday with two eight-hour
shifts per day. In 2005, the Group continued to utilize subcontractors to meet demand.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group also directly manages 64 stores (of which 20 located in Italy), but it is not the
owner of any of them.
</DIV>

<DIV align="left">
<A name="123"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Capital Expenditures</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the Group&#146;s capital expenditures for each year in the
three-year period ended December&nbsp;31, 2005:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>Year ending December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">(millions of Euro)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Land and plants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47.3</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Capital expenditures during the last three years were primarily made in the areas of
construction, as well as improvements to property, plant and equipment and the expansion of the
Company&#146;s retail network. In 2005, capital expenditures were primarily made to open new Natuzzi
stores and galleries, as well as to make improvements at existing facilities (such as those located
in Bahia Mare, Romania, in Pozzuolo del Friuli, Italy, and other facilities located in and around
Santeramo in Colle, Italy) in order to increase productivity and production capacity. The Group
expects that capital expenditures in 2006, to be financed with cash flow from operations, will be
approximately <FONT face="'Times New Roman',times,serif">&#128;</FONT>25&nbsp;million mainly directed to improvements of existing plants as well as to opening
new Natuzzi stores and galleries.
</DIV>

<DIV align="left">
<A name="124"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;4A. Unresolved Staff Comments</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 5%">None
</DIV>

<DIV align="left">
<A name="125"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;5. Operating and Financial Review and Prospects</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following discussion of the Group&#146;s results of operations, liquidity and capital resources
is based on information derived from the audited Consolidated Financial Statements and the notes
thereto included in Item&nbsp;18 of this annual report. These financial statements have been prepared in
accordance with Italian GAAP, which differ in certain
</DIV>


<P align="center" style="font-size: 10pt">27
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">respects from U.S. GAAP. For a discussion of
the principal differences between Italian GAAP and U.S. GAAP as they relate to the Group&#146;s
consolidated net earnings (loss) and shareholders&#146; equity, see Note 27 to the Consolidated
Financial Statements included in Item&nbsp;18 of this annual report.
</DIV>

<DIV align="left">
<A name="126"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Critical Accounting Policies</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Use of Estimates </B>- The significant accounting policies used by the Group to prepare its
financial statements are described in Note 3 to the Consolidated Financial Statements included in Item&nbsp;18 of this annual report. The application of these
policies requires management to make estimates, judgments and assumptions that are subjective and
complex and affect the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. The
Group&#146;s financial presentation could be materially different if different estimates, judgements or
assumptions were used. The following discussion addresses the estimates, judgements and
assumptions that the Group considers most material based on the degree of uncertainty and the
likelihood of a material impact if a different estimate, judgement or assumption were used.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Recoverability of Long-lived Assets &#151; </B>The Group periodically reviews the carrying value of the
long-lived assets held and used and that of assets to be disposed of, including goodwill and other
intangible assets, when events and circumstances warrant such a review. If the carrying value of a
long-lived asset is considered impaired, an impairment charge is recorded for the amount by which
the carrying value of the long-lived asset exceeds its estimated recovery value, in relation to its
use or realization, as determined by reference to the most recent corporate plans. Management
believes that the estimates of these recovery values are reasonable; however, changes in estimates
of such recovery values could affect the relevant valuations. The analysis of each long-lived asset
is unique and requires that management use estimates and assumptions that are deemed prudent and
reasonable for a particular set of circumstances.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2005, the Company didn&#146;t record impairment losses for goodwill, and it recorded <FONT face="'Times New Roman',times,serif">&#128;</FONT>2.8
million of write-off of fixed assets attributable most of them to the closure of several stores
managed directly by the Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Allowances for Returns and Discounts </B>- The Group records revenues net of returns and
discounts. The Group estimates sales returns and discounts and creates an allowance for them in
the year of the related sales. The Group makes estimates in connection with such allowances based
on its experience and historical trends in its large volumes of homogeneous transactions. However,
actual costs for returns and discounts may differ significantly from these estimates if factors
such as economic conditions, customer preferences or changes in product quality differ from the
ones used by the Group in making these estimates.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Allowance for Doubtful Accounts </B>- The Group makes estimates and judgments in relation to the
collectibility of its accounts receivable and maintains an allowance for doubtful accounts based on
losses it may experience as a result of failure by its customers to pay amounts owed. The Group
estimates these losses using consistent methods that take into consideration, in particular,
insurance coverage in place, the credit worthiness of its customers and general economic
conditions. Changes to assumptions relating to these estimates could affect actual results. The
reader should be cautioned that actual results may
</DIV>


<P align="center" style="font-size: 10pt">28
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">differ significantly from the Group&#146;s estimates
if factors such as general economic conditions and the credit worthiness of its customers are
different from the Group&#146;s assumptions.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Revenue Recognition </B>- Under Italian GAAP, the Group recognizes sales revenue, and accrues
costs associated with the sales revenue, at the time products are shipped from its manufacturing
facilities located in Italy and abroad. A significant part of the products are shipped from
factories directly to customers under terms that risks and ownership are transferred to the
customer when the customer takes possession of the goods. These terms are &#145;delivered duty paid&#146;,
&#145;delivered duty unpaid&#146;, &#145;delivered ex quay&#146; and &#145;delivered at customer factory&#146;. Delivery to the customer generally occurs within one to six weeks from the time of shipment.
The Group&#146;s revenue recognition under Italian GAAP is at variance with U.S. GAAP. For a discussion
of revenue recognition under U.S. GAAP, see Note 27(d) to the Consolidated Financial Statements
included in Item&nbsp;18 of this annual report.
</DIV>

<DIV align="left">
<A name="127"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Results of Operations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Summary &#151; </B>In 2005, price pressure from competitors in countries that are able to produce goods
at lower costs, and economic stagnation in some of our major markets, contributed to a decrease of
net sales of 11.1% compared to 2004. Units sold decreased, by 8.4%, due to the negative
performance suffered in Americas (-11.4%), in the Rest of the World (-12.8%) and in Europe (-4.3%).
Italsofa, the Group&#146;s lower-priced brand continued to represent a growing percentage of the Group&#146;s
total seats sold, 48.4% of total seats sold in 2005 compared to 35.3% in 2004.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2005 the Group showed a net loss of <FONT face="'Times New Roman',times,serif">&#128;</FONT> 14.6&nbsp;million, whereas one year earlier it reported
net earnings of <FONT face="'Times New Roman',times,serif">&#128;</FONT> 18.4&nbsp;million. On a per Ordinary Share, or ADS basis, net losses for 2005 totaled
<FONT face="'Times New Roman',times,serif">&#128;</FONT> 0.27 down from earnings per share of <FONT face="'Times New Roman',times,serif">&#128;</FONT> 0.34 reported in 2004. The decrease was primarily caused
by the negative results recorded by foreign distribution companies that in the whole year 2005
realized net losses for <FONT face="'Times New Roman',times,serif">&#128;</FONT>23.7&nbsp;million. In particular, our United Kingdom distribution company
continued to poorly perform also in 2005 and, as a result, the Group closed 9 stores during the
first four months of 2006. The closing of the abovementioned stores is a consequence of the
decision of the Group to relocate directly owned stores in the London Area. In addition net losses
were caused by lower efficiencies in manufacturing operations, as well as to higher impact of fixed
costs resulting from the decrease in net sales. Finally, 2005 net result was negatively affected
by the obsolescence charges of <FONT face="'Times New Roman',times,serif">&#128;</FONT> 6.7&nbsp;million regarding, in particular, leather used in the
Company&#146;s manufacturing process.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth certain income statement data expressed as a percentage of net
sales for the years indicated:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>Year Ended December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23.3</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">29
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>Year Ended December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">General and administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other income (expense), net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net earnings (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.9</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See Item&nbsp;4, &#147;Information on the Company &#151; Markets&#148;, for tables setting forth the Group&#146;s net
leather- and fabric-upholstered furniture sales and unit sales, which are broken down by geographic market, for the years ended December&nbsp;31, 2001 through
2005.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2005 Compared to 2004 &#151; </B>Net sales for 2005, including sales of leather- and fabric-upholstered
furniture and other sales (principally polyurethane foam, leather sold to third parties and
accessories), decreased 11.1% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>669.9&nbsp;million compared to 2004.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net sales for 2005 of leather- and fabric-upholstered furniture decreased 10.6% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>594.8
million compared to 2004. The 10.6% decrease was due to a 8.4% decrease in units sold and to a
2.2% adverse change in the mix of products and product prices, with a higher proportion of sales of
lower priced furniture. Net sales for the Natuzzi-branded furniture accounted for 66.4% of our net
sales for 2005, and net sales of Italsofa products accounted for 33.6% of our net sales for 2005.
Net sales for 2005 of Natuzzi-branded furniture decreased 22.1%, while net sales of
Italsofa-branded furniture increased 26.1% compared to 2004. During 2005 the euro did not
appreciate significantly against the major currencies, and therefore net sales were not
significantly affected by exchange rate fluctuations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net sales for 2005 of leather-upholstered furniture decreased 8.9% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>498.9&nbsp;million compared
to 2004, and net sales for 2005 of fabric-upholstered furniture decreased 18.5% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>95.9&nbsp;million
compared to 2004.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the Americas, net sales for 2005 of upholstered furniture decreased 13.5% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>241.7&nbsp;million
compared to 2004, and seats sold decreased by 11.4% at 1,386,329, because of persistent pricing
pressures in the U.S. market. Net sales from the lower-priced Italsofa-branded furniture increased
20.1% compared to 2004, while net sales from the higher-priced Natuzzi-branded furniture decreased
25.8%. In Europe, net sales for 2005 of upholstered furniture decreased 7.9% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>313.2&nbsp;million
compared to 2004, due to a 18.9% decrease in net sales of Natuzzi-branded furniture partially
offset by a growth in net sales of Italsofa-branded furniture (&#043;31.4%). In the rest of the world,
net sales for 2005 of upholstered furniture decreased 13.2% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>39.9&nbsp;million compared to 2004. Also
in this case net sales for Natuzzi-branded furniture decreased 24.2%, while net sales of
Italsofa-branded furniture increased 33.0%.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net sales for 2005 of Natuzzi-branded furniture decreased 22.1% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>394.9&nbsp;million compared to
2004. During the same period, net sales of the lower-priced Italsofa furniture increased 26.1% to
<FONT face="'Times New Roman',times,serif">&#128;</FONT>199.9&nbsp;million compared to 2004. The continued growth of Italsofa was due to consumer price
sensitivity resulting from sluggish economic conditions worldwide and the Group&#146;s ability to offer
Italsofa products at attractive prices. The Group currently believes that the impact on our sales
from the growing percentage of sales represented by lower-priced Italsofa furniture relative to the
higher-priced Natuzzi brand furniture will be counterbalanced in the medium- to long-term (three to
five years) by the Group&#146;s expectation
</DIV>


<P align="center" style="font-size: 10pt">30
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">of an increasing penetration of the Natuzzi brand in the
medium-high end of the upholstery market as a result of the adopted marketing initiatives.
However, we can give no assurance that we will achieve our objectives, since our expectations are
subject to inherent risks and uncertainties. See &#147;Item&nbsp;3 &#151; Forward Looking Information&#148;.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total net sales of Divani &#038; Divani by Natuzzi, Natuzzi Stores and Kingdom of Leather stores
decreased 11.4% in 2005 to <FONT face="'Times New Roman',times,serif">&#128;</FONT>113.9&nbsp;million compared to 2004.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2005, total seats sold decreased 8.4% to 2,811,739 from 3,070,971 sold in 2004. The
negative performance was recorded in the Americas (11.4% down to 1,386,329 seats), in the rest of
the world (12.8% down to 162,523 seats) and in Europe (4.3% down to 1,262,886 seats).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Considering that in 2005 units sold of the lower-priced Italsofa furniture increased 25.4%
while units sold from the higher-priced Natuzzi brand furniture decreased 26.9%, presented below
are change in our volume sales by brand in our principal markets.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In terms of seats sold under the Natuzzi brand, the Group recorded negative results in USA
(-30.3%), Italy (-14.8%), Canada (-20.9%), the United Kingdom (-44.9%), Belgium (-18.9%), France
(-31.8%), Australia (-33.3%), Holland (-22.7%), Germany (-38.4%), Portugal (-23.6%), Japan
(-54.4%), Switzerland (-32.8%), Sweden (-34.9%), Greece (-27.2%) and Norway (-34.0%). Positive
performances were reported in Spain (&#043;8.5%), Denmark (&#043;111.0%) and Chile (&#043;27.8%).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In terms of seats sold under the Italsofa brand, the Group reported significant growth in many
countries: USA (&#043;23.1%), Germany (&#043;109.0%), France (&#043;50.0%), Sweden (&#043;51.8%), Belgium (&#043;114.2%),
Spain (&#043;33.8%), Holland (&#043;77.6%), Australia (&#043;35.6%), Italy (&#043;348.4% realized by Ikea stores),
Ireland (&#043;4.9%), Switzerland (&#043;157.2%), Russia (&#043;18.1%), and Austria (&#043;69.6%). Negative performances
were reported in United Kingdom (-20.0%), Norway (-6.1%), Canada (-29.2%) and Denmark (-5.3%).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other net sales decreased 14.6% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>75.1&nbsp;million compared to 2004. The decrease was mainly
attributable to lower sales of living room accessories (20.6% decrease compared to 2004),
polyurethane foam (14.61% decrease compared to 2004) and raw materials sold to third parties (9.1%
decrease compared to 2004).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cost of goods sold decreased by 5.2% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>459.5&nbsp;million or 68.6% of net sales in 2005, from
<FONT face="'Times New Roman',times,serif">&#128;</FONT>484.6&nbsp;million or 64.3% of net sales in 2004. The decrease in cost of sales was primarily
attributable to a decrease in the quantity of leather purchased as a result of a decrease in sales.
The increase in cost of goods sold, as a percentage of net sales, was due to lower efficiencies
achieved in manufacturing operations as well as to higher impact of fixed costs resulting from the
decrease in net sales. In addition 2005 cost of goods sold was negatively affected by the
obsolescence charges of <FONT face="'Times New Roman',times,serif">&#128;</FONT> 6.7&nbsp;million regarding, in particular, leather used in the Company&#146;s
manufacturing process.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group&#146;s gross profit decreased 21.7% in 2005 to <FONT face="'Times New Roman',times,serif">&#128;</FONT>210.5&nbsp;million compared to 2004, as a
result of the factors described above.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling expenses for 2005 decreased 3.2% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>182.2&nbsp;million compared to 2004, and as a
percentage of net sales increased from 25.0% in 2004 to 27.2% in 2005. This decrease was
attributable to a reduction in variable costs, such as commissions and transportation
</DIV>


<P align="center" style="font-size: 10pt">31
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">costs, as
well as to lower advertising expenses. The decrease in transportation costs was partially off set
by higher oil prices reported in 2005. In terms of percentage of net sales, the 2.2% increase was
due to higher fixed costs from investments in the &#147;Natuzzi Galleries&#148; and &#147;Natuzzi Stores&#148; program
(30.0% increase compared to 2004), and to an increase in store rent (17.9% increase compared to
2004), as well as to lower net sales. Also in this case lower net sales determined higher incidence
of selling expenses.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General and administrative expenses for 2005 increased 5.6% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>43.0&nbsp;million compared to 2004,
and as a percentage of net sales increased from 5.4% in 2004 to 6.4% in 2005. This increase was
primarily attributable to higher directors&#146; fees and administrative salaries. In addition the Group
reported an increase in administrative salaries mainly determined by the consolidation of companies
acquired in 2005 (see Consolidated Financial Statements Item&nbsp;18 of this annual report).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group had an operating loss for 2005 of <FONT face="'Times New Roman',times,serif">&#128;</FONT>14.7&nbsp;million compared to operating income of
<FONT face="'Times New Roman',times,serif">&#128;</FONT>40.0&nbsp;million in 2004, as a result of the factors above described.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other income (expense), net increased to <FONT face="'Times New Roman',times,serif">&#128;</FONT>3.0&nbsp;million in 2005 from other expense, net of <FONT face="'Times New Roman',times,serif">&#128;</FONT>3.9
million in 2004. Net interest income (expense), included in other income (expense), net, in 2005
was <FONT face="'Times New Roman',times,serif">&#128;</FONT>0.1&nbsp;million, compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>(0.6) million in 2004.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Foreign exchange gains (losses), net, included in other income (expense), net, were <FONT face="'Times New Roman',times,serif">&#128;</FONT>(1.6)
million in 2005, compared to a net gain of <FONT face="'Times New Roman',times,serif">&#128;</FONT>2.3&nbsp;million in 2004. Foreign exchange losses in 2005
were mainly due to the following reasons:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#150;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A net realized loss of <FONT face="'Times New Roman',times,serif">&#128;</FONT>4.3&nbsp;million in 2005 (compared to a gain of <FONT face="'Times New Roman',times,serif">&#128;</FONT>5.0&nbsp;million in
2004) on the domestic currency swaps due to the difference between the forward rate of the
domestic currency swaps and the spot rate at which the domestic currency swaps were closed
(the Company uses the forward rate to hedge its price risks against unfavorable exchange
variations);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#150;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A net realized gain of <FONT face="'Times New Roman',times,serif">&#128;</FONT>5.4&nbsp;million in 2005 (compared to a loss of <FONT face="'Times New Roman',times,serif">&#128;</FONT>1.0&nbsp;million in
2004), from the difference between the invoice exchange rate and the collection/payment
exchange rate;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#150;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>During 2005 the Italian Accounting Profession changed the Italian accounting
standard regarding the translation of the financial statements of a foreign
subsidiary (see Note 3(c) to the Consolidated Financial Statements in Item&nbsp;18 of this
annual report). According to the new accounting principle, the exchange difference
resulting from the translation of the financial statements of a foreign subsidiary
expressed in a foreign currency has to be recorded as a direct adjustment to shareholders&#146;
equity. Therefore in 2005 the Group did not record in the statement of earnings exchange
differences from the conversion of the non euro financial statements of the Company&#146;s
subsidiaries, while in 2004 recorded a gain of <FONT face="'Times New Roman',times,serif">&#128;</FONT>1.4&nbsp;million. Had the new Italian standard
not been adopted in 2005, the Company would have recognized, in 2005, a foreign exchange
gain of <FONT face="'Times New Roman',times,serif">&#128;</FONT>1.7&nbsp;million in the consolidated statement of earnings. The comparative financial
statements of prior years have not been adjusted to apply the new Italian GAAP foreign
currency translation standard retrospectively.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#150;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A net unrealized gain of <FONT face="'Times New Roman',times,serif">&#128;</FONT>2.1&nbsp;million in 2005 (compared to an unrealized loss of
<FONT face="'Times New Roman',times,serif">&#128;</FONT>10.2&nbsp;million in 2004) on accounts receivable and payable;</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">32
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#150;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>An unrealized loss of <FONT face="'Times New Roman',times,serif">&#128;</FONT>4.8&nbsp;million in 2005 (compared to an unrealized gain of <FONT face="'Times New Roman',times,serif">&#128;</FONT>7.1
million in 2004), from mark-to-market of domestic currency swaps.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group also recorded other income, included in other income (expense), in 2005 of <FONT face="'Times New Roman',times,serif">&#128;</FONT>4.5
million compared to other expense of <FONT face="'Times New Roman',times,serif">&#128;</FONT>5.6&nbsp;million reported in 2004. The gain in 2005 was mainly
due to the following reasons:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#150;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Revenue from capital grants of <FONT face="'Times New Roman',times,serif">&#128;</FONT>4.4&nbsp;million. In 2005, Natuzzi received under the
aforementioned project &#147;Natuzzi 2000&#148; additional capital grants amounting to <FONT face="'Times New Roman',times,serif">&#128;</FONT>7.9&nbsp;million.
A part of these capital grants, amounting to <FONT face="'Times New Roman',times,serif">&#128;</FONT>4.4&nbsp;million, is related to depreciation of
property, plant and equipment recorded in the consolidated statements of earnings in the
years prior to 2005. Therefore, for this reason the amount of <FONT face="'Times New Roman',times,serif">&#128;</FONT>4.4&nbsp;million has been
classified under the caption &#147;other income (expense), net&#148;. Another portion of these
capital grants, amounting to <FONT face="'Times New Roman',times,serif">&#128;</FONT>0.3&nbsp;million has been classified in the net sales as they
relate to depreciation of 2005. The remaining portion of <FONT face="'Times New Roman',times,serif">&#128;</FONT>3.2&nbsp;million has been classified
in the consolidated balance sheet at December&nbsp;31, 2005 as deferred income, and it will be
charged to statements of earnings as revenue on a systematic basis over the useful life of
the related asset. See Note 24 to the Consolidated Financial Statements included in Item&nbsp;18
of this Annual Report.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#150;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Other expenses of <FONT face="'Times New Roman',times,serif">&#128;</FONT>2.8&nbsp;million deriving from the write-off of fixed assets, most of
them related to leasehold improvements related to the closure of some stores managed
directly by Natuzzi.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#150;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Revenue for incentive benefit of <FONT face="'Times New Roman',times,serif">&#128;</FONT>2.1&nbsp;million. This incentive is measured on the
basis of the export sales realized by the subsidiary Italsofa Bahia Ltd.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#150;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Expense of <FONT face="'Times New Roman',times,serif">&#128;</FONT>0.6&nbsp;million represents the provision established for the penalties that
the Company expects to pay to landlords of several stores located in England for the early
termination of the related operating leases. Actual amounts payable may be higher.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#150;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Other income, net of
<FONT face="'Times New Roman',times,serif">&#128;</FONT>1.4 million.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since 2003, the Company does not follow hedge accounting, and records all fair value changes
of its domestic currency swaps in the income statement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group&#146;s effective income tax rate for 2005 was 26.5% of the loss before taxes and minority
interest, compared to 48.9% of the earnings before taxes and minority interest in 2004.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group&#146;s domestic companies recorded an effective tax rate negative of 34.9%, and the
Group&#146;s foreign companies recorded an effective tax rate positive of 9.4%. For domestic companies, the
Group&#146;s tax rate was negatively affected by the regional tax denominated Irap (see Note 14 to the
Consolidated Financial Statements in Item&nbsp;18 of this annual report). This regional tax is
applicable on the gross profit determined as the difference between gross revenue (excluding
interest and dividend income) and direct production costs (excluding labor costs, interest expenses
and other financial costs). As a consequence, even if an Italian company reports a net loss, it
might be subject to this regional tax. In 2005, most domestic companies of Natuzzi reported losses
but had to pay IRAP.
</DIV>


<P align="center" style="font-size: 10pt">33
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Some foreign subsidiaries (Italsofa Shanghai Ltd, Softaly Shanghai Ltd, Italsofa Bahia Ltd,
Minuano Nordeste S.A. and Italsofa Romania) are entitled to take advantage of significant tax
benefits, such as corporate income tax exemptions or reductions of the corporate income tax rates,
the most significant of which will expire in 2012. As a consequence, foreign subsidiaries reported
a lower effective tax rate than our domestic subsidiaries.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group had a net loss of <FONT face="'Times New Roman',times,serif">&#128;</FONT>14.6&nbsp;million in 2005 compared to net earnings of <FONT face="'Times New Roman',times,serif">&#128;</FONT>18.4&nbsp;million in
2004. On a per Ordinary Share, or ADS basis, the Group had a net loss of <FONT face="'Times New Roman',times,serif">&#128;</FONT>0.27 in 2005 compared to
net earnings of <FONT face="'Times New Roman',times,serif">&#128;</FONT>0.34 in 2004.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As disclosed in Note 27 to the Consolidated Financial Statements included in Item&nbsp;18 of this
annual report, established accounting principles in Italy vary in certain significant respects from
generally accepted accounting principles in the United States. Under US GAAP, for the years ended
December&nbsp;31, 2005, 2004 and 2003, the Group would have had net losses of <FONT face="'Times New Roman',times,serif">&#128;</FONT>6.9&nbsp;million, net earnings
of <FONT face="'Times New Roman',times,serif">&#128;</FONT>18.8&nbsp;million and net earnings <FONT face="'Times New Roman',times,serif">&#128;</FONT>38.0&nbsp;million, respectively, compared to net losses of <FONT face="'Times New Roman',times,serif">&#128;</FONT> 14.6
million, net earnings of <FONT face="'Times New Roman',times,serif">&#128;</FONT>18.4&nbsp;million and net earnings of <FONT face="'Times New Roman',times,serif">&#128;</FONT>37.3&nbsp;million, respectively, under
Italian GAAP for the same periods.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2004 Compared to 2003 &#151; </B>Net sales for 2004, including sales of leather- and fabric-upholstered
furniture and other sales (principally polyurethane foam, leather sold to third parties and
accessories), decreased 2.1% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>753.4&nbsp;million compared to 2003.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net sales for 2004 of leather- and fabric-upholstered furniture decreased 1.3% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>665.5
million compared to 2003. The 1.3% decrease was due to a 4.3% appreciation of the euro against the
major currencies, particularly the U.S. dollar, to a 0.4% increase in units sold and to a 2.6%
increase in the mix of products and product prices. Net sales for 2004 of Natuzzi-branded furniture
decreased 2.4%, while net sales of Italsofa-branded furniture increased 2.6% compared to 2003. Net
sales for 2004 of leather-upholstered furniture decreased 0.4% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>547.9&nbsp;million compared to 2003,
and net sales for 2004 of fabric-upholstered furniture decreased 5.2% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>117.6&nbsp;million compared to
2003.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the Americas, net sales for 2004 of upholstered furniture decreased 12.7% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>279.4&nbsp;million
compared to 2003 because of the unfavorable conversion of sales made in dollars to euro, and
because of persistent pricing pressure in the U.S. market, both contributing to a decrease in units
sold (-7.9%). In Europe, net sales for 2004 of upholstered furniture increased 8.5% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>340.1
million compared to 2003 due to a marked growth in net sales of Italsofa-branded furniture (35.2%).
In the rest of the world, net sales for 2004 of upholstered furniture increased 13.9% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>46.0
million compared to 2003.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net sales for 2004 of Natuzzi-branded furniture decreased 2.4% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>507.0&nbsp;million compared to
2003. During the same period, net sales of the lower-priced Italsofa furniture increased 2.6% to
<FONT face="'Times New Roman',times,serif">&#128;</FONT>158.5&nbsp;million compared to 2003. The continued growth of Italsofa was due to consumer price
sensitivity resulting from sluggish economic conditions worldwide and the Group&#146;s ability to offer
Italsofa products at attractive prices. The Group currently believes that the impact on our sales
from the growing percentage of sales from the lower-priced Italsofa furniture relative to the
higher-priced Natuzzi brand furniture will be counterbalanced in the medium- to long-term (three to
five years) by the increasing penetration of the Natuzzi brand in the medium-high end of the
upholstery market expected by the Group as a result of the marketing initiatives adopted. However,
we can give no
</DIV>


<P align="center" style="font-size: 10pt">34
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">assurance that we will achieve our objectives, since our expectations are subject to
inherent risks and uncertainties. See &#147;Item&nbsp;3 &#151; Forward Looking Information&#148;.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total net sales of Divani &#038; Divani by Natuzzi, Natuzzi Stores and Kingdom of Leather stores
increased 21.0% in 2004 to <FONT face="'Times New Roman',times,serif">&#128;</FONT>128.6&nbsp;million compared to 2003.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2004, total seats sold increased 0.4% to 3,070,971 from 3,058,835 sold in 2003. The slight
increase was due to an increase of 11.7% in Europe (1,319,740 seats) and a 4.6% increase in the
rest of the world (excluding Europe) (186,330 seats), which together offset a 7.9% decrease
reported in Americas (1,564,900 seats).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The negative performance of Natuzzi products in the Americas was caused by our decreased
ability to offer competitive prices in the United States resulting from the appreciation of the
euro against the U.S. dollar and the growing presence in that market of imported products from
countries, such as China, with lower manufacturing costs. In the Americas, seats sold in 2004 by
the higher priced Natuzzi brand decreased 8.0%, and seats sold by the lower priced Italsofa brand
decreased 7.7% compared to 2003. In particular, the decrease in units sold in the Americas
included a decrease in the United States of 10.2% partially offset by higher sales in Canada
(&#043;8.4%) and other minor markets (&#043;70.3%).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Seats sold in Europe increased from 1,181,566 in 2003 to 1,319,740 in 2004. The positive
performance achieved in Europe reflects the success of the Group&#146;s lower-priced brand, Italsofa.
Units sold for Italsofa brand increased by 37.6% from 317,925 in 2003 to 437,558 in 2004, while
units sold for Natuzzi brand slightly increased from 863,641 in 2003 to 882,182 in 2004. Positive
results were reported in many countries: United Kingdom (&#043;12.5%), Spain (58,4%), France (12.0%),
Belgium (31.6%), Norway (49.9%), Switzerland (8.3%), Sweden (12.5%), and Portugal (43.3%).
Negative performances were suffered in Germany (-13.7%), Holland
(-5.9%), Ireland (-13.1%) and Greece&nbsp;(-8.9%).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the rest of the world, seats sold increased from 178,109 in 2003 to 186,330 in 2004. The
rise included increases in Australia (&#043;17.1%), Korea (&#043;28.0%), China (23.2%), Turkey (&#043;41.9%), Taiwan
(&#043;49.0%), which were partially offset by lower sales in Japan (-5.5%), New Zealand (-18.9%) and Israel (-23.4%).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2004, total leather-upholstered seats sold increased 1.5% to 2,345,044 from 2,310,121 seats
sold in 2003, while total fabric-upholstered seats sold decreased 3.0% to 725,927 from 748,714
seats sold in 2003.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Natuzzi brand sold 1,986,461 seats in 2004, 2.9% less than in 2003, while sales of
Italsofa seats increased 7.0% to 1,084,510 compared to 2003.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other net sales decreased 8.1% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>87.9&nbsp;million compared to 2003. The decrease is mainly
attributable to the lower sales of living room accessories (15.5% decrease compared to 2003),
polyurethane foam (3.1% decrease compared to 2003) and raw materials sold to third parties (8.8%
decrease compared to 2003).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cost of goods sold decreased by 4.8% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>484.5&nbsp;million or 64.3% of net sales in 2004, from
<FONT face="'Times New Roman',times,serif">&#128;</FONT>508.8&nbsp;million or 66.1% of net sales in 2003. The decrease in cost of sales was attributable
primarily to a decrease in the quantity of leather purchased as a result of a
</DIV>


<P align="center" style="font-size: 10pt">35
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">decrease in order
flows for leather upholstery compared to 2003, as well as to a decrease in the average price of
leather due to the Group&#146;s purchasing policies and, to a lesser extent, to savings resulting from
efficiencies achieved in manufacturing operations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group&#146;s gross profit increased 3.1% in 2004 to <FONT face="'Times New Roman',times,serif">&#128;</FONT>268.9&nbsp;million compared to 2003, as a
result of the factors described above.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling expenses for 2004 increased 5.0% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>188.2&nbsp;million compared to 2003, and as a
percentage of net sales increased from 23.3% in 2003 to 25.0% in 2004. This increase was caused
primarily by our continued investment in the &#147;Natuzzi Galleries&#148; and &#147;Natuzzi Stores&#148; program,
which resulted in higher marketing expenses (5.5% increase compared to 2003), store rent (27.0%
increase compared to 2003) and depreciation costs (41.2% increase compared to 2003), and to a lesser degree, by increased transportation costs (3.1% increase compared to 2003), which
were due to higher oil prices.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General and administrative expenses for 2004 increased 3.8% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>40.7&nbsp;million compared to 2003,
and as a percentage of net sales increased slightly from 5.1% in 2003 to 5.4% in 2004.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating income for 2004 decreased 5.4% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>40.0&nbsp;million compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>42.3&nbsp;million reported
in 2003, as a results of the factors described above.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other income (expense), net decreased to <FONT face="'Times New Roman',times,serif">&#128;</FONT>(3.9) million in 2004 from a net income of <FONT face="'Times New Roman',times,serif">&#128;</FONT>3.6
million in 2003. Net interest income (expense), included in other income (expense), net, in 2004
was <FONT face="'Times New Roman',times,serif">&#128;</FONT>(0.6) million, compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>0.5&nbsp;million in 2003.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Foreign exchange gains, net, also included in other income (expense), net, were <FONT face="'Times New Roman',times,serif">&#128;</FONT>2.3&nbsp;million
in 2004, compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>6.3&nbsp;million in 2003. The gain in 2004 was mainly due to the following:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#150;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A net realized gain of <FONT face="'Times New Roman',times,serif">&#128;</FONT>5.0&nbsp;million in 2004 (compared to a gain of <FONT face="'Times New Roman',times,serif">&#128;</FONT>25.4&nbsp;million in
2003) on the domestic currency swaps due to the difference between the forward rate of the
domestic currency swaps and the spot rate at which the domestic currency swaps were closed
(the Company uses the forward rate to protect its price risks against unfavorable exchange
variations);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#150;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A net realized loss of <FONT face="'Times New Roman',times,serif">&#128;</FONT>1.0&nbsp;million in 2004 (compared to a loss of <FONT face="'Times New Roman',times,serif">&#128;</FONT>7.6&nbsp;million in
2003), from the difference between the invoice exchange rate and the collection/payment
exchange rate;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#150;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A gain of <FONT face="'Times New Roman',times,serif">&#128;</FONT>1.4&nbsp;million (compared to a loss of <FONT face="'Times New Roman',times,serif">&#128;</FONT>1.2&nbsp;million in 2003) recorded in the
consolidated statement of earnings from the conversion of non-euro financial statements of
the Company&#146;s subsidiaries;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#150;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A net unrealized loss of <FONT face="'Times New Roman',times,serif">&#128;</FONT>10.2&nbsp;million in 2004 (compared to an unrealized loss of
<FONT face="'Times New Roman',times,serif">&#128;</FONT>16.6&nbsp;million in 2003) on accounts receivable and payable; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#150;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>An unrealized gain of <FONT face="'Times New Roman',times,serif">&#128;</FONT>7.1&nbsp;million in 2004 (compared to an unrealized gain of <FONT face="'Times New Roman',times,serif">&#128;</FONT>6.3
million in 2003), from the mark-to-market of domestic currency swaps.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group also recorded other expense in 2004 of <FONT face="'Times New Roman',times,serif">&#128;</FONT>5.6&nbsp;million compared to other expense of
<FONT face="'Times New Roman',times,serif">&#128;</FONT>3.1&nbsp;million reported in 2003. The loss in 2004 was mainly due to the following:
</DIV>


<P align="center" style="font-size: 10pt">36
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#150;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A loss of <FONT face="'Times New Roman',times,serif">&#128;</FONT>6.1&nbsp;million in 2004 due to the impairment of goodwill related to the
Group&#146;s operations and expectations in the United Kingdom;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#150;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A gain of <FONT face="'Times New Roman',times,serif">&#128;</FONT>3.4&nbsp;million in 2004 realized from the by disposal of the subsidiary
&#147;Spagnesi S.p.A.&#148;;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#150;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>An expense net of <FONT face="'Times New Roman',times,serif">&#128;</FONT>1.3&nbsp;million deriving from the write-off of fixed assets;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#150;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Other expense, net of <FONT face="'Times New Roman',times,serif">&#128;</FONT>1.5&nbsp;million in 2004.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since 2003, the Company does not follow hedge accounting, and records all fair hedge
accounting, and records all fair value changes of its domestic currency swaps in the income
statement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group&#146;s effective income tax rate for 2004 was 48.9%, compared to 18.5% in 2003. The
higher rate was due to the expiring, on December&nbsp;27, 2003, of the last domestic tax exemption and
to the negative impact of certain other expenses, recorded in the consolidated statement of
earnings, that are not fiscally deductible.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net earnings decreased from <FONT face="'Times New Roman',times,serif">&#128;</FONT>37.3&nbsp;million in 2003 to <FONT face="'Times New Roman',times,serif">&#128;</FONT>18.4&nbsp;million in 2004. On a per Ordinary
Share, or ADS basis, net earnings decreased from <FONT face="'Times New Roman',times,serif">&#128;</FONT>0.68 in 2003 to <FONT face="'Times New Roman',times,serif">&#128;</FONT>0.34 in 2004. As a percentage
of net sales, net earnings decreased from 4.9% in 2003 to 2.4% in 2004.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As disclosed in Note 27 to the Consolidated Financial Statements included in Item&nbsp;18 of this
annual report, established accounting principles in Italy vary in certain significant respects from
generally accepted accounting principles in the United States. Net earnings under U.S. GAAP for
the years ended December&nbsp;31, 2004, 2003 and 2002 would have been <FONT face="'Times New Roman',times,serif">&#128;</FONT>18.8&nbsp;million, <FONT face="'Times New Roman',times,serif">&#128;</FONT>38.0&nbsp;million and
<FONT face="'Times New Roman',times,serif">&#128;</FONT>92.0&nbsp;million, respectively, compared to net earnings under Italian GAAP for the same periods of
<FONT face="'Times New Roman',times,serif">&#128;</FONT>18.4&nbsp;million, <FONT face="'Times New Roman',times,serif">&#128;</FONT>37.3&nbsp;million and <FONT face="'Times New Roman',times,serif">&#128;</FONT>91.4&nbsp;million, respectively.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Effect of Inflation &#151; </B>Management believes that the impact of inflation was not material to the
Group&#146;s net sales or operating income in the three years ended December&nbsp;31, 2005.
</DIV>

<DIV align="left">
<A name="128"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Liquidity and Capital Resources</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents were <FONT face="'Times New Roman',times,serif">&#128;</FONT>89.7&nbsp;million at December&nbsp;31, 2005 compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>87.3&nbsp;million at
December&nbsp;31, 2004. The most significant changes in the Group&#146;s cash flow are described below.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash flows from operations were <FONT face="'Times New Roman',times,serif">&#128;</FONT>23.1&nbsp;million in 2005, compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>68.3&nbsp;million in 2004.
This decrease of <FONT face="'Times New Roman',times,serif">&#128;</FONT>45.2&nbsp;million from 2004 to 2005 resulted principally from the Group&#146;s net loss of
<FONT face="'Times New Roman',times,serif">&#128;</FONT>14.6&nbsp;million in 2005, which was mainly caused by the negative results of the Group&#146;s foreign
distribution companies. These companies realized net losses of <FONT face="'Times New Roman',times,serif">&#128;</FONT>23.7&nbsp;million. In addition, the
decrease in cash flows from operations was due to a slight increase in working capital, compared to
a significant decrease in working capital during 2004. In 2004 cash flow generated by
working capital was higher than 2005 because of the significant decrease in net receivables, as a
consequence of the positive results achieved in reducing collection periods for clients. In 2005
the Group continued to achieve positive results in
</DIV>


<P align="center" style="font-size: 10pt">37
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">credit collection, but the positive impact was
lower than in 2004, when the reduction of collection periods for clients was much more significant.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash flows used in investment activities in 2005 decreased <FONT face="'Times New Roman',times,serif">&#128;</FONT>16.1&nbsp;million to <FONT face="'Times New Roman',times,serif">&#128;</FONT>21.0&nbsp;million.
The decrease in cash used in investment activities was due to lower capital expenditures partially
offset by lower inflow generated by disposals of businesses and long lived assets. Capital
expenditures were <FONT face="'Times New Roman',times,serif">&#128;</FONT>20.9&nbsp;million and <FONT face="'Times New Roman',times,serif">&#128;</FONT>51.9&nbsp;million in 2005 and 2004, respectively. In 2005, capital
expenditures were primarily made to open new Natuzzi stores and galleries as well as to make
improvements at existing facilities in order to increase productivity and production capacity,
which included the purchase of equipment.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The positive effect on our cash flows used in investment activities from decreased capital
expenditures and the Government grants received was partially offset by (i)&nbsp;a decrease of <FONT face="'Times New Roman',times,serif">&#128;</FONT>5.5
million in cash flows from disposals of business,
which in 2004 were solely due to the sale of Spagnesi S.p.A. for cash consideration of <FONT face="'Times New Roman',times,serif">&#128;</FONT>5.5
million, and (ii)&nbsp;a decrease of <FONT face="'Times New Roman',times,serif">&#128;</FONT>8.5&nbsp;million in cash flows from disposals of long-lived assets. In
2005, the Group generated <FONT face="'Times New Roman',times,serif">&#128;</FONT>916 thousands from the sale of fixed assets, such as machinery,
equipment and a portion of a building located in Taranto, Italy. The positive effect of decreased
capital expenditures and the Government grants received was also partially offset by a <FONT face="'Times New Roman',times,serif">&#128;</FONT>1.9&nbsp;million
increase in cash used for the purchase of businesses, from <FONT face="'Times New Roman',times,serif">&#128;</FONT>0.1&nbsp;million in 2004 to <FONT face="'Times New Roman',times,serif">&#128;</FONT>2.0&nbsp;million in
2005. In 2005, the Company acquired Koine&#232; S.r.l., an enterprise based in a town
close to Pescara operating seven &#147;<I>Divani &#38; Divani by
Natuzzi</I>&#148; stores; a network of seven  &#147;<I>Divani &#038;
Divani by Natuzzi</I>&#148; stores in Rome; and a store in the center of Milan&#146;s main
shopping and commercial area. See Note 1 to the Consolidated Financial Statements included in Item
18 of this Annual Report.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash used for financing activities in 2005 totaled <FONT face="'Times New Roman',times,serif">&#128;</FONT>3.8&nbsp;million compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>6.0&nbsp;million in
the previous year. This decrease primarily reflects lower dividends paid to shareholders, <FONT face="'Times New Roman',times,serif">&#128;</FONT>3.8
million in 2005 compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>7.7&nbsp;million in 2004, which was partially offset by increased long-term
debt repayments, from <FONT face="'Times New Roman',times,serif">&#128;</FONT>1.3&nbsp;million in 2004 to <FONT face="'Times New Roman',times,serif">&#128;</FONT> 2.1&nbsp;million in 2005, and decreased long-term debt
proceeds, from <FONT face="'Times New Roman',times,serif">&#128;</FONT>1.3&nbsp;million in 2004 to <FONT face="'Times New Roman',times,serif">&#128;</FONT>0.5&nbsp;million in 2005.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As at December&nbsp;31, 2005, the Group had available lines of credit for cash disbursements
totaling <FONT face="'Times New Roman',times,serif">&#128;</FONT>93.0&nbsp;million, 8.3% of which were used. The unused portion of these lines of credit
amounted to approximately <FONT face="'Times New Roman',times,serif">&#128;</FONT>85.2&nbsp;million (see Note 11 to the Consolidated Financial Statements
included in Item&nbsp;18 of this annual report). The Group&#146;s long-term debt represented less than 1% of
shareholders&#146; equity at December&nbsp;31, 2005 and 2004 (see Note 16 to the Consolidated Financial
Statements included in Item&nbsp;18 of this annual report).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management believes that the Group&#146;s working capital is sufficient for its present
requirements. The Group&#146;s principal source of funds is expected to be cash flows generated from
operating activities, cash on hand and amounts available under its lines of credit. The Group&#146;s
principal use of funds is expected to be the payment of operating expenses, working capital
requirements and capital expenditures.
</DIV>

<DIV align="left">
<A name="129"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Contractual Obligations and Commitments</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following tables set forth the contractual obligations and commercial commitments of the
Group as at December&nbsp;31, 2005:
</DIV>


<P align="center" style="font-size: 10pt">38
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="19"><B>Payments Due by Period </B>(in euro thousands)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Less than</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>1-3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>After 5</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Contractual Obligations</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Total</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>1 year</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>years</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>4-5 years</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>years</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-Term Debt<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">426</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,620</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">525</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,437</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest on long term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">469</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">117</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating Leases<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,643</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,443</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,969</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,860</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,371</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Contractual Cash
Obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66,120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,952</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,761</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,482</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,925</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Please see Note 16 to the Consolidated Financial Statements included in this annual report
for more information on the Group&#146;s long-term debt.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>The leases relate to the leasing of manufacturing facilities and stores by several of the
Group&#146;s companies.</TD>
</TR>

</TABLE>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="38%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>Amount of Commitment Expiration Per</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Total</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>Period </B>(in euro thousands)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amounts</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Less than</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>1-3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>After 5</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Other Commitments</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Committed</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>1 year</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>years</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>4-5 years</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>years</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Guarantees<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>The guarantees are primarily comprised of surety bonds provided by certain financial
institutions in connection with the Natuzzi 2000 project. The Company, in turn, directly
provides guarantees in an equivalent amount to such financial institutions. The surety bonds
will expire when the Italian Ministry of Budget releases the final approvals of all
investments already made in connection with the Natuzzi 2000 project.</TD>
</TR>

</TABLE>


<DIV align="left">
<A name="130"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Related Party Transactions</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Please refer to Item&nbsp;7, &#147;Major Shareholders and Related Party Transactions&#148; of this annual
report.
</DIV>

<DIV align="left">
<A name="131"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Research and Development</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Innovation remains a strategic activity for the Group. Research and development efforts in
2005 have continued to focus on the design of new products and improvements in the manufacturing
process. See Item&nbsp;4, &#147;Information on the Company&#151;Manufacturing&#148; and Item&nbsp;4, &#147;Information on the
Company&#151;Products and Design&#148;. During 2005, the Group&#146;s investments in research and development
activities was <FONT face="'Times New Roman',times,serif">&#128;</FONT>10.0&nbsp;million, the same amount as in 2004. Approximately 150 highly qualified
people work in these activities, and more than 100 new products are generally introduced each year.
The Group conducts its research and development efforts at its headquarters in Santeramo.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group conducts all of its activities in accordance with stringent quality standards and
has earned the ISO 9001 certification for quality and the ISO 14001 certification for low
environmental impact production. The ISO 14001 certification applies also to Natuzzi&#146;s tannery
subsidiary, Natco S.p.A.
</DIV>


<P align="center" style="font-size: 10pt">39
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="132"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Trend Information and Guidance</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;Although the operating economic and currency scenario in which the Company has been operating
remains unfavorable, the Group has experienced an improvement in sales starting in the second half
of 2005 and continuing through the first quarter of 2006, particularly in Europe.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total net sales during the first three months of 2006 were at <FONT face="'Times New Roman',times,serif">&#128;</FONT>188.2&nbsp;million, increasing by
13.0% from <FONT face="'Times New Roman',times,serif">&#128;</FONT>166.6&nbsp;million, for the first quarter of 2005. In terms of seats sold, the Group sold 747,152 units during the first quarter of 2006, 6.1%
less than the first quarter of 2005.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group continues to see mixed results between its major product lines, with the Italsofa
line continuing to exhibit growth (up 42.2% over the first quarter of 2005, at <FONT face="'Times New Roman',times,serif">&#128;</FONT> 58.3&nbsp;million), and
the Natuzzi brand line (up 3.5% over the first quarter 2005, at <FONT face="'Times New Roman',times,serif">&#128;</FONT>109.1&nbsp;million) still adversely
affected by competitive pricing pressure, particularly evident in United States.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After reporting net losses in 2005 for the first time in its corporate history, the Group
recorded net income of <FONT face="'Times New Roman',times,serif">&#128;</FONT>6.8&nbsp;million during the first quarter of 2006, principally as a consequence
of the restructuring efforts that have been undertaken since June&nbsp;2005 &#150; namely more efficient cost
management and the closing of non-performing retail units &#151; together with more favorable currency
conditions in the period.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although during first quarter 2006 the Group reported an encouraging positive results,
Natuzzi&#146;s top management is aware that rising energy prices and interest rates will continue to
adversely affect consumers&#146; discretionary spending and, as a consequence, the furniture industry.
In addition, the Group&#146;s profitability and pricing flexibility has been and continues to be
adversely affected by the strength in the value of the Euro against the U.S. dollar. As a result,
the ability of the Group to improve its competitiveness largely depends on the Group&#146;s ability to
implement the current restructuring process of its operations and improve its retail activities.
See Item&nbsp;3, &#147;Risk Factors&#148;.
</DIV>

<DIV align="left">
<A name="133"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>New Accounting Standards under Italian and U.S. GAAP</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Process of Transition to International Accounting Standards &#151; </B>Following the entry into force
of European Regulation&nbsp;No.&nbsp;1606 of July&nbsp;2002, EU companies whose securities are traded on regulated
markets in the EU are required to adopt International Financial Reporting Standards (&#147;IFRS&#148;),
formerly known as IAS, in the preparation of their 2005 consolidated financial statements. Given
that the Company&#146;s securities are only traded on the NYSE, the Company is not subject to this
requirement and continues to report its financial results in accordance with Italian GAAP and to
provide the required reconciliation of certain items to U.S. GAAP in the Company&#146;s annual reports
in Form 20-F.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Italian GAAP &#150; </B>The new accounting standard under Italian GAAP relevant for the Company is
outlined below.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During September&nbsp;2005, effective as of December&nbsp;31, 2005, the Italian Accounting Profession
has changed the Italian accounting standard No. 17,
&#147;<I>Consolidated Financial Statements</I>&#148;, with regard to the translation of the financial statements
of a foreign subsidiary expressed in a foreign currency.
</DIV>


<P align="center" style="font-size: 10pt">40
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the previous accounting principle an Italian parent company was allowed to translate the
financial statements of a foreign subsidiary expressed in a foreign currency using the following
two methodologies:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;if the foreign subsidiary was considered an integral part of the parent company due to
various factors including intercompany transactions, financing, and cash flow indicators, its
financial statements expressed in the foreign currency was translated directly into euro from the
local currency as follows: (i)&nbsp;year-end exchange rate for monetary assets and liabilities, (ii)
historical exchange rates for non monetary assets and liabilities, share capital and retained earnings,
and (iii)&nbsp;average exchange rates during the year for revenues and expenses except for those
revenues and expenses related to assets and liabilities translated at historical exchange rates.
The resulting exchange differences on translation were recognized in other income (expenses), net,
in the consolidated statements of earnings;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;if the foreign subsidiary was not considered an integral part of a parent company, its
financial statements expressed in the foreign currency was translated directly into euro as
follows: (i)&nbsp;year-end exchange rate for assets and liabilities, (ii)&nbsp;historical exchange rates for
share capital and retained earnings, and (iii)&nbsp;average exchange rates during the year for revenues
and expenses. The resulting exchange differences on translation were recorded as a direct
adjustment to shareholders&#146; equity.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As indicated above, effective as of December&nbsp;31, 2005, the Italian Accounting Profession has
eliminated the option (a)&nbsp;indicated above.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Therefore, under Italian GAAP as from December&nbsp;31, 2005, an Italian parent company must
translate the financial statements of a foreign subsidiary expressed in a foreign currency using
only option (b)&nbsp;indicated above. This means that the financial statements of a foreign subsidiary
expressed in the foreign currency must be translated directly into euro as follows: (i)&nbsp;year-end
exchange rate for assets and liabilities, (ii)&nbsp;historical exchange rates for share capital and
retained earnings, and (iii)&nbsp;average rates during the year for revenues and expenses. The resulting
exchange differences on translation have to be recorded as a direct adjustment to shareholders&#146;
equity. This approach effectively ignores the operating environment of the foreign entity, in
particular if the local currency is also the functional currency.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>U.S. GAAP &#151; </B>The new accounting standards under U.S. GAAP relevant for the Company are outlined
below:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>- SFAS No.&nbsp;151: </B>In November&nbsp;2004, the FASB issued SFAS No.&nbsp;151, &#147;<I>Inventory Costs</I>&#148; (SFAS
151), which is an amendment of Accounting Research Bulletin No.&nbsp;43, &#147;Inventory Pricing.&#148; SFAS 151
clarifies that abnormal amounts of idle facility expense, freight, handling costs and wasted
materials (spoilage)&nbsp;should be recognized as current period charges. The provisions of SFAS 151
are effective for inventory costs incurred beginning January&nbsp;1, 2006, and are applied on a
prospective basis. The Company does not expect the adoption of SFAS 151 <U>will</U> have a
significant impact on the Company&#146;s consolidated financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>- SFAS No.&nbsp;153: </B>In December&nbsp;2004, the FASB issued SFAS Statement No.&nbsp;153, <I>Exchanges of
Nonmonetary Assets</I>, which eliminates an exception in APB 29 for nonmonetary exchanges of similar
productive assets and replaces it with a general exception
</DIV>


<P align="center" style="font-size: 10pt">41
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">for exchanges of nonmonetary assets that
do not have commercial substance. This Statement will be effective for the Company for nonmonetary
asset exchanges occurring on or after January&nbsp;1, 2006. Application of this statement will not have
an impact on the consolidated financial statements of the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>- SFAS No.&nbsp;123 R: </B>In December&nbsp;2004, the FASB issued SFAS No.123 (revised 2004),
<I>Share-Based Payment</I>, which is a revision of SFAS No.123, <I>Accounting for Stock-Based Compensation</I>.
SFAS No.123(R) supersedes APB Opinion No.&nbsp;25, <I>Accounting for Stock Issued to Employees</I>, and amends
SFAS No.&nbsp;95, <I>Statement of Cash Flows</I>. Generally, the approach in SFAS No.123(R) is similar to the
approach described in SFAS No.&nbsp;123. However, SFAS No.123(R) requires all share-based payments to
employees, including grants of employee stock options, to be recognized in the income statement
based on their fair values. Pro forma disclosure is no longer an alternative. The Company intends
to adopt the &#147;modified prospective&#148; method in which compensation cost is recognized beginning with
the effective date (a)&nbsp;based on the requirements of SFAS No.123(R) for all share-based payments
granted or modified after the effective date and (b)&nbsp;based on the requirements of SFAS No.123 for
all awards granted to employees prior to the effective date of SFAS No.123(R) that remain unvested
on the effective date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As permitted by SFAS No.123, the company currently accounts for share-based payments to
employees using the APB Opinion No.&nbsp;25 intrinsic-value method. Accordingly, the adoption of the
SFAS No.123(R) fair value method will affect the Company&#146;s results of operations. The Company has
not yet determined the impact, if any, that the adoption of SFAS 123 (R)&nbsp;will have on the Company&#146;s
consolidated financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>- FASB interpretation No.&nbsp;47: </B>In March&nbsp;2005, the FASB issued FASB Interpretation (FIN)
No.&nbsp;47 <I>Accounting for Conditional Asset Retirement Obligations</I>, which clarifies that a liability
(at fair value) must be recognized for asset retirement obligations when it has been incurred if
the amount can be reasonably estimated, even if settlement of the liability is conditional on a
future event. FIN 47 is effective as of December&nbsp;31, 2005. The Company currently does not have any
assets retirement obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>- EITF 04-1: </B>In October&nbsp;2004, the EITF reached a consensus on EITF 04-1, &#147;<I>Accounting for
Preexisting relationships between the Parties to a Business Combination</I>&#148;. EITF 04-1 addresses
various elements connected to a business combination between two parties that have a pre-existing
relationship and the settlement of the pre-existing relationship in conjunction with the business
combination. The Company applied the provisions of EITF 04-1 to business combinations consummated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>- SFAS No.&nbsp;154: </B>In May&nbsp;2005, the FASB issued SFAS 154, &#147;<I>Accounting Changes and Error
Corrections &#150; a Replacement of APB Opinion No.&nbsp;20 and FASB Statement No.&nbsp;3</I>&#148;. SFAS 154 requires
retrospective application to prior period financial statements of changes in accounting principle,
unless it is impracticable to determine either the period-specific effects or the cumulative effect
of the change. SFAS 154 also redefines &#147;restatement&#148; as the revising of previously issued financial
statements to reflect the correction of an error. This statement is effective for accounting
changes and corrections of errors made in fiscal years beginning after December&nbsp;15, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>- EITF 05-06: </B>In June&nbsp;2005 the EITF reached a consensus on EITF 05-6, &#147;<I>Determining the
amortization period for leasehold improvements</I>&#148;. The issue is how to
</DIV>


<P align="center" style="font-size: 10pt">42
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">determine the amortization
period for leasehold improvements acquired subsequent to inception of lease, including leasehold
improvement acquired in a business combination. For both cases the Task Force reached the consensus
that the leasehold improvements acquired should be amortized over the shorter of the useful life of
the assets and the hypothetical lease term. This consensus does not apply to pre-existing
improvements and it is effective for reporting periods beginning after June&nbsp;29, 2005. The Company does not believe that the adoption of EITF 05-6 will
have a significant impact on the consolidated financial statements.
</DIV>

<DIV align="left">
<A name="134"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;6. Directors, Senior Management and Employees</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
directors, executive officers and officers of the Company at
June&nbsp;10, 2006 were as
follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="73%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Age</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Position with the Company</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Pasquale Natuzzi
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">66</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chairman of the Board of Directors</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Ernesto Greco
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">55</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Executive Officer, Member of the Board of Directors</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Giuseppe Desantis
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">43</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">General Manager, Vice Chairman of the Board of Directors</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Daniele Tranchini
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">47</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Sales &#038; Marketing Officer, Member of the Board of&nbsp;Directors</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Giambattista Massaro
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">44</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">General Manager of Purchasing and Overseas Operations,&nbsp;Member
of the Board of Directors</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Gianluca Monteleone
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">39</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Marketing and Communication Director, Member of the&nbsp;Board
of Directors</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Giuseppe Russo Corvace
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">56</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Managing Director for Accounting
and Finance, Member of the Board of Directors</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Armando Branchini
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">61</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Outside Director</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Stelio Campanale
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">44</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Outside Director</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Pietro Gennaro
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">84</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Outside Director</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Enrico Vitali
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">45</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Outside Director</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Enrico Carta
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">58</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Human Resources and Organization Director</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Nicola V.M. Dell&#146;Edera</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">44</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Financial Officer a.i. and Finance Director</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Giovanni Costantino
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">42</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Research and Development Director</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Annunziata Natuzzi
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">42</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Executive Officer of Natco S.p.A.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Gaetano De Cataldo
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">42</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Vice President of Finance and Operations of&nbsp;Natuzzi
Americas, Inc.</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Jos&#233; Manuel Gulias&nbsp;Roo
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">48</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Spain and Portugal Country Manager</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Cesare Laberinti
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">73</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chairman and Managing Director of IMPE S.p.A</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Bo Lippert-Larsen
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">44</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Nordic Region Country Manager</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Jan Mentens
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">39</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Benelux Country Manager</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Giovanni Mercadante
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">49</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Accounting Director</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Ottavio Milano
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">40</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Control and Internal Auditing Director</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Nick Moore
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">44</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Managing Director of Natuzzi United Kingdom Ltd</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Achille Poretta
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">48</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Information Systems Director</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Dave Riches
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">46</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Finance Director of Natuzzi United Kingdom Ltd</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Bodo Rupp
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">47</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Germany, Switzerland and Austria Country Manager</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Fredrick Starr
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">74</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">President and Chief Executive Officer of Natuzzi
Americas Inc.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">43
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="73%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Age</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Position with the Company</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Francesco Stasolla
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">40</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chairman and Managing Director of Italsofa Romania S.r.l.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Richard Tan
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">46</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chairman and Managing Director of Italsofa (Shanghai)&nbsp;Ltd
and Softaly (Shanghai) Ltd</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Vito Testini
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">52</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Managing Director of Minuano Nordeste S.A and Italsofa&nbsp;Bahia
Ltd</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Fernando R. Vitale
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">40</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">General Manager and Director of Italsofa Bahia Ltda.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pasquale Natuzzi, who serves as
Chairman of the Board of Directors, founded the Company in 1959 and
acted as its principal executive officer until June&nbsp;2006. Mr.&nbsp;Natuzzi held the title of Sole Director of the
Company from its incorporation in 1972 until 1991, when he became the Chairman of the Board of
Directors.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ernesto Greco is the Chief Executive Officer of the Group and member of the Board of
Directors since June&nbsp;6, 2006. Mr.&nbsp;Greco holds a degree in Mechanical Engineering and a Master in Business
Administration from CUOA, Italy. He developed his career in various areas within multinational
Companies, such as Montedison, Hewlett-Packard, Wang Laboratories. Before his appointment in
Natuzzi, he was CFO of Bulgari, world leader in the luxury goods business.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Giuseppe Desantis is General Manager and Vice Chairman of the Board of Directors. He became
Vice Chairman of the Company in 1991. From 1988 to 1991, he was Assistant to Mr.&nbsp;Natuzzi. In 1987,
he managed the Company&#146;s pricing and costing department. From 1984, when he joined the Company, to
1986 he worked in the Company&#146;s accounting department.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Daniele Tranchini is the Chief Sales and Marketing Officer and member of the Board of
Directors<B>. </B>He joined the Company in June&nbsp;2004 after studying Marketing and Business Administration
in the United States. He was previously the Managing Director of J.Walter Thompson.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Giambattista Massaro is General Manager of Purchasing and Overseas Operations and member of
the Board of Directors. From 1992 to 1993 he was assistant to Mr.&nbsp;Natuzzi and from 1990 to 1992 he
was Pricing and Costs Manager. He joined the Company in 1987 as a buyer. He is also Chairman of
Natco S.p.A , Nacon S.p.A. and Natuzzi Trade Service S.r.l. as well as Director of Italsofa Bahia
Ltda., Italsofa Romania S.r.l. and Natuzzi Asia Ltd.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gianluca Monteleone is Marketing and Communication Director and member of the Board of
Directors. He joined the Company and became a Director in 1999. He was previously a brand manager
at Johnson &#038; Johnson, Italy and Marketing Manager at Sara Lee International.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Giuseppe Russo Corvace acts as Managing Director for Accounting and Finance and is a member of
the Board of Directors. He is a partner of <I>Vitali, Romagnoli, Piccardi e Associati</I>, a major
Italian law and tax consulting firm serving the Company and other major domestic and multinational
companies. He has also served as a consultant to non-profit organizations. He serves as member of
the Board of Auditors of a number of other Italian companies. He is delegated by the Board to
supervise all activities related to domestic and international tax issues.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Armando Branchini has been an Outside Director of the Company since 2001. He
</DIV>


<P align="center" style="font-size: 10pt">44
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">founded
<I>InterCorporate &#151; Strategie e Impresa</I>, a consultancy firm specializing in business strategies and
strategic marketing. He is a professor of Strategic Marketing of Luxury Goods at the IULM
University in Milan. From 1973 through 1987, he was responsible for establishing and implementing a
marketing program aimed at supporting the entrance and development of Italian fashion in principal
international markets.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stelio Campanale is an Outside Director of the Company and has been a member of the Board of
Directors since 1991. He was Legal Counsel of the Company from 1991 to 1997, and then served as a consultant of the Company. He was previously a
senior consultant at Praxi S.p.A., a corporate consulting company, from 1988 to 1990.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pietro Gennaro has been an Outside Director of the Company since 1993. He is the founder of
Gennaro-Boston Associati, an Italian management consulting firm that is a subsidiary of the Boston
Consulting Group. He is currently a professor at the University of Pavia and at ISTUD, a senior
management business school. Mr.&nbsp;Gennaro is also a management consultant to major companies in
Italy, serving as Chief Executive Officer of <I>PGA &#151; Strategia e Organizzazione</I>, a management
consultancy. Previously, he has also served as President of Waste Management Italia.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Enrico Vitali has been an Outside Director of the Company since 1994. He is a Certified Public
Accountant and a partner of <I>Vitali, Romagnoli, Piccardi e Associati</I>, a major Italian law and tax
consulting firm serving the Company and other major domestic and multinational companies. Mr.
Vitali also serves as a member of the Boards of Statutory Auditors and the Boards of Directors of a
number of other Italian companies.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Enrico Carta joined the Company in February&nbsp;2002 as Human Resources and Organization Director.
He has served as human resources manager over several years for some of the most important Italian
industrial and consulting firms.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Giovanni Costantino has served as Research and Development Director of the Group since 1999.
He was previously a consultant for furnishings and was in charge of developing the Company&#146;s
&#147;Decorator&#148; program.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Annunziata Natuzzi is the Chief Executive Officer of Natco S.p.A.. She joined the Company in
1981. She started working in the Production Department and, in two years, worked briefly in all of
the departments of the Group. She has extensive experience in the Italian Sales Department and in
the International Sales Administration Department. She has worked in the Personnel Department since
1990.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gaetano De Cataldo is Executive Vice President of Finance and Operations of Natuzzi Americas,
Inc. He previously served the Company as Sales Manager for Latin America. From 1995 to 1997, he was
International Franchisee Operations Manager, and from 1993 to 1995 he was Assistant Sales
Administration Manager. He joined the Company in 1990 as a customer service representative.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nicola Vittorio Maria Dell&#146;Edera is Chief Financial Officer a.i. and Finance Director. He
joined the Company in 1999. From 1997 to 1999, he was head of the Financial Analysis Department in
the New York branch of Banca di Roma, an Italian bank. He previously worked in Banca di Roma&#146;s
branches in Rome and Bari.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Jos&#233; Manuel Gulias Roo has been Managing Director of the subsidiary Natuzzi
</DIV>


<P align="center" style="font-size: 10pt">45
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Ib&#233;rica since June
2004. He joined the Group in June&nbsp;2004. Previously, Mr.&nbsp;Gulias Roo worked for HL-Display, a
world-leading supplier of the retail industry.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cesare Laberinti is Chairman and Managing Director of IMPE S.p.A., the subsidiary engaged in
polyurethane foam operations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bo Lippert-Larsen is Nordic Region Country Manager. He is Managing Director of Natuzzi Nordic
ApS, the Copenhagen-based subsidiary of the Group. He joined Natuzzi in December&nbsp;2002.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Jan Mentens has been Benelux Country Manager since April&nbsp;2003. He is Managing Director of
Natuzzi Benelux NV.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Giovanni Mercadante is Accounting Director. He joined the Company in 1983.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ottavio Milano is Control and Internal Auditing Manager. He joined the Company in May&nbsp;1992.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nick Moore joined the Group in January&nbsp;2006 as Managing Director for Natuzzi United Kingdom
Ltd. Nick previously held the position of Retail Director for Orange UK (a subsidiary of France
Telecom)for 5&nbsp;years. Prior to that he worked for Habitat Group for 12&nbsp;years in various retail
positions including Head of Franchises and New Markets, Head of Selling Systems and culminating in
Group Head of Retail<I>.</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Achille Poretta is the Information System Director. He joined the company in March&nbsp;2006. Until
2005 he worked in Accenture. Previously he worked for Carrefour Italia as Information Technology
Director.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;David Riches is Finance Director for Natuzzi United Kingdom Ltd. He joined the Group in
January&nbsp;2002. Previously he held the position of Finance Director for Hi-Tec Sports International
Ltd (a wholly owned subsidiary of Hi-Tec Sports PLC) and prior to that he worked for Amstrad PLC
for 10&nbsp;years in various finance positions culminating in being Financial Controller and Company
Secretary.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bodo Rupp has been leading Natuzzi Germany since December&nbsp;2004, after a long period at Nike
USA. He manages the development of business.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fredrick Starr is President and CEO of Natuzzi Americas, Inc. He joined the Company in
October&nbsp;2001. Since retiring in 1998 from Thomasville Furniture Industries, where he served as
President for 16&nbsp;years, he has been involved in several business and civic efforts. Most recently,
he has worked with Style Craft Metal Beds as part owner and adviser. Additionally, he was appointed
by Governor Hunt to lead an effort to bring Major League Baseball to North Carolina, has served as
President of Piedmont Triad Partnership and is currently on the North Carolina Environmental
Management Commission.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Francesco Stasolla is Chairman and Managing Director of Italsofa Romania S.r.l.. He started at
Natuzzi in January&nbsp;1988 as a buyer.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Richard Tan is Chairman and Managing Director of Italsofa (Shanghai) as well as Softaly
(Shanghai) Limited. He has been in the upholstery business for 17&nbsp;years. In November&nbsp;2000, he
began cooperation with Natuzzi Asia Ltd for the start-up of the Chinese production operations. He
was appointed as Chairman of Italsofa (Shanghai) Limited on
</DIV>


<P align="center" style="font-size: 10pt">46
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">October&nbsp;2002.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Vito Testini is Production Manager of Minuano Nordeste S.A. and Italsofa Bahia Ltd. He joined
the Company in 1985. After a period work in production, he has been Quality Manager of the Group
since 2000. From 2000 to 2003 he was Production Director of Italsofa Bahia Ltda.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fernando R. Vitale is General Manager and Director of the Brazilian subsidiary Italsofa Bahia
Ltda. Previously, he worked for 15&nbsp;years at Curtume Touro Ltda., a Brazilian leather tannery.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Annunziata Natuzzi is the daughter of Pasquale Natuzzi. There are no other family
relationships among the directors and executive officers of the Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Directors are elected for three-year terms. The next election of Directors will take place in
April&nbsp;2007. See Item&nbsp;10, &#147;Additional Information &#151; By-laws &#151; Board of Directors&#148;.
</DIV>

<DIV align="left">
<A name="135"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Compensation of Directors and Officers</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Aggregate compensation paid by the Group to the directors and officers named above was
approximately <FONT face="'Times New Roman',times,serif">&#128;</FONT>8.1&nbsp;million in 2005.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;24, 2006, pursuant to the Natuzzi Stock Incentive Plan 2004-2009 (the &#147;Plan&#148;)
approved by the Shareholders&#146; Ordinary Meeting on July&nbsp;26, 2004, the first tranche of
29,245 Natuzzi Ordinary Shares relating to the 2004 MBO Awards, were assigned to the Natuzzi Directors and
Officers participating in the Plan. The second tranche of 29,236 Natuzzi ordinary shares will be
assigned from January&nbsp;15 to January&nbsp;31, 2007. These same Directors and
Officers were also awarded, with reference to the 2004 MBO Awards, 216,920 stock options whose
exercise price was fixed at $10.04 and that can be vested until January&nbsp;15, 2009. Because of an
exercise price greater than the stock market price, no stock option has vested so far.
</DIV>

<DIV align="left">
<A name="136"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Share Ownership</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Pasquale
Natuzzi owns 47.6% of the issued and outstanding Ordinary Shares. As from
December&nbsp;16, 2003, Mr.&nbsp;Natuzzi holds his entire beneficial ownership of Natuzzi S.p.A. shares
(other than 196 ADSs) through INVEST 2003 S.r.l., an Italian holding company (having its registered
office at Via Gobetti 8, Taranto, Italy) wholly-owned by Pasquale Natuzzi. Each of Annunziata
Natuzzi and Anna Maria Natuzzi owns 2.6% of the issued and outstanding Ordinary Shares. To our
knowledge, none of the Company&#146;s other directors and officers listed above owns one percent or more
of the Ordinary Shares. See Item&nbsp;7, &#147;Major Shareholders and Related Party Transactions &#151; Major
Shareholders&#148;.
</DIV>

<DIV align="left">
<A name="137"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Statutory Auditors</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the names of the three members of the board of statutory
auditors of the Company and the two alternate statutory auditors and their respective positions, as
of the date of this annual report. The current board of statutory auditors was elected for a
three-year term on April&nbsp;30, 2004.</DIV>

<P align="center" style="font-size: 10pt">47
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Position</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Francesco Venturelli
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Chairman</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Cataldo Sferra
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Member</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Costante Leone
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Member</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Giuseppe Pio Macario
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Alternate</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Vittorio Boscia
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Alternate</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2005, our statutory auditors received in the aggregate approximately <FONT face="'Times New Roman',times,serif">&#128;</FONT>285,000 in
compensation for their services to the Company and its Italian subsidiaries.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;According to Rule&nbsp;10A-3 of the Securities Exchange Act of 1934, companies must establish an
audit committee meeting specific requirements. In particular, all members of this committee must
be independent and the committee must adopt a written charter. The committee&#146;s prescribed
responsibilities include (i)&nbsp;the appointment, compensation, retention and oversight of the external
auditors; (ii)&nbsp;establishing procedures for the handling of &#147;whistle blower&#148; complaints; (iii)
discussion of financial reporting and internal control issues and critical accounting policies
(including through executive sessions with the external auditors); (iv)&nbsp;the approval of audit and
non-audit services performed by the external auditors; and (v)&nbsp;the adoption of an annual
performance evaluation. A company must also have an internal audit function, which may be
out-sourced, except to the independent auditor.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company is relying on an exemption from these audit committee requirements provided by
Exchange Act Rule&nbsp;10A-3(c)(3) for foreign private issuers with a board of statutory auditors
established in accordance with local law or listing requirements and
subject to independence requirements under local law or listing requirements. See Item&nbsp;16, &#147;Exemption from
Listing Standards for Audit Committees&#148; for more information.
</DIV>

<DIV align="left">
<A name="138"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>External Auditors</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;30, 2004, at the annual general shareholders&#146; meeting, KPMG S.p.A., with offices in
Bari, Italy, was appointed as the Company&#146;s external auditors for a three-year period.
</DIV>

<DIV align="left">
<A name="139"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Employees</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As at December&nbsp;31, 2005, the Group had 7,846 employees (3,633 in Italy and 4,213 abroad), as
compared to 6,832 and 6,230 on December&nbsp;31, 2004 and 2003, respectively. As at April&nbsp;30, 2006, the
Group had 7,975 employees (3,614 in Italy and 4,361 abroad). As at April&nbsp;30, 2006, the average age
of the Group&#146;s employees was approximately 33&nbsp;years. Historically, there has been very little
turnover among the Group&#146;s employees. The Group maintains a company intranet and, as a major
employer in the Bari/Santeramo area, is, in the view of management, an important participant in
community life.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Italian law provides that, upon termination of employment for whatever reason, employees
located in Italy are entitled to receive certain indemnity payments based on length of employment.
As at March&nbsp;31, 2006, the Company had <FONT face="'Times New Roman',times,serif">&#128;</FONT>33.8&nbsp;million reserved for such termination indemnities, such
reserves being equal to the amounts, calculated on a percentage basis, required by Italian law.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group has continued to expand its presence overseas thanks to the new production plants in
Brazil, Romania and China and the establishment of some new
</DIV>


<P align="center" style="font-size: 10pt">48
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">distribution subsidiaries. The
corporate structure has been reinforced by the hiring of new skilled and experienced managers and
employees.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In Italy the effects of the &#147;<I>Biagi </I>reform&#148; continue, allowing the Group to adopt new, highly
flexible employment contracts. One such contract is the <I>project work contract</I>, an innovative
employment agreement that has enabled the Group to hire employees for the limited purpose of
completing a particular project during a predetermined period. These new employment contracts have
enhanced the Group&#146;s ability to recruit and hire workers quickly and to do so with a high degree of
flexibility.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2005, the Group has reduced its training activities, focusing on training only new
employees in the production and sales and marketing areas.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2004, the Group&#146;s compensation philosophy was focused on rewarding management and
employees for the achievement of specified performance goals and for improvement in the Company&#146;s share
price. In 2004 the Group launched the Stock Incentive Plan (the &#147;SIP&#148;) for key management
employees. The purpose of the SIP is to provide designated employees of the Group with incentives
and rewards to motivate them to increase the Group&#146;s value and to encourage them to continue their
employment with the Group. The SIP was approved by the shareholders
of Natuzzi at the Extraordinary Meeting of Shareholders on July&nbsp;23, 2004. At that meeting, the shareholders approved
the issuance of up to 3,000,000 shares under the SIP, 500,000 of
which may be issued upon
settlement of restricted stock units. Under the SIP, employees of the Group selected by a
committee of the Board of Directors were offered the opportunity to receive options to purchase ordinary shares of Natuzzi and grants of
restricted stock units instead of payment of their 2004 and 2005 MBO
Awards. The options to purchase and the restricted stock units vest or become exercisable only on the achievement of certain
designated performance targets. Under the SIP, the Group assigned
113,820 restricted stock units and 369,752 stock options for MBO 2004. On January&nbsp;24, 2006 the Natuzzi Board of Directors, in
accordance with the Natuzzi Stock Incentive Plan 2004-2009, approved
the issuance without consideration of
56,910 new Natuzzi ordinary shares in favor of the beneficiary employees. See Note 20 to the
Consolidated Financial Statements of this annual report for a more detailed description of the
operation of the SIP.
</DIV>

<DIV align="left">
<A name="140"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;7. Major Shareholders and Related Party Transactions</B>
</DIV>

<DIV align="left">
<A name="141"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Major Shareholders</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Pasquale
Natuzzi, who founded the Company and served as its chief executive
officer until June&nbsp;2006, and who is currently Chairman of the
Board of Directors, owns 47.6% of the issued and outstanding Ordinary Shares of
the Company (52.8% of the Ordinary Shares if the Ordinary Shares owned by members of Mr.&nbsp;Natuzzi&#146;s
immediate family (the Natuzzi Family) are aggregated) and controls the Company, including its
management and the selection of its Board of Directors. Since December&nbsp;16, 2003, Mr.&nbsp;Natuzzi holds
his entire beneficial ownership of Natuzzi S.p.A. shares (other than 196 ADSs) through INVEST 2003
S.r.l., an Italian holding company (having its registered office at Via Gobetti 8, Taranto, Italy)
wholly-owned by Pasquale Natuzzi.
</DIV>


<P align="center" style="font-size: 10pt">49
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth information, as reflected in the records of the Company as at
March&nbsp;31, 2006, with respect to each person who owns more than 5% of the Company&#146;s Ordinary Shares
or ADSs.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percent</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Shares Owned</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Owned</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pasquale Natuzzi<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,064,906</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">47.6</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Royce &#038; Associates, LLC </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,209,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">9.5</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Brandes Investment Partners, LP </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,540,281</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">8.3</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tweedy, Browne Company, L.L.C</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,050,759</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">7.4</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>If Mr.&nbsp;Natuzzi&#146;s Ordinary Shares are aggregated with those held by members of the
Natuzzi Family, the amount owned would have been 28,864,906 and the percentage ownership
of Ordinary Shares would have been 52.8%.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, the Natuzzi Family has a right of first refusal to purchase all the rights,
warrants or other instruments which The Bank of New York, as Depositary under the Deposit
Agreement, determines may not lawfully or feasibly be made available to owners of ADSs in
connection with each rights offering, if any, made to holders of Ordinary Shares. None of the
shares held by the above shareholders have any special voting rights.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of May&nbsp;31, 2006, 54,738,538 Ordinary Shares were outstanding. As of the same date, there
were 25,829,181 ADSs (equivalent to 25,829,181 Ordinary Shares) outstanding. The ADSs represented
47.2% of the total number of outstanding Natuzzi Ordinary Shares.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since certain of the shares and ADSs were held by brokers or other nominees, the number of
direct record holders in the United States may not be fully indicative of the number of direct
beneficial owners in the United States or of where the direct beneficial owners of such shares are
resident.
</DIV>

<DIV align="left">
<A name="142"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Related Party Transactions</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No member of the board of directors or board of statutory auditors and no senior officer
(including close members of any such person&#146;s families) nor any enterprise over which any such
person is able to exercise a significant influence has had any interest in any transactions that
are or were unusual in their nature or conditions or are or were material to the Company, and that
were either effected since January&nbsp;1, 2003 or that were effected during an earlier period and
remain in any respect outstanding or unperformed. The Company has not provided any loans or
guarantees to or for the benefit of any such person since January&nbsp;1, 2003 or that remain
outstanding or unperformed.
</DIV>

<DIV align="left">
<A name="143"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;8. Financial Information</B>
</DIV>

<DIV align="left">
<A name="144"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Consolidated Financial Statements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Please refer to Item&nbsp;18, &#147;Financial Statements&#148; of this annual report.
</DIV>


<P align="center" style="font-size: 10pt">50
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="145"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Export Sales</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Export sales from Italy totaled approximately <FONT face="'Times New Roman',times,serif">&#128;</FONT>323.7&nbsp;million in 2005, down 25.5% compared with
2004. That figure represented 54.4% of the Group&#146;s 2005 net leather- and fabric-upholstered
furniture sales.
</DIV>

<DIV align="left">
<A name="146"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Legal and Governmental Proceedings</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In early 2005, the National Institute for Social Security (INPS &#150; <I>Istituto Nazionale di
Previdenza Sociale</I>) requested that the Company pay approximately <FONT face="'Times New Roman',times,serif">&#128;</FONT>16.3&nbsp;million of social security
contributions related to the periods between November&nbsp;1995 to May&nbsp;2001. The Company did not pay
these contributions because it benefited from certain exemptions granted by the Italian government
in connection with personnel employed under &#147;Training and Work Experience&#148; contracts (<I>Contratti di
formazione e lavoro</I>). In 2004, the European Court of Justice ruled that such exemptions constitute
State financial aid, and thus conflict with European Union laws and regulations on free
competition, and the European Commission ordered the Italian government to collect all social
security contributions not paid in reliance on these exemptions. The Company believes that it
complied with the law in force at the time it took the exemptions and that the request from INPS
with respect to periods up to February&nbsp;2000 should be barred by the statute of limitations up to
February&nbsp;2000 in accordance with Italian Law 335/1995. As such, the Company has set aside only
<FONT face="'Times New Roman',times,serif">&#128;</FONT>457,000 to cover the social security contributions in connection with employees hired after March
2000. See note 21 to the Consolidated Financial Statements included in item 18 of this annual
report.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Apart from the proceeding described above, neither the Company nor any of its subsidiaries is
a party to any legal or governmental proceeding that is pending or, to the Company&#146;s knowledge,
threatened or contemplated against Natuzzi or any such subsidiary that, if determined adversely to
Natuzzi or any such subsidiary, would have a materially adverse effect, either individually or in
the aggregate, on the business, financial condition or results of operations of the Group.
</DIV>

<DIV align="left">
<A name="147"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Dividends</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group&#146;s policy is to maintain a dividend payout ratio of approximately 20%. In light of
the Group&#146;s negative results for the year ended December&nbsp;31, 2005 the Group did not distribute
dividends for the year ended December&nbsp;31, 2005.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The table below sets forth the cash dividends paid per Ordinary Share in respect of each of
the years indicated, and translated into dollars per ADS (each representing one Ordinary Share) at
the Noon Buying Rate on the date or dates the respective dividends were first payable.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Dividends per</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Translated into</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Year ended December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Ordinary Share</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>dollars per ADS</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap>Not distributed</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap>Not distributed</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">0.0673</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.09</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">0.1366</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">0.3300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.35</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">0.2872</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.26</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">51
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The payment of future dividends will depend upon the Company&#146;s earnings and financial
condition, capital requirements, governmental regulations and policies and other factors.
Accordingly, there can be no assurance that dividends in future years will be paid at a rate
similar to dividends paid in past years or at all.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dividends paid to owners of ADSs or Ordinary Shares who are United States residents qualifying
under the Income Tax Convention will generally be subject to Italian withholding tax at a maximum
rate of 15%, provided that certain certifications are timely given. Such withholding tax will be
treated as a foreign income tax which U.S. owners may elect to deduct in computing their taxable
income, or, subject to the limitations on foreign tax credits generally, credit against their
United States federal income tax liability. See Item&nbsp;10, &#147;Additional Information &#151; Taxation &#151;
Taxation of Dividends&#148;.
</DIV>

<DIV align="left">
<A name="148"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;9. The Offer and Listing</B>
</DIV>

<DIV align="left">
<A name="149"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Trading Markets and Share Prices</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Natuzzi&#146;s Ordinary Shares are listed on the New York Stock Exchange (&#147;NYSE&#148;) in the form of
ADSs under the symbol &#147;NTZ&#148;. Neither the Company&#146;s Ordinary Shares nor its ADSs are listed on a
securities exchange outside the United States. The Bank of New York is the Company&#146;s Depositary
for purposes of issuing the ADRs evidencing ADSs.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Trading in the ADSs on the NYSE commenced on May&nbsp;13, 1993. The following table sets forth,
for the periods indicated, the high and low closing prices per ADS as reported by the
NYSE.<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Starting on January&nbsp;1, 2001, the NYSE
changed its practice of reporting stock quotes from a fractional to a decimal
system. All stock quotes prior to this date, originally reported in fractions,
were restated into decimals for ease of comparison.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">52
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>New York Stock Exchange</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Price per ADS</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>High</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Low</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>(in U.S. dollars)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>2001</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">First Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.125</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Second Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Third Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.150</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Fourth Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.640</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.860</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>2002</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">First Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13.910</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Second Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16.100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13.350</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Third Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.040</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.920</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Fourth Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.970</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.120</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>2003</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">First Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.240</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Second Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.990</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Third Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.390</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.820</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Fourth Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.460</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>2004</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">First Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.550</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.150</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Second Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.550</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.150</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Third Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.230</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Fourth Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.170</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.010</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>2005</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">First Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.290</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Second Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.270</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Third Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.050</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Fourth Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.760</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>2006</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">First Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.810</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Monthly Data</B>:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">December&nbsp;2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.660</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.980</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">January&nbsp;2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.790</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">February&nbsp;2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.530</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">March&nbsp;2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.810</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.300</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">April&nbsp;2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.570</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.860</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">May&nbsp;2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">June&nbsp;2006 (through June&nbsp;19)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.110</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">53
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="150"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;10. Additional Information</B>
</DIV>

<DIV align="left">
<A name="151"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>By-laws</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a summary of certain information concerning the Company&#146;s shares and By-laws
(<I>Statuto</I>) and of Italian law applicable to Italian stock corporations whose shares are not listed
in a regulated market in the



European Union, as in effect at the date of this annual report. The summary contains all the
information that the Company considers to be material regarding the shares but does not purport to
be complete and is qualified in its entirety by reference to the By-laws or Italian law, as the
case may be.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Italian companies whose shares are not listed on a regulated market of the European Union are
governed by the rules of the Italian civil code as modified by the reform of the corporate law
provisions of the Italian civil code, which took effect on January&nbsp;1, 2004.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On July&nbsp;23, 2004 the Company&#146;s shareholders approved a number of amendments to the Company&#146;s
By-laws dictated or made possible by the so-called &#147;corporate law reform&#148;. The following summary
takes into account the corporate law reform and the consequent amendments to the Company&#146;s By-laws.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>General &#151; </B>The issued share capital of the Company consists of 54,681,628 Ordinary Shares, par
value <FONT face="'Times New Roman',times,serif">&#128;</FONT>1.0 per share. All the issued shares are fully paid, non-assessable and in registered form.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company is registered with the Companies&#146; Registry of Bari at n. 19551, with its
registered office in Bari, Italy.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As set forth in Article&nbsp;3 of the By-laws, the Company&#146;s corporate purpose is the production,
marketing and sale of sofas, armchairs, furniture in general and raw materials used for their
production. The Company is generally authorized to take any actions necessary or useful to achieve
its corporate purpose.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Authorization of Shares &#151; </B>The extraordinary meeting of the Company&#146;s shareholders held on July
23, 2004 authorized the Company&#146;s board of directors to carry out a free capital increase of up to
<FONT face="'Times New Roman',times,serif">&#128;</FONT>500,000.00, and a capital increase against payment of up to <FONT face="'Times New Roman',times,serif">&#128;</FONT>3.0&nbsp;million to be issued, in
connection with the grant of stock options to employees of the Company. On January&nbsp;24, 2006 the
Natuzzi Board of Directors, in accordance with the Regulations of the &#147;Natuzzi Stock Incentive Plan
2004-2009&#148;, approved by the Board of Directors in a meeting held on July&nbsp;23, 2004, decided to
issue without consideration 56,910 new Natuzzi ordinary shares in favor of the beneficiary
employees. Consequently, the number of the Natuzzi ordinary shares were increased on the same date
from 54,681,628 to 54,738,538.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Form and Transfer of Shares &#151; </B>The Company&#146;s Ordinary Shares are in certificated form and are
freely transferable by endorsement of the share certificate by or on behalf of the registered
holder, with such endorsement either authenticated by a notary in Italy or elsewhere or by a
broker-dealer or a bank in Italy. The transferee must request that the Company enter his name in
the register of shareholders in order to establish his rights as a shareholder as against the
Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Dividend Rights &#151; </B>Payment by the Company of any annual dividend is proposed by the board of
directors and is subject to the approval of the shareholders at the annual
</DIV>


<P align="center" style="font-size: 10pt">54
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">shareholders&#146; meeting.
Before dividends may be paid out of the Company&#146;s unconsolidated net income in any year, an amount
at least equal to 5.0% of such net income must be allocated to the Company&#146;s legal reserve until
such reserve is at least equal to one-fifth of the par value of the Company&#146;s issued share capital.
If the Company&#146;s capital is reduced as a result of accumulated losses, dividends may not be paid
until the capital is reconstituted or reduced by the amount of such losses. The Company may pay
dividends out of available retained earnings from prior years, provided that, after such payment, the Company will have a
legal reserve at least equal to the legally required minimum. No interim dividends may be approved
or paid.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dividends will be paid in the manner and on the date specified in the shareholders&#146; resolution
approving their payment (usually within 30&nbsp;days of the annual general meeting). Dividends which
are not collected within five years of the date on which they become payable are forfeited to the
benefit of the Company. Holders of ADSs will be entitled to receive payments in respect of
dividends on the underlying shares through The Bank of New York, as ADR depositary, in accordance
with the deposit agreement relating to the ADRs.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Voting Rights &#151; </B>Registered holders of the Company&#146;s Ordinary Shares are entitled to one vote
per Ordinary Share.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a registered shareholder, the Depositary (or its nominee) will be entitled to vote the
Ordinary Shares underlying the ADSs. The Deposit Agreement requires the Depositary (or its
nominee) to accept voting instructions from holders of ADSs and to execute such instructions to the
extent permitted by law. Neither Italian law nor the Company&#146;s By-laws limit the right of
non-resident or foreign owners to hold or vote shares of the Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Board of Directors &#151; </B>Pursuant to the Company&#146;s By-laws, the Company may be run by a sole
director or by a board of directors, consisting of seven to eleven individuals. The Company is
currently run by a board of directors composed by eleven individuals, and the description below
will refer to such system. The board of directors is elected at a shareholders&#146; meeting, for the
period established at the time of election but in no case for longer than three fiscal years. A
director, who may be but is not required to be a shareholder of the Company, may be re-appointed
for successive terms. The board of directors has complete power of ordinary and extraordinary
administration of the Company after specific authorization in the cases requested by the law and in
particular may perform all acts it deems advisable for the achievement of the Company&#146;s corporate
purposes, except for the actions reserved by applicable law or the By-laws to a vote of the
shareholders at an ordinary or extraordinary shareholders&#146; meeting. See also &#147;&#151;Meetings of
Shareholders&#148;.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The board of directors must appoint a chairman (<I>Presidente</I>) and may appoint a vice-chairman.
The chairman of the board of directors is the legal representative of the Company. The board of
directors may delegate certain powers to one or more managing directors (<I>amministratori delegati</I>),
determine the nature and scope of the delegated powers of each director and revoke such delegation
at any time. The managing directors must report to the board of directors and board of statutory
auditors at least every 180&nbsp;days on the Company&#146;s business and the main transactions carried out by
the Company or by its subsidiaries.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The board of directors may not delegate certain responsibilities, including the preparation
and approval of the draft financial statements, the approval of merger and de-
</DIV>


<P align="center" style="font-size: 10pt">55
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">merger plans to be
presented to shareholders&#146; meetings, increases in the amount of the Company&#146;s share capital or the
issuance of convertible debentures (if any such power has been delegated to the board of directors
by vote of the extraordinary shareholders&#146; meeting) and the fulfillment of the formalities required
when the Company&#146;s capital has to be reduced as a result of accumulated
losses that reduce the Company&#146;s stated capital by more than one-third. See also &#147;&#151;Meetings
of Shareholders&#148;.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The board of directors may also appoint a general manager (<I>direttore generale</I>), who reports
directly to the board of directors and confer powers for single acts or categories of acts to
employees of the Company or persons unaffiliated with the Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Meetings of the board of directors are called no less than five days in advance by registered
letter, fax, telegram or e-mail by the chairman on his own initiative and must be called upon the
request of any director or statutory auditor. Meetings may be held in person, or by
video-conference or tele-conference, in the location indicated in the notice convening the meeting,
or in any other destination, each time that the chairman may consider necessary. The quorum for
meetings of the board of directors is a majority of the directors in office. Resolutions are
adopted by the vote of a majority of the directors present at the meeting. In case of a tie, the
chairman has the deciding vote.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Directors having any interest in a proposed transaction must disclose their interest to the
board and to the statutory auditors, even if such interest is not in conflict with the interest of
the Company in the same transaction. The interested director is not required to abstain from
voting on the resolution approving the transaction, but the resolution must state explicitly the
reasons for, and the benefit to the Company of, the approved transaction. In the event that these
provisions are not complied with, or that the transaction would not have been approved without the
vote of the interested director, the resolution may be challenged by a director or by the board of
statutory auditors if the approved transaction may be prejudicial to the Company. A managing
director having any such interest in a proposed transaction within the scope of his powers must
solicit prior board approval of such transaction. The interested director may be held liable for
damages to the Company resulting from a resolution adopted in breach of the above rules. Finally,
directors may be held liable for damages to the Company if they illicitly profit from insider
information or corporate opportunities.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The board of directors may transfer the Company&#146;s registered office within Italy or make other
amendments to the Company&#146;s By-laws when these amendments are required by law, set up and eliminate
secondary offices, approve mergers by absorption into the Company of any subsidiary in which the
Company holds at least 90% of the issued share capital and reductions of the Company&#146;s share
capital in case of withdrawal of a shareholder. The board of directors may also approve the
issuance of shares or convertible debentures, if so authorized by the shareholders&#146; meeting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Italian law, directors may be removed from office at any time by the vote of
shareholders at an ordinary shareholders&#146; meeting. However, if removed in circumstances where
there was no just cause, such directors may have a claim for indemnification against the Company.
Directors may resign at any time by written notice to the board of directors and to the chairman of
the board of statutory auditors. The board of directors must appoint substitute directors to fill
vacancies arising from removals or resignations, subject to the approval of the board of statutory
auditors, to serve until the next ordinary shareholders&#146;
</DIV>


<P align="center" style="font-size: 10pt">56
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">meeting. If at any time more than half of
the members of the board of directors appointed at a shareholders&#146; meeting resign, such resign is
ineffective until the majority of the new board of directors has been appointed. In such a case,
the remaining members of the board of directors (or the board of statutory auditors if all the
members of the board of directors have resigned or ceased to be directors) must promptly call an ordinary
shareholders&#146; meeting to appoint the new directors.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shareholders determine the remuneration of directors at ordinary shareholders&#146; meeting
appointing them. The board of directors, after consultation with the board of statutory auditors,
may determine the remuneration of directors that perform management or other special services for
the Company, such as the managing director, within a maximum amount established by the
shareholders. Directors are entitled to reimbursement for expenses reasonably incurred in
connection with their functions.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Statutory Auditors &#151; </B>In addition to electing the board of directors, the Company&#146;s
shareholders elect a board of statutory auditors (<I>Collegio Sindacale</I>), appoint its chairman and set
the compensation of its members. At ordinary shareholders&#146; meetings of the Company, the statutory
auditors are elected for a term of three fiscal years, may be re-elected for successive terms and
may be removed only for cause and with the approval of a competent court. Expiration of their
office will have no effect until a new board is appointed. Membership of the board of statutory
auditors is subject to certain good standing, independence and professional requirements. In
particular, at least one member must be a certified auditor.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s By-laws provide that the board of statutory auditors shall consist of three
statutory auditors and two alternate statutory auditors (who are automatically substituted for a
statutory auditor who resigns or is otherwise unable to serve).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s board of statutory auditors is required, among other things, to verify that the
Company (i)&nbsp;complies with applicable laws and its By-laws, (ii)&nbsp;respects principles of good
governance, and (iii)&nbsp;maintains adequate organizational structure and administrative and accounting
systems. The Company&#146;s board of statutory auditors is required to meet at least once every ninety
days. The board of statutory auditors reports to the annual shareholders&#146; meeting on the results
of its activity and the results of the Company&#146;s operations. In addition, the statutory auditors
of the Company must be present at meetings of the Company&#146;s board of directors and shareholders&#146;
meetings.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The statutory auditors may decide to call a meeting of the shareholders or the board of
directors, ask the directors information about the management of the Company, carry out inspections
and verifications at the Company and exchange information with the Company&#146;s external auditors.
Any shareholder may submit a complaint to the board of statutory auditors regarding facts that such
shareholder believes should be subject to scrutiny by the board of statutory auditors, which must
take any complaint into account in its report to the shareholders&#146; meeting. If shareholders
collectively representing 5% of the Company&#146;s share capital submit such a complaint, the board of
statutory auditors must promptly undertake an investigation and present its findings and any
recommendations to a shareholders&#146; meeting (which must be convened immediately if the complaint
appears to have a reasonable basis and there is an urgent need to take action). The board of
statutory auditors may report to the competent court serious breaches of directors&#146; duties.
</DIV>


<P align="center" style="font-size: 10pt">57
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>External Auditor &#151; </B>The corporate law reform requires companies to appoint an external auditor
or a firm of external auditors, each of them qualified to act in such capacity under Italian law,
that shall verify (i)&nbsp;during the fiscal year, that the company&#146;s accounting records are correctly
kept and accurately reflect the company&#146;s activities, and (ii)&nbsp;that the financial statements correspond to the accounting
records and the verifications conducted by the external auditors and comply with applicable rules.
The external auditor or the firm of external auditors express their opinion on the financial
statements in a report that may be consulted by the shareholders prior to the annual shareholders&#146;
meeting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The external auditor or the firm of external auditors is appointed for a three-year term and
its compensation is determined by a vote at an ordinary shareholders&#146; meeting, having heard the
board of statutory auditors, and may be removed only for just cause by a vote of the shareholders&#146;
meeting and with the approval of a competent court.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;30, 2004, the Company&#146;s shareholders appointed KPMG S.p.A., with legal offices at Via
Vittor Pisani, 25, 20124 Milano, Italy, as its external auditors for a fifth consecutive three-year
term.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the entire duration of their office the external auditors or the firm of external auditors
must meet certain requirements provided for by law.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Meetings of Shareholders &#151; </B>Shareholders are entitled to attend and vote at ordinary and
extraordinary shareholder&#146;s meetings. Votes may be cast personally or by proxy. Shareholder
meetings may be called by the Company&#146;s board of directors (or the board of statutory auditors) and
must be called if requested by holders of at least 10% of the issued shares. If a shareholders&#146;
meeting is not called despite the request by shareholders and such refusal is unjustified, a
competent court may call the meeting. Shareholders are not entitled to request that a meeting of
shareholders be convened to vote on matters which, as a matter of law, shall be resolved on the
basis of a proposal, plan or report by the Company&#146;s board of directors.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company may hold general meetings of shareholders at its registered office in Bari, at its
executive offices in Santeramo or elsewhere within Italy or at locations outside Italy, following
publication of notice of the meeting in any of the following Italian newspapers: &#147;<I>Il Sole 24 ore</I>&#148;,
&#147;<I>Corriere della Sera</I>&#148; or &#147;L<I>a Repubblica</I>&#148; at least 15&nbsp;days before the date fixed for the meeting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shareholders&#146; meetings must be convened at least once a year. The Company&#146;s annual
stand-alone financial statements are prepared by the board of directors and submitted for approval
to the ordinary shareholders&#146; meeting which must be convened within 120&nbsp;days after the end of the
fiscal year to which such financial statements relate. This term may be extended to up to 180&nbsp;days
after the end of the fiscal year, as long as the Company continues to be bound by law to draw up
consolidated financial statements or if particular circumstances concerning its structure or its
purposes so require. At ordinary shareholders&#146; meetings, shareholders also appoint the external
auditors, approve the distribution of dividends, appoint the board of directors and statutory
auditors, determine their remuneration and vote on any matter the resolution or authorization of
which is entrusted to them by law.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Extraordinary shareholders&#146; meetings may be called to vote on proposed amendments to the
By-laws, issuance of convertible debentures, mergers and de-mergers, capital increases and
reductions, when such resolutions may not be taken by the board of
</DIV>


<P align="center" style="font-size: 10pt">58
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">directors. Liquidation of the
Company must be resolved upon by an extraordinary shareholders&#146; meeting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The notice of a shareholders&#146; meeting may specify up to two meeting dates for an ordinary or
extraordinary shareholders&#146; meeting; such meeting dates are generally referred to as &#147;calls&#148;.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The quorum for an ordinary meeting of shareholders is 50% of the Ordinary Shares, and
resolutions are carried by the majority of Ordinary Shares present or represented. At an adjourned
ordinary meeting, no quorum is required, and the resolutions are carried by the majority of
Ordinary Shares present or represented. Certain matters, such as amendments to the By-laws, the
issuance of shares, the issuance of convertible debentures and mergers and de-mergers may only be
effected at an extraordinary meeting, at which special voting rules apply. Resolutions at an
extraordinary meeting of the Company are carried, on first call, by a majority of the Ordinary
Shares. An adjourned extraordinary meeting is validly held with a quorum of one-third of the
issued shares and its resolutions are carried by a majority of at least two-thirds of the holders
of shares present or represented at such meeting. In addition, certain matters (such as a change
in purpose or corporate form of the company, the transfer of its registered office outside Italy,
its liquidation prior to the term set forth in its By-laws, the extension of the term and the
issuance of preferred shares) must be carried by the holders of more than one-third of the issued
shares and more than two-thirds of the shares present and represented at such meeting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;According to the By-laws, in order to attend any shareholders&#146; meeting, shareholders, at least
five days prior to the date fixed for the meeting, must deposit their share certificates at the
offices of the Company or with such banks as may be specified in the notice of meeting, in exchange
for an admission ticket. Owners of ADRs may make special arrangements with the Depositary for the
beneficial owners of such ADRs to attend shareholders&#146; meetings, but not to vote at or formally
address such meetings. The procedures for making such arrangements will be specified in the notice
of such meeting to be mailed by the Depositary to the owners of ADRs.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shareholders may appoint proxies by delivering in writing an appropriate instrument of
appointment to the Company. Directors, auditors and employees of the Company or of any of its
subsidiaries may not be proxies and any one proxy cannot represent more than 20 shareholders.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Preemptive Rights &#151; </B>Pursuant to Italian law, holders of Ordinary Shares or of debentures
convertible into shares, if any, are entitled to subscribe for the issuance of shares, debentures
convertible into shares and rights to subscribe for shares, in proportion to their holdings, unless
such issues are for non-cash consideration or preemptive rights are waived or limited by an
extraordinary resolution adopted by the affirmative vote of holders of more than 50% of the
Ordinary Shares (whether at an extraordinary or adjourned extraordinary meeting) and such waiver or
limitation is required in the interest of the Company. There can be no assurance that the holders
of ADSs may be able to exercise fully any preemptive rights pertaining to Ordinary Shares.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Preference Shares; Other Securities &#151; </B>The Company&#146;s By-laws allow the Company to issue
preference shares with limited voting rights, to issue other classes of equity securities with
different economic and voting rights, to issue so-called participation certificates with
</DIV>


<P align="center" style="font-size: 10pt">59
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">limited
voting rights, as well as so-called tracking stock. The power to issue such financial instruments
is attributed to the extraordinary meeting of shareholders.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company, by resolution of the board of directors, may issue debt securities
non-convertible into shares, while it may issue debt securities convertible into shares through a
resolution of the extraordinary shareholders&#146; meeting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Segregation of Assets and Proceeds &#151; </B>The Company, by means of an extraordinary shareholders&#146;
meeting resolution, may approve the segregation of certain assets into one or more separate pools.
Such pools of assets may have an aggregate value not exceeding 10% of the shareholders&#146; equity of
the company. Each pool of assets must be used exclusively for the carrying out of a specific
business and may not be attached by the general creditors of the Company. Similarly, creditors
with respect to such specific business may only attach those assets of the Company that are
included in the corresponding pool. Tort creditors, on the other hand, may always attach any
assets of the Company. The Company may issue securities carrying economic and administrative
rights relating to a pool. In addition, financing agreements relating to the funding of a specific
business may provide that the proceeds of such business be used exclusively to repay the financing.
Such proceeds may be attached only by the financing party and such financing party would have no
recourse against other assets of the Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has no present intention to enter into any such transaction and none is currently
in effect.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Liquidation Rights &#151; </B>Pursuant to Italian law and subject to the satisfaction of the claims of
all other creditors, shareholders are entitled to a distribution in liquidation that is equal to
the nominal value of their shares (to the extent available out of the net assets of the Company).
Holders of preferred shares, if any such shares are issued in the future by the Company, may be
entitled to a priority right to any such distribution from liquidation up to their par value.
Thereafter, all shareholders would rank equally in their claims to the distribution or surplus
assets, if any. Ordinary Shares rank <I>pari passu </I>among themselves in liquidation.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Purchase of Shares by the Company &#151; </B>The Company is permitted to purchase shares, subject to
certain conditions and limitations provided for by Italian law. Shares may only be purchased out
of profits available for dividends or out of distributable reserves, in each case as appearing on
the latest shareholder &#151; approved stand-alone financial statements. Further, the Company may only
repurchase fully paid-in shares. Such purchases must be authorized by an ordinary shareholders&#146;
meeting. The number of shares to be acquired, together with any shares previously acquired by the
Company or any of its subsidiaries, may not (except in limited circumstances) exceed in the
aggregate 10% of the total number of shares then issued and the aggregate purchase price of such
shares may not exceed the earnings reserve specifically approved by shareholders. Shares held in
excess of such 10% limit must be sold within one year of the date of purchase. Similar limitations
apply with respect to purchases of the Company&#146;s shares by its subsidiaries.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A corresponding reserve equal to the purchase price of such shares must be created in the
balance sheet, and such reserve is not available for distribution, unless such shares are sold or
cancelled. Shares purchased and held by the Company may be resold only pursuant to a resolution
adopted at an ordinary shareholders&#146; meeting. The voting rights attaching to
</DIV>


<P align="center" style="font-size: 10pt">60
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">the shares held by
the Company or its subsidiaries cannot be exercised, but the shares can be counted for quorum
purposes in shareholders&#146; meetings. Dividends attaching to such shares will accrue to the benefit
of other shareholders; pre-emptive rights attaching to such shares will accrue to the benefit of other shareholders, unless the shareholders&#146; meeting
authorizes the Company to exercise, in whole or in part, the pre-emptive rights thereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In July&nbsp;2000, the shareholders of the Company approved a share repurchase program to buy-back
up to 4&nbsp;million shares or <FONT face="'Times New Roman',times,serif">&#128;</FONT>51.6&nbsp;million during a period of up to 18&nbsp;months. The Company spent
<FONT face="'Times New Roman',times,serif">&#128;</FONT>23.2&nbsp;million in 2000 and <FONT face="'Times New Roman',times,serif">&#128;</FONT>14.6&nbsp;million in 2001 to repurchase shares. The Company repurchased
1,782,700 shares in 2000 at an average cost of US$ 11.3 per share and 1,061,200 shares in 2001 at
an average cost of US$ 12.3 per share. The repurchase program is no longer in effect. At an
extraordinary meeting held in November&nbsp;2003 the shareholders approved the cancellation of all the
treasury shares. Such treasury shares were cancelled effective on February&nbsp;21, 2004.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Notification of the Acquisition of Shares &#151; </B>In accordance with Italian antitrust laws, the
Italian Antitrust Authority is required to prohibit the acquisition of control in a company which
would thereby create or strengthen a dominant position in the domestic market or a significant part
thereof and which would result in the elimination or substantial reduction, on a lasting basis, of
competition, provided that certain turnover thresholds are exceeded. However, if the turnover of
the acquiring party and the company to be acquired exceed certain other monetary thresholds, the
antitrust review of the acquisition falls within the exclusive jurisdiction of the European
Commission.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Minority Shareholders&#146; Rights; Withdrawal Rights &#151; </B>Shareholders&#146; resolutions which are not
adopted in conformity with applicable law or the Company&#146;s By-laws may be challenged (with certain
limitations and exceptions) within ninety days by absent, dissenting or abstaining shareholders
representing individually or in the aggregate at least 5% of Company&#146;s share capital (as well as by
the board of directors or the board of statutory auditors). Shareholders not reaching this
threshold or shareholders not entitled to vote at Company&#146;s meetings may only claim damages
deriving from the resolution.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dissenting or absent shareholders may require the Company to buy back their shares as a result
of shareholders&#146; resolutions approving, among others things, material modifications of the
Company&#146;s corporate purpose or of the voting rights of its shares, the transformation of the
Company from a stock corporation into a different legal entity, or the transfer of the Company&#146;s
registered office outside Italy. According to the reform, the buy-back would occur at a price
established by the board of directors, upon consultation with the board of statutory auditors and
the Company&#146;s external auditor, having regard to the net assets value of the Company, its
prospective earnings and the market value of its shares, if any. The Company&#146;s By-laws may set
forth different criteria to determine the consideration to be paid to dissenting shareholders in
such buy-backs.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each shareholder may bring to the attention of the board of statutory auditors facts or
actions which are deemed wrongful. If such shareholders represent more than 5% of the share
capital of the Company, the board of statutory auditors must investigate without delay and report
its findings and recommendations to the shareholders&#146; meeting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shareholders representing more than 10% of the Company&#146;s share capital have the right to
report to the competent court serious breaches of the duties of the directors, which
</DIV>


<P align="center" style="font-size: 10pt">61
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">may be
prejudicial to the Company or to its subsidiaries. In addition, shareholders representing at least
20% of the Company&#146;s share capital may commence derivative suits before the competent court against its directors, statutory
auditors and general managers.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company may waive or settle the suit unless shareholders holding at least 20% of the
shares vote against such waiver or settlement. The Company will reimburse the legal costs of such
action in the event that the claim of such shareholders is successful and the court does not award
such costs against the relevant directors, statutory auditors or general managers.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any dispute arising out of or in connection with the By-Laws that may arise between the
Company and its shareholders, directors, liquidators shall fall under the exclusive jurisdiction of
the Tribunal of Bari.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Liability for Mismanagement of Subsidiaries &#151; </B>Under Italian law, companies and other legal
entities that, acting in their own interest or the interest of third parties, mismanage a company
subject to their direction and coordination powers are liable to such company&#146;s shareholders and
creditors for ensuing damages. This liability is excluded if (i)&nbsp;the ensuing damage is fully
eliminated, including through subsequent transactions, or (ii)&nbsp;the damage is effectively offset by
the global benefits deriving in general to the company from the continuing exercise of such
direction and coordination powers. Direction and coordination powers are presumed to exist, among
other things, with respect to consolidated subsidiaries.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company is subject to the direction and coordination of INVEST 2003 S.r.l.
</DIV>

<DIV align="left">
<A name="152"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Certain Contracts</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2005, the Group entrusted approximately 14% of its production needs,
primarily relating to the assembly of raw materials and finished parts into finished products, to
subcontractors in the Santeramo area.
</DIV>

<DIV align="left">
<A name="153"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Exchange Controls</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Currently, there are no Italian exchange controls that would affect the payment of dividends
or other remittances to holders of the ADSs or Ordinary Shares who reside outside Italy. The
Company is not aware of any plans by the Italian Government to institute any exchange controls that
would affect the payment of dividends or other remittances to holders of ADSs or Ordinary Shares
who reside outside Italy. Neither Italian law nor the Company&#146;s By-laws limits the right of
non-resident or foreign owners to hold or vote the Ordinary Shares or the ADSs.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;However, Italian resident and non-resident investors who transfer, directly or indirectly
(through banks or other intermediaries) into or out of Italy, cash, investments or other securities
in excess of <FONT face="'Times New Roman',times,serif">&#128;</FONT>12,500.00 must report all such transfers to the Italian Exchange Office (&#147;<I>Ufficio
Italiano Cambi</I>&#148; or &#147;UIC&#148;). In the case of indirect transfers, banks or other intermediaries are
required to maintain records of all such transfers for five years for inspection by Italian tax and
judicial authorities. Non-compliance with these reporting and record-keeping requirements may
result in administrative fines or, in the case of false reporting or in certain cases of incomplete
reporting, criminal penalties. The UIC is required to maintain reports for a period of ten years
and may use such reports, directly or through
</DIV>


<P align="center" style="font-size: 10pt">62
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">other government offices, to police money laundering, tax evasion and any other crime
or violation.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Individuals, non-profit entities and partnerships that are residents of Italy must disclose on
their annual tax returns all investments and financial assets held outside Italy, as well as the
total amount of transfers to, from, within and between countries other than Italy relating to such
foreign investments or financial assets, even if at the end of the taxable period foreign
investments or financial assets are no longer owned. No such tax disclosure is required if: (i)
the foreign investments or financial assets are exempt from income tax; or (ii)&nbsp;the total value of
the foreign investments or financial assets at the end of the taxable period or the total amount of
the transfers effected during the fiscal year does not exceed <FONT face="'Times New Roman',times,serif">&#128;</FONT>12,500.00. Corporate residents of
Italy are exempt from these tax disclosure requirements with respect to their annual tax returns
because this information is required to be discussed in their financial statements.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company cannot assure you that the present regulatory environment in or outside Italy will
continue or that particular policies presently in effect will be maintained, although Italy is
required to maintain certain regulations and policies by virtue of its membership of the European
Union and other international organizations and its adherence to various bilateral and multilateral
international agreements.
</DIV>

<DIV align="left">
<A name="154"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Taxation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a summary of certain U.S. federal and Italian tax matters. The summary
contains a description of the principal United States federal and Italian tax consequences of the
purchase, ownership and disposition of Ordinary Shares or ADSs by a holder who is a citizen or
resident of the United States or a U.S. corporation or who otherwise will be subject to United
States federal income tax on a net income basis in respect of the Ordinary Shares or ADSs. The
summary is not a comprehensive description of all of the tax considerations that may be relevant to
a decision to purchase or hold Ordinary Shares or ADSs. In particular, the summary deals only with
beneficial owners who will hold Ordinary Shares or ADSs as capital assets and does not address the
tax treatment of a beneficial owner who owns 10% or more of the voting shares of the Company or who
may be subject to special tax rules, such as banks, tax-exempt entities, insurance companies or
dealers in securities or currencies, or persons that will hold Ordinary Shares or ADSs as a
position in a &#147;straddle&#148; for tax purposes or as part of a &#147;constructive sale&#148; or a &#147;conversion&#148;
transaction or other integrated investment comprised of Ordinary Shares or ADSs and one or more
other investments. The summary does not discuss the treatment of Ordinary Shares or ADSs that are
held in connection with a permanent establishment through which a non-resident beneficial owner
carries on business or performs personal services in Italy.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The summary is based upon tax laws and practice of the United States and Italy in effect on
the date of this annual report, which are subject to change. Investors and prospective investors
in Ordinary Shares or ADSs should consult their own advisors as to the U.S., Italian or other tax
consequences of the purchase, beneficial ownership and disposition of Ordinary Shares or ADSs,
including, in particular, the effect of any state or local tax laws.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For purposes of the summary, beneficial owners of Ordinary Shares or ADSs who are considered
residents of the United States for purposes of the current income tax convention between the United
States and Italy (the &#147;Income Tax Convention&#148;), and are not
</DIV>


<P align="center" style="font-size: 10pt">63
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">subject to an anti-treaty shopping provision that applies in limited
circumstances, are referred to as &#147;U.S. owners&#148;. Beneficial owners who are citizens or residents
of the United States, corporations organized under U.S. law, and U.S. partnerships, estates or
trusts (to the extent their income is subject to U.S. tax either directly or in the hands of
partners or beneficiaries) generally will be considered to be residents of the United States under
the Income Tax Convention. Special rules apply to U.S. owners who are also residents of Italy. A
new tax treaty to replace the current Income Tax Convention was signed on August&nbsp;25, 1999, but has
not yet been ratified by Italy. The new treaty would not change significantly the provisions of
the Income Tax Convention that are discussed below (except that it would clarify the availability
of benefits to certain tax-exempt organizations). These laws are subject to change, possibly on a
retroactive basis.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the purpose of the Income Tax Convention and the United States Internal Revenue Code of
1986, beneficial owners of ADRs evidencing ADSs will be treated as the beneficial owners of the
Ordinary Shares represented by those ADSs.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Taxation of Dividends</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Italian Tax Considerations  &#151;  </B>Italian laws provide for the withholding of income tax at a 27%
rate on dividends paid by Italian companies to shareholders who are not residents of Italy for tax
purposes. Italian laws provide a mechanism under which non-resident shareholders can claim a
refund of up to four-ninths of Italian withholding taxes on dividend income by establishing to the
Italian tax authorities that the dividend income was subject to income tax in another jurisdiction
in an amount at least equal to the total refund claimed. U.S. owners should consult their own tax
advisers concerning the possible availability of this refund, which traditionally has been payable
only after extensive delays. Alternatively, reduced rates (normally 15%) may apply to non-resident
shareholders who are entitled to, and comply with procedures for claiming, benefits under an income
tax convention.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Income Tax Convention, dividends derived and beneficially owned by U.S. owners are
subject to an Italian withholding tax at a reduced rate of 15%. However, the amount initially made
available to the Depositary for payment to U.S. owners will reflect withholding at the 27% rate.
U.S. owners who comply with the certification procedures described below may then claim an
additional payment of 12% of the dividend (representing the difference between the 27% rate and the
15% rate, and referred to herein as a &#147;treaty refund&#148;). The certification procedure will require
U.S. owners (i)&nbsp;to obtain from the U.S. Internal Revenue Service (&#147;IRS&#148;) a form of certification
required by the Italian tax authorities with respect to each dividend payment (Form&nbsp;6166), unless a
previously filed certification will be effective on the dividend payment date (such certificates
are effective until March&nbsp;31 of the year following submission), (ii)&nbsp;to produce a statement whereby
the U.S. owner represents to be a U.S. owner individual or corporation and does not maintain a
permanent establishment in Italy, and (iii)&nbsp;to set forth other required information. IRS Form&nbsp;6166
may be obtained by filing a request for certification on IRS Form&nbsp;8802. (Additional information,
including IRS Form&nbsp;8802, can be obtained from the IRS website at www.irs.gov. Information appearing
on the IRS website is not incorporated by reference into this document.) The time for processing
requests for certification by the IRS normally is six to eight weeks. Accordingly, in order to be
eligible for the procedure described below, U.S. owners should begin the process
</DIV>


<P align="center" style="font-size: 10pt">64
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">of obtaining certificates as soon as possible after receiving
instructions from the Depositary on how to claim a treaty refund.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Depositary&#146;s instructions will specify certain deadlines for delivering to the Depositary
the documentation required to obtain a treaty refund, including the certification that the U.S.
owners must obtain from the IRS. In the case of ADSs held by U.S. owners through a broker or other
financial intermediary, the required documentation should be delivered to such financial
intermediary for transmission to the Depositary. In all other cases, the U.S. owners should deliver
the required documentation directly to the Depositary. The Company and the Depositary have agreed
that if the required documentation is received by the Depositary on or within 30&nbsp;days after the
dividend payment date and, in the reasonable judgment of the Company, such documentation satisfies
the requirements for a refund by the Company of Italian withholding tax under the Convention and
applicable law, the Company will within 45&nbsp;days thereafter pay the treaty refund to the Depositary
for the benefit of the U.S. owners entitled thereto.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If the Depositary does not receive a U.S. owner&#146;s required documentation within 30&nbsp;days after
the dividend payment date, such U.S. owner may for a short grace period (specified in the
Depositary&#146;s instructions) continue to claim a treaty refund by delivering the required
documentation (either through the U.S. owner&#146;s financial intermediary or directly, as the case may
be) to the Depositary. However, after this grace period, the treaty refund must be claimed
directly from the Italian tax authorities rather than through the Depositary. Expenses and
extensive delays have been encountered by U.S. owners seeking refunds from the Italian tax
authorities.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Distributions of profits in kind will be subject to withholding tax. In that case, prior to
receiving the distribution, the holder will be required to provide the Company with the funds to
pay the relevant withholding tax.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>United States Tax Considerations </B><B><I>- </I></B>The gross amount of any dividends (that is, the amount
before reduction for Italian withholding tax) paid to a U.S. owner generally will be subject to
U.S. federal income taxation as foreign source dividend income and will not be eligible for the
dividends-received deduction allowed to domestic corporations. Dividends paid in euro will be
includable in the income of such U.S. owners in a dollar amount calculated by reference to the
exchange rate in effect on the day the dividends are received by the Depositary or its agent. If
the euro are converted into dollars on the day the Depositary or its agent receives them, U.S.
owners generally should not be required to recognize foreign currency gain or loss in respect of
the dividend income. U.S. owners who receive a treaty refund may be required to recognize foreign
currency gain or loss to the extent the amount of the treaty refund (in dollars) received by the
U.S. owner differs from the U.S. dollar equivalent of the euro amount of the treaty refund on the
date the dividends were received by the Depositary or its agent. Italian withholding tax at the
15% rate will be treated as a foreign income tax which U.S. owners may elect to deduct in computing
their taxable income or, subject to the limitations on foreign tax credits generally, credit
against their U.S. federal income tax liability. Dividends will generally constitute
foreign-source &#147;passive income&#148; or &#147;financial services income&#148; for U.S. tax purposes.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to certain exceptions for short-term and hedged positions, the U.S. dollar amount of
dividends received by an individual prior to January&nbsp;1, 2011 with respect to the Company&#146;s shares
or ADSs will be subject to taxation at a maximum rate of 15% if the
</DIV>


<P align="center" style="font-size: 10pt">65
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">dividends are &#147;qualified
dividends&#148;. Dividends paid on the ADSs will be treated as qualified dividends if (i)&nbsp;the Company is eligible for the benefits of a
comprehensive income tax treaty with the United States that the IRS has approved for the purposes
of the qualified dividend rules and (ii)&nbsp;the Company was not, in the year prior to the year in
which the dividend was paid, and is not, in the year in which the dividend is paid, a passive
foreign investment company (&#147;PFIC&#148;). The Income Tax Convention has been approved for the purposes
of the qualified dividend rules. Based on the Company&#146;s audited financial statements and relevant
market and shareholder data, the Company believes that it was not treated as a PFIC for U.S.
federal income tax purposes with respect to its 2004 or 2005 taxable year. In addition, based on
the Company&#146;s audited financial statements and its current expectations regarding the value and
nature of its assets, the sources and nature of its income, and relevant market and shareholder
data, the Company does not anticipate becoming a PFIC for its 2006 taxable year.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The U.S. Treasury has announced its intention to promulgate rules pursuant to which holders of
ADSs or common stock and intermediaries though whom such securities are held will be permitted to
rely on certifications from issuers to treat dividends as qualified for tax reporting purposes.
Because such procedures have not yet been issued, it is not clear whether the Company will be able
to comply with the procedures. Holders of the Company&#146;s shares and ADSs should consult their own
tax advisers regarding the availability of the reduced dividend tax rate in the light of the
considerations discussed above and their own particular circumstances.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Foreign tax credits may not be allowed for withholding taxes imposed in respect of certain
short-term or hedged positions in securities or in respect of arrangements in which a U.S. owner&#146;s
expected economic profit is insubstantial. U.S. owners should consult their own advisers
concerning the implications of these rules in light of their particular circumstances.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Distributions of additional shares to U.S. owners with respect to their ADSs that are made as
part of a pro rata distribution to all shareholders of the Company generally will not be subject to
U.S. federal income tax.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A beneficial owner of Ordinary Shares or ADSs who is, with respect to the United States, a
foreign corporation or a nonresident alien individual, generally will not be subject to U.S.
federal income tax on dividends received on Ordinary Shares or ADSs, unless such income is
effectively connected with the conduct by the beneficial owner of a trade or business in the United
States.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Taxation of Capital Gains</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Italian Tax Considerations </B>- Under Italian law, capital gains tax (&#145;CGT&#148;) is levied on
capital gains realized by non-residents from the disposal of shares in companies resident in Italy
for tax purposes even if those shares are held outside of Italy. Capital gains realized by
non-resident holders on the sale of non-qualified shareholdings (as defined below) in companies
listed on a stock exchange and resident in Italy for tax purposes (as is Natuzzi&#146;s case) are not
subject to CGT.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A qualified shareholding&#148; consists of securities that entitle the holder to exercise more than
2% of the voting rights of a company with shares listed on a stock exchange in the ordinary meeting
of the shareholders or represent more than 5% of the share capital of a company with shares listed
on a stock exchange. A &#147;non-qualified shareholding&#148; is any
</DIV>


<P align="center" style="font-size: 10pt">66
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">shareholding that does not meet the
above mentioned interest rights to be qualified as a &#145;qualified shareholding&#148;.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The relevant percentage is calculated taking into account the shareholdings sold during the
prior 12-month period.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon disposal of a &#147;qualified&#148; shareholding, non-resident shareholders are in principle
subject to Italian ordinary taxation on 40% of the capital gain realized.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The above is subject to any provisions of an income tax treaty entered into by the Republic of
Italy, if the income tax treaty provisions are more favourable. The majority of double tax treaties
entered into by Italy, in accordance with the OECD Model tax convention, provide that capital gains
realized from the disposition of Italian securities are subject to CGT only in the country of
residence of the seller.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>United States Tax Considerations </B><B><I>- </I></B>Gain or loss realized by a U.S. owner on the sale or
other disposition of Ordinary Shares or ADSs will be subject to U.S. federal income taxation as
capital gain or loss in an amount equal to the difference between the U.S. owner&#146;s basis in the
Ordinary Shares or the ADSs and the amount realized on the disposition (or its dollar equivalent,
determined at the spot rate on the date of disposition, if the amount realized is denominated in a
foreign currency). Such gain or loss will generally be long-term capital gain or loss if the U.S.
owner holds the Ordinary Shares or ADSs for more than one year. The net amount of long-term
capital gain recognized by a U.S. owner that is an individual holder before January&nbsp;1, 2011
generally is subject to taxation at a maximum rate of 15%. Deposits and withdrawals of Ordinary
Shares by U.S. owners in exchange for ADSs will not result in the realization of gain or loss for
U.S. federal income tax purposes.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A beneficial owner of Ordinary Shares or ADSs who is, with respect to the United States, a
foreign corporation or a nonresident alien individual will not be subject to U.S. federal income
tax on gain realized on the sale of Ordinary Shares or ADSs, unless (i)&nbsp;such gain is effectively
connected with the conduct by the beneficial owner of a trade or business in the United States or
(ii), in the case of gain realized by an individual beneficial owner, the beneficial owner is
present in the United States for 183&nbsp;days or more in the taxable year of the sale and certain other
conditions are met.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Taxation of Distributions from Capital Reserves</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Italian Tax Considerations </B><I>- </I>Special rules applied to the distribution of capital reserves.
Under certain circumstances, such a distribution may be considered as taxable income in the hands
of the recipient depending on the reserves of the distributing company outstanding at the time of
distribution and the actual nature of the reserves distributed. The application of such rules may
also have an impact on the tax basis in the Ordinary Shares or ADSs held and/or the
characterization of any taxable income received and the tax regime applicable to it. Non-resident
shareholders may be subject to withholding tax and CGT as a result of such rules. You should
consult your tax advisor in connection with any distribution of capital reserves.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Other Italian Taxes</B>
</DIV>


<P align="center" style="font-size: 10pt">67
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Estate and Gift Tax &#151;  </B>As of October&nbsp;25, 2001, the Italian estate and gift tax has been
abolished and consequently any transfer of shares or ADSs occurring by reason of death or gift as
of that date is no longer subject to any Italian estate and gift tax.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Transfer Tax &#151;  </B>An Italian transfer tax is normally payable on the transfer of shares in an
Italian company, unless (i)&nbsp;the contract is concluded on a regulated market, or (ii)&nbsp;the shares are
transferred to or from a non-Italian resident, on the one hand, and banks or other investment
services companies, on the other hand. As a result, the transfer tax concluded either on a
regulated market or with a bank or an investment service company will not be payable with respect
to any transfers of Ordinary Shares or ADSs involving non-Italian residents.
</DIV>

<DIV align="left">
<A name="155"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Documents on Display</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company is subject to the information reporting requirements of the Securities Exchange
Act of 1934, as amended (the &#147;Exchange Act&#148;) applicable to foreign private issuers. In accordance
therewith, Natuzzi is required to file reports, including annual reports on Form 20-F, and other
information with the U.S. Securities and Exchange Commission. These materials, including this
annual report on Form 20-F, are available for inspection and copying at the SEC&#146;s Public Reference
Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the Commission at 1-800-SEC-0330
for further information on the public reference room. As a foreign private issuer, we have
required to make filings with the SEC by electronic means since November&nbsp;4, 2002. Any filings we
make electronically will be available to the public over the Internet at the SEC&#146;s website at
<U>http://www.sec.gov</U>. The Form 20-F and reports and other information filed by the Company with the
Commission will also be available for inspection by ADS holders at the Corporate Trust Office of
The Bank of New York at 101 Barclay Street, New York, New York 10286.
</DIV>

<DIV align="left">
<A name="156"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;11. Quantitative and Qualitative Disclosures About Market Risk</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following discussion of the Group&#146;s risk management activities include &#147;forward-looking
statements&#148; that involve risks and uncertainties. Actual results could differ materially from
those projected in the forward looking statements. See Item&nbsp;3, &#147;Key Information &#151; Forward Looking
Information.&#148; A significant portion of the Group&#146;s net sales, but only approximately 44% of its
costs, are denominated in currencies other than the euro, in particular the U.S. dollar.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group is exposed to market risks principally from fluctuations in the exchange rates
between the euro and other currencies, including in particular the U.S. dollar, and to a
significantly lesser extent, from variations in interest rates.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Exchange Rate Risks</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group&#146;s foreign exchange rate risks in 2005 arose principally in connection with U.S.
dollars, British pounds, Canadian dollars, Australian dollars, Swiss francs, Swedish kroner,
Norwegian kroner, Danish kroner , Japanese yen.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As at December&nbsp;31, 2005 and 2004, the Group had outstanding trade receivables denominated in
foreign currencies totaling <FONT face="'Times New Roman',times,serif">&#128;</FONT>66.7&nbsp;million and <FONT face="'Times New Roman',times,serif">&#128;</FONT>66.3&nbsp;million, respectively, of which 62,2% and
54.7%, respectively, were denominated in U.S. dollars. On those same
</DIV>


<P align="center" style="font-size: 10pt">68
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">dates, the Group had <FONT face="'Times New Roman',times,serif">&#128;</FONT>23.1&nbsp;million and <FONT face="'Times New Roman',times,serif">&#128;</FONT>25.9&nbsp;million,
respectively, of trade payables denominated in foreign currencies, principally U.S. dollars. See
Notes 6 and 12 to the Consolidated Financial Statements included in Item&nbsp;18 of this annual report.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As at December&nbsp;31, 2005, the Company was a party to a number of forward exchange contracts
(known in Italy as domestic currency swaps) designed to hedge future sales denominated in U.S.
dollars and other currencies. The Group does not use foreign exchange contracts for speculative
trading purposes. At such date, the notional amounts of such forward exchange contracts aggregated
<FONT face="'Times New Roman',times,serif">&#128;</FONT>140.1&nbsp;million (compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>173.0&nbsp;million at December&nbsp;31, 2004), consisting of forward exchange
contracts with notional amounts of U.S. dollar 89.0&nbsp;million, Canadian dollar 27.0&nbsp;million, Swiss
franc 1.0&nbsp;million, Australian dollar 18.5&nbsp;million, Japanese yen 200.0&nbsp;million, British pound 18.8
million, Swedish kroner 31.5&nbsp;million, Danish kroner 6.3&nbsp;million, and Norwegian kroner 48.0&nbsp;million.
Such contracts had various maturities extending through December&nbsp;2005. See Note 25 to the
Consolidated Financial Statements included in Item&nbsp;18 of this annual report.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The table below summarizes in thousands of euro equivalent the contractual amounts of forward
exchange contracts designed to hedge future cash flows from accounts receivable and sales orders at
December&nbsp;31, 2005 and 2004:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Sales</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">U.S. dollars </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">72,496</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">66,108</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">British pounds </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,783</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,451</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Canadian dollars </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,698</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,629</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Australian dollars </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,744</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,173</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Norwegian kroner </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,928</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,774</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Swedish kroner </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,441</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,932</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Japanese yen </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,504</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,740</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Swiss francs </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">656</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,240</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Danish kroner </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">940</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">140,095</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">172,987</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
at December&nbsp;31, 2005, these forward exchange contracts had a net unrealized loss of <FONT face="'Times New Roman',times,serif">&#128;</FONT>4.8
million, versus a net unrealized gain of <FONT face="'Times New Roman',times,serif">&#128;</FONT>7.1&nbsp;million at December&nbsp;31, 2004. The Group recorded this
amount in other income (expense), net in its Consolidated Financial Statements. See Note 24 to the
Consolidated Financial Statements included in Item&nbsp;18 of this annual report.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table presents information regarding the contract amount in thousands of euro
equivalent and the estimated fair value of all of the Group&#146;s forward exchange contracts. Contracts with unrealized gains are presented as &#147;assets&#148; and
contracts with unrealized losses are presented as &#147;liabilities&#148;.
</DIV>


<P align="center" style="font-size: 10pt">69
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>December 31, 2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>December 31, 2004</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Contract</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Fair</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Contract</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Fair</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Amount</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Value</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Amount</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Value</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,075</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">392</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">159,584</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,191</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94,020</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,159</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,403</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(90</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">140,095</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,767</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">172,987</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,101</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group&#146;s forward exchange contracts as at December&nbsp;31, 2005 had maturities of maximum 12
months. The potential loss in fair value of the Group&#146;s forward exchange contracts at December&nbsp;31,
2005 that would have resulted from a hypothetical, instantaneous and unfavorable 10% change in
currency exchange rates would have been approximately <FONT face="'Times New Roman',times,serif">&#128;</FONT>21.4&nbsp;million. This sensitivity analysis
assumes an instantaneous unfavorable 10% fluctuation in exchange rates affecting the foreign
currencies of the Group&#146;s domestic currency swap contracts.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the accounting of transactions entered into in an effort to reduce the Group&#146;s exchange
rate risks, see Notes 3, 24 and 25 to the Consolidated Financial Statements included in Item&nbsp;18 of
this annual report.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Interest Rate Risks </B>- To a significantly lesser extent, the Group is also exposed to interest
rate risk. At December&nbsp;31, 2005, the Group had <FONT face="'Times New Roman',times,serif">&#128;</FONT>11.7&nbsp;million (representing 1.8% of the Group&#146;s
total assets as of that date) in debt outstanding (short-term borrowings and long-term debt,
including the current portion of such debt). See Notes 11 and 16 to the Consolidated Financial
Statements included in Item&nbsp;18 of this annual report.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the normal course of business, the Group also faces risks that are either non-financial or
non-quantifiable. Such risks principally include country risk, credit risk and legal risk.
</DIV>

<DIV align="left">
<A name="157"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;12. Description of Securities Other than Equity Securities</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>


<P align="center" style="font-size: 10pt">70
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="158"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART II</B>
</DIV>

<DIV align="left">
<A name="159"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;13. Defaults, Dividend Arrearages and Delinquencies</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.
</DIV>

<DIV align="left">
<A name="160"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;14. Material Modifications to the Rights of Security Holders and Use of Proceeds</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.
</DIV>

<DIV align="left">
<A name="161"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;15. Controls and Procedures</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company carried out an evaluation under the supervision and with the participation of the
Company&#146;s management, including the Chief Executive Officer and the Chief Financial Officer, of the
effectiveness of the design and operation of the Company&#146;s disclosure controls and procedures as of
December&nbsp;31, 2005. Disclosure controls and procedures are controls and other procedures that are
designed to ensure that (i)&nbsp;information required to be disclosed in the reports the Company files
and submits under the Exchange Act is recorded, processed, summarized and reported as and when
required and (ii)&nbsp;information required to be disclosed in the reports the Company files or submits
under the Exchange Act is accumulated and communicated to the Company&#146;s management, including the
Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required
disclosure. There are inherent limitations to the effectiveness of any system of disclosure
controls and procedures, including the possibility of human error and the circumvention or
overriding of the controls and procedures. Accordingly, even effective disclosure controls and
procedures can only provide reasonable assurance of achieving their control objectives.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on the Company&#146;s evaluation of its disclosure controls and procedures and in preparation
for its evaluation of internal controls under Section&nbsp;404 of the Sarbanes-Oxley Act, the Chief
Executive Officer and Chief Financial Officer concluded that some of the Company&#146;s disclosure
controls and procedures as of December&nbsp;31, 2005 needed to be
improved and accordingly that the Company&#146;s disclosure controls
and procedures as of December 31, 2005 were not fully effective. The management determined
that the Company needed a more structured procedure for the collection and internal communication
of information from some subsidiaries overseas and determined that some overseas subsidiaries were
using accounting and information systems with limited automated procedures.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In light of the above, in preparing its consolidated financial statements for the year ended
December&nbsp;31, 2005, the Company implemented a number of ad-hoc actions. The Company is also
implementing more formal and detailed disclosure controls and procedures for its overseas
subsidiaries and working to improve the Company&#146;s disclosure obligations in connection with the
reports it files under the Exchange Act. The Group is also continuing to improve its internal
controls over financial reporting for its consolidated overseas subsidiaries and has taken measures
to implement consistent systems and software throughout the Group
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company, based on significant work and knowledge to date, believes there are no material
misstatements or omissions of material fact in this annual report and that the financial statements
contained in this annual report are fairly presented in all material respects.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other than as described above, there has been no change in the Company&#146;s internal control over
financial reporting during 2005 that has materially affected, or is reasonably likely to materially
affect the Company&#146;s internal control over financial reporting.
</DIV>

<DIV align="left">
<A name="162"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;16. &#091;Reserved&#093;</B>
</DIV>

<DIV align="left">
<A name="163"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Item&nbsp;16.A Audit committee financial expert</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has determined that, because of the existence and nature of its board of statutory
auditors, it qualifies for an exemption provided by Exchange Act Rule&nbsp;10A-3(c)(3) from many of the
Rule&nbsp;10A-3(c)(3) audit committee requirements. The board of statutory auditors has determined that
each of its members is an &#147;audit committee financial expert&#148; as defined in Item&nbsp;16A of Form 20-F.
For the names of the members of the board of statutory auditors and
information regarding the independence of the board of statutory
auditors, see &#147;Item&nbsp;6. Directors, Senior
Management and Employees&#151;Statutory Auditors.&#148;
</DIV>


<P align="center" style="font-size: 10pt">71
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="164"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;16.B Code of Ethics</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has adopted a code of ethics, as defined in Item&nbsp;16B of Form 20-F under the
Exchange Act. This code of ethics applies, among others, to the Company&#146;s Chief Executive Officer
and Chief Financial Officer. The Company&#146;s code of ethics is available on its website at
<U>www.natuzzi.com/codeofethics/</U>. If the Company amends the provisions of its code of ethics that
apply to the Company&#146;s Chief Executive Officer and Chief Financial Officer, or if the Company
grants any waiver of such provisions, it will disclose such amendment or waiver on its website at
the same address.
</DIV>

<DIV align="left">
<A name="165"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;16.C Principal Accountant Fees and Services</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the aggregate fees billed to the Company by its independent
auditors, KPMG in Italy and abroad during the fiscal years ended December&nbsp;31, 2005 and 2004, for
audit fees, audit&#150;related fees, tax fees and all other fees.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">(in euros)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Audit fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">558,412</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">463,317</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Audit-related fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>Total fees</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">558,412</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">463,317</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Audit fees in the above table are the aggregate fees billed by KPMG in connection with the
audit of the Company&#146;s annual financial statements and the review of our interim financial
statements.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s audit committee has not established pre-approval policies and procedures for the
engagement of our independent auditors for services. The Company&#146;s audit committee expressly
approves on a case-by-case basis any engagement of our independent auditors for audit and non-audit
services provided to our subsidiaries or to us.
</DIV>


<P align="center" style="font-size: 10pt">72
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="166"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;16.D Exemptions from the Listing Standards for Audit Committees.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company is relying on the exemption from listing standards for audit committees provided
by Exchange Act Rule&nbsp;10A-3(c)(3). The basis for this reliance is that the Company&#146;s board of
statutory auditors meets the following requirements set forth in Exchange Act <font style="white-space: nowrap">Rule&nbsp;10A-3(c)(3):</font>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#150;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the board of statutory auditors is established and selected
pursuant to Italian law expressly permitting such a board;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#150;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the board of statutory auditors is required under Italian law
to be separate from the Company&#146;s board of directors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#150;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the board of statutory auditors is not elected by management
of the Company and no Executive Officer of the Company is a member
of the board of statutory auditors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#150;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Italian Law provides for standards for the independence of the
board of statutory auditors from the Company and its management;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#150;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the board of statutory auditors, in accordance with applicable
Italian law and the Company&#146;s governing documents, is responsible,
to the extent permitted by Italian law, for the appointment,
retention and oversight of the work (including, to the extent
permitted by law, the resolution of disagreements between
management and the auditor regarding financial reporting) of any
registered public accounting firm engaged for the purpose of
preparing or issuing an audit report or performing other audit,
review or attest services for the Company, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#150;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to the extent permitted by Italian law, the audit committee
requirements of paragraphs (b)(3), (b)(4) and (b)(5) of Rule&nbsp;10A-3
apply to the Board of Statutory Auditors.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s reliance on Rule&nbsp;10A-3(c)(3) does not, in its opinion, materially adversely
affect the ability of its Board of Statutory Auditors to act independently and to satisfy the other
requirements of Rule&nbsp;10A-3.
</DIV>

<DIV align="left">
<A name="167"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;16.E Purchases of Equity Securities by the Issuer and Affiliated Purchasers</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From January&nbsp;1, 2005, to December&nbsp;31, 2005, no purchases were made by or on behalf of the
Company or any affiliated purchaser of the Company&#146;s Ordinary Shares or ADSs.
</DIV>


<P align="center" style="font-size: 10pt">73
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="168"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART III</B>
</DIV>

<DIV align="left">
<A name="169"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;17. Financial Statements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>

<DIV align="left">
<A name="170"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;18. Financial Statements</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="94%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Page</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#300">Report of Independent Registered Public Accounting Firm</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">F-1</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#301">Consolidated Balance Sheets as of December&nbsp;31, 2005 and 2004</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">F-2</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#302">Consolidated Statements of Earnings for the Years Ended December&nbsp;31,
2005, 2004 and 2003</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">F-3</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#303">Consolidated Statements of Changes in Shareholders&#146; Equity for the
Years Ended December&nbsp;31, 2005, 2004 and 2003</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">F-4</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#304">Consolidated Statements of Cash Flows for the Years Ended December
31, 2005, 2004 and 2003</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">F-5</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#305">Notes to the Consolidated Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">F-7</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">74
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="171"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;19. Exhibits</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1 English translation of the by-laws (<I>Statuto</I>) of the Company, as amended and restated
as of January&nbsp;24, 2006.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1 Deposit Agreement dated as of May&nbsp;15, 1993, as amended and restated as of December&nbsp;31,
2001, among the Company, The Bank of New York, as Depositary, and owners and beneficial owners of
ADRs (incorporated by reference to the Form 20-F filed by Natuzzi S.p.A. with the Securities and
Exchange Commission on July&nbsp;1, 2002, file number 1-11854).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.1 List of Significant Subsidiaries.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.1 Chief Executive Officer Certification pursuant to Section&nbsp;302 of the Sarbanes-Oxley Act
of 2002.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.2 Chief Financial Officer Certification pursuant to Section&nbsp;302 of the Sarbanes-Oxley Act
of 2002.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.1 Certifications pursuant to 18 U.S.C. 1350, as adopted pursuant to Section&nbsp;906 of the
Sarbanes-Oxley Act of 2002.
</DIV>



<P align="center" style="font-size: 10pt">75
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="300"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Report of Independent Registered Public Accounting Firm
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To the Shareholders of<BR>
Natuzzi S.p.A.

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have audited the accompanying consolidated balance sheets of Natuzzi S.p.A. and subsidiaries
(the &#145;Natuzzi Group&#146;) as of December&nbsp;31, 2005 and 2004 and the related consolidated statements of
earnings, changes in shareholders&#146; equity and cash flows for each of the years in the three-year
period ended December&nbsp;31, 2005. These consolidated financial statements are the responsibility of
the management of Natuzzi S.p.A.. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We conducted our audits in accordance with auditing standards generally accepted in the Republic of
Italy and in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of the Natuzzi Group as of December&nbsp;31, 2005 and 2004 and
the results of its operations and its cash flows for each of the years in the three-year period
ended December&nbsp;31, 2005, in conformity with established accounting principles in the Republic of
Italy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As discussed in Note 3 (c), the Natuzzi Group adopted the new Italian accounting standard No.&nbsp;17,
&#147;Consolidated Financial Statements&#148;, with regard to the translation of the financial statements of
foreign subsidiaries, effective December&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Established accounting principles in the Republic of Italy vary in certain significant respects
from generally accepted accounting principles in the United States of America. Information relating
to the nature and effect of such differences is presented in note 27 to the consolidated financial
statements.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>KPMG S.p.A.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Bari, Italy<BR>
June&nbsp;23, 2006

</DIV>

<P align="center" style="font-size: 10pt">F - 1
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Natuzzi S.p.A. and Subsidiaries</B>
</DIV>

<DIV align="left">
<A name="301"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>Consolidated Balance Sheets as at December&nbsp;31, 2005 and 2004</B></DIV>


<DIV align="center" style="font-size: 10pt">(Expressed in thousands of euros)</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">December 31,</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ASSETS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Current assets:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and cash equivalents (note 4)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89,723</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">87,340</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Marketable debt securities (note 5)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Trade receivables, net (note 6)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">123,608</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">137,559</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other receivables (note 7)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,169</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Inventories (note 8)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">115,690</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">112,601</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unrealized foreign exchange gains (note 25)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,101</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Prepaid expenses and accrued income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,551</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,390</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred income taxes (note 14)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,632</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,227</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">384,465</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">389,392</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Non current assets:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Property plant and equipment (note 9 and 22)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">407,847</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">389,262</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Less accumulated depreciation (note 9 and 22)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(145,054</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(117,257</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">262,793</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">272,005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other assets (note 10)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,616</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,228</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred income taxes (note 14)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,064</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">602</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">664,938</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">673,227</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>LIABILITIES AND SHAREHOLDERS&#146; EQUITY</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Current liabilities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Short-term borrowings (note 11)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,727</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,572</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current portion of long-term debt (note 16)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">426</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">571</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts payable-trade (note 12)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73,533</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83,737</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts payable-other (note 13)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,768</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,353</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unrealized foreign exchange losses (note 25)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,767</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income taxes (note 14)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,907</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,521</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Salaries, wages and related liabilities (note 15)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,083</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,732</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">136,211</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">131,486</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Long-term liabilities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Employees&#146; leaving entitlement (note 3 (n) )</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,274</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,617</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long-term debt (note 16)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,582</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,998</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred income taxes (note 14)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">433</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred income for capital grants (note 3 (m) )</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,779</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,485</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other liabilities (note 17)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,358</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,359</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Minority interest (note 18)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">709</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">916</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Shareholders&#146; equity (note 19) :</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Share capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,682</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,682</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Reserves</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,292</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,292</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Additional paid-in capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,282</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,282</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Retained earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">367,769</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">382,677</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">473,025</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">487,933</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Committments and contingent liabilities (notes 21 and 25)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total liabilities and shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">664,938</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">673,227</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>See accompanying notes to the consolidated financial statements</B>
</DIV>



<P align="center" style="font-size: 10pt">F - 2
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Natuzzi S.p.A. and Subsidiaries</B>
</DIV>

<DIV align="left">
<A name="302"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>Consolidated Statements of Earnings</B></DIV>


<DIV align="center" style="font-size: 10pt"><B>Years ended December&nbsp;31, 2005, 2004 and 2003</B></DIV>


<DIV align="center" style="font-size: 10pt">(Expressed in thousands of euros except per share data)</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net sales (note 22)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">669,926</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">753,434</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">769,579</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of sales (note 23)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(459,492</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(484,601</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(508,764</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">210,434</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">268,833</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">260,815</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(182,169</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(188,182</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(179,282</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">General and administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(42,955</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(40,673</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(39,205</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Operating income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14,690</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,978</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,328</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other income (expense), net (note 24)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,960</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,892</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,631</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Earnings (loss)&nbsp;before taxes and minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,730</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,086</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,959</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income taxes (note 14)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,110</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(17,650</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,501</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Earnings (loss)&nbsp;before minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14,840</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,436</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,458</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(83</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(158</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net earnings (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14,624</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,353</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,300</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic earnings (loss)&nbsp;per share (note 3<I>(u)</I>)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.27</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.68</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted earnings (loss)&nbsp;per share (note 3 <I>(u)</I>)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.27</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.68</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>See accompanying notes to the consolidated financial statements</B>
</DIV>




<P align="center" style="font-size: 10pt">F - 3
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Natuzzi S.p.A. and Subsidiaries</B>
</DIV>

<DIV align="left">
<A name="303"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>Consolidated Statements of Changes in Shareholders&#146; Equity</B></DIV>


<DIV align="center" style="font-size: 10pt"><B>Years ended December&nbsp;31, 2005, 2004 and 2003</B></DIV>


<DIV align="center" style="font-size: 10pt">(Expressed in thousands of euros except number of ordinary shares)</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Share capital</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Number of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Additional</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Ordinary</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">paid-in</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Retained</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">shares</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Reserves</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">capital</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Earnings</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Total</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balances at December&nbsp;31, 2002</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,681,628</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,526</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73,071</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,282</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">356,929</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">495,808</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividends distributed</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(18,045</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(18,045</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Transfer to legal reserve</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,375</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,375</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Transfer for liquidation of subsidiary</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(210</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">210</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,300</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balances at December&nbsp;31, 2003</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,681,628</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,526</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80,236</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,282</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">369,019</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">515,063</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividends distributed</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,655</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,655</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Treasury shares cancelled</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,844</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(37,828</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,844</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(37,828</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Transfer for liquidation of subsidiary</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(116</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">116</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,353</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,353</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balances at December&nbsp;31, 2004</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,681,628</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,682</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,292</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,282</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">382,677</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">487,933</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividends distributed</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,828</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,828</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exchange difference on translation of
financial statements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,544</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,544</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(14,624</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(14,624</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balances at December&nbsp;31, 2005</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,681,628</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,682</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,292</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,282</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">367,769</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">473,025</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>See accompanying notes to the consolidated financial statements</B>
</DIV>




<P align="center" style="font-size: 10pt">F - 4
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Natuzzi S.p.A. and Subsidiaries</B>
</DIV>

<DIV align="left">
<A name="304"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>Consolidated Statements of Cash Flows</B></DIV>


<DIV align="center" style="font-size: 10pt"><B>Years ended December&nbsp;31, 2005, 2004 and 2003</B></DIV>


<DIV align="center" style="font-size: 10pt">(Expressed in thousands of euros)</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from operating activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net earnings (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(14,624</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,353</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,300</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Adjustments to reconcile net income to net cash
provided by operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,042</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,068</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,221</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Employees&#146; leaving entitlement</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,877</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,435</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,776</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,300</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(651</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">799</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(216</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">158</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">(Gain) loss on disposal of assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(149</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,468</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">814</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Unrealized foreign exchange losses and gains</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,868</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">621</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(264</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Deferred income for capital grants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,616</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(874</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(870</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Change in assets and liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Receivables, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,580</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,052</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,096</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,546</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(16,637</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,251</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Prepaid expenses and accrued income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(141</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(240</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(903</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,361</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(893</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,122</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,443</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,659</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(18,370</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">386</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,737</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,041</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Salaries, wages and related liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,318</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,641</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,383</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,001</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(357</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,719</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Employees&#146; leaving entitlement</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,526</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,795</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,766</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Total adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,772</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,907</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">941</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Net cash provided by operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,148</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68,260</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,241</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from investing activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Property, plant and equipment:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Additions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(20,917</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(51,860</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(47,259</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Disposals</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">916</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,407</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">762</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Government grants received</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,119</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Marketable debt securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Proceeds from sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchase of business, net of cash acquired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,985</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(100</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,482</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Disposal of business</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,475</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Net cash used in investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(20,984</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(37,078</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(49,839</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">F - 5
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from financing activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long-term debt:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Proceeds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">533</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,284</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,970</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Repayments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,094</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,349</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,739</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Short-term borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,628</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,820</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">299</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Dividends paid to shareholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,828</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,655</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(18,045</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Dividends paid to minority interests</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(61</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(26</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Net cash used in financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,761</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,961</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(17,541</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Effect of translation adjustments on cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,980</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,446</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,991</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Increase (decrease)&nbsp;in cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,383</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,775</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(33,130</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Cash and cash equivalents, beginning of the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">87,340</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,565</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">96,695</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Cash and cash equivalents, end of the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89,723</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">87,340</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,565</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Supplemental disclosure of cash flow information:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash paid during the year for interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">951</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">606</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash paid during the year for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,659</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,293</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,955</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>See accompanying notes to the consolidated financial statements</B>
</DIV>



<P align="center" style="font-size: 10pt">F - 6
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Natuzzi S.p.A. and Subsidiaries
</DIV>

<DIV align="left">
<A name="305"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>

</DIV>

<DIV align="left" style="font-size: 10pt">(Expressed in thousands of euros except as otherwise indicated)</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>1. Description of business and Group composition</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The consolidated financial statements include the accounts of Natuzzi S.p.A. (&#145;Natuzzi&#146; or the
&#145;Company&#146;) and of its subsidiaries (together with the Company, the &#145;Group&#146;). The Group&#146;s primary
activity is the design, manufacture and marketing of contemporary and traditional leather and
fabric upholstered furniture.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The subsidiaries included in the consolidation at December&nbsp;31, 2005, together with the related
percentages of ownership, are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="29%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>Percent of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" style="border-bottom: 1px solid #000000"><B>ownership</B></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Registered office</B></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" style="border-bottom: 1px solid #000000"><B>Activity</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Italsofa Bahia Ltd</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">97.99</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bahia, Brazil</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(1)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Minuano Nordeste S.A.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Pojuca, Brazil</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(1)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Italsofa Shanghai Ltd</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Shanghai, China</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(1)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Softaly Shanghai Ltd</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Shanghai, China</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(1)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Italsofa Romania</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Baia Mare, Romania</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(1)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natco S.p.A.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">99.99</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bari, Italy</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(2)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">I.M.P.E. S.p.A.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">90.83</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Qualiano,Italy</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(3)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Divani Due S.r.l.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Verona, Italy</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(4)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Koine&#233; S.r.l.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Montesilvano, Italy</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(4)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nacon S.p.A.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bari, Italy</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(4)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Americas Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">High Point, NC, USA</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(4)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Iberica S.A.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Madrid, Spain</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(4)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Switzerland AG</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">97.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Kaltbrunn, Switzerland</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(4)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Nordic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Copenaghen, Denmark</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(4)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Benelux S.A.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Geel, Belgium</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(4)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Germany Gmbh</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Dusseldorf, Germany</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(4)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Sweden AB</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Stockholm, Sweden</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(4)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Japan KK</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Tokyo, Japan</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(4)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Kingdom of Leather Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">London, UK</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(4)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">La Galleria Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">London, UK</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(4)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Italholding S.r.l.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bari, Italy</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(5)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Kingdom of Leather Trustees Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">London, UK</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(5)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Netherlands Holding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amsterdam, Holland</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(5)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi United Kingdom Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">London, UK</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(5)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Trade Service S.r.l.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bari, Italy</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(6)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Lagene S.r.l.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bari, Italy</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(7)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Asia Ltd</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Hong-Kong, China</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(7)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Manufacture and distribution</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Intragroup leather dyeing and finishing</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Production and distribution of polyurethane foam</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>Distribution</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD>Investment holding</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(6)</TD>
    <TD>&nbsp;</TD>
    <TD>Transportation services</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(7)</TD>
    <TD>&nbsp;</TD>
    <TD>Non operative</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">F - 7
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">






<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In April&nbsp;2005, the Company acquired 100% of the equity interest in Koine&#232; S.r.l.
(Koine&#232;), an Italian enterprise that was operating as a Natuzzi&#146;s franchisee, for a cash
consideration of 297. This enterprise operated seven stores under &#147;Divani &#038; Divani by Natuzzi&#148;
trade name. Prior to the date of acquisition the franchise agreement between Natuzzi and Koine&#232; was
expired under the original terms. The stores are located in the Abruzzo and Marche regions of
Italy. The primary reason for this acquisition is the opportunity to maintain the market presence
in the aforementioned regions. The main factor that contributed to the determination of the price
is the presence of the stores in key geographic locations. The acquisition was accounted for using
the purchase method and it resulted in a goodwill of 1,664, which represents the excess of the
purchase price over the fair value of assets acquired and liabilities assumed. The following table
summarizes the estimated fair value of the assets acquired and liabilities assumed at date of
acquisition.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,107</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,664</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other non current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,634</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,080</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(306</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase price</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,019</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The purchase price is composed of the consideration paid 297, plus the elimination of trade
receivables from Koine&#232; S.r.l., amounting to 1,722 at the date of acquisition. Koine&#232; S.r.l.
recorded for the years ended December&nbsp;31, 2005 and 2004 net sales of 5,427 and 5,724, respectively.
The pre-acquistion results for 2005 of this business acquisition have been included in the
consolidated statements of earnings of the Company for the entire year ended at December&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In November&nbsp;2005, the Company acquired 100% of a business composed by seven stores &#147;Divani &#038;
Divani by Natuzzi&#148;, located in Rome, for a cash consideration of 688. This business was operating
as a Natuzzi&#146;s franchisee. Prior to the date of acquisition the franchise agreement between Natuzzi
and the acquired business was expired under the original terms. The primary reason for this
acquisition is the opportunity to maintain the market presence in the capital city of Rome. The
main factor that contributed to the determination of the purchase price is the presence of the
stores in key street locations in Rome. The acquisition was accounted for using the purchase price
and it resulted in a goodwill of 3,709, which represents the excess of the purchase price over the
fair value of assets acquired and liabilities assumed. The following table summarizes the estimated
fair value of the assets acquired and liabilities assumed at date of acquisition.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">710</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,709</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fixed assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">221</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Leasehold improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">313</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(143</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase price</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,810</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F - 8
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The purchase price is composed by the consideration paid of 688, plus the elimination of
trade receivables due from the vendor, and amounting to 4,122 at the date of acquisition. This
business recorded for the years ended December&nbsp;31, 2005 and 2004 net sales of 8,083 and 8,588,
respectively. The results of this business acquisition have been included in the consolidated
statements of earnings from the date of acquisition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;23, 2005 the Company acquired an entity for which its sole asset was a store
located in the centre of Milan&#146;s main shopping and commercial area. The cash consideration paid by
the Company for this acquisition was 1,000. At the date of acquisition there were no employees,
inventory or revenues associated with this asset. During 2006, the Company started some
construction work in order to set up in the store the Natuzzi&#146;s layout selling system. The
acquisition resulted in a goodwill of 600, which represents the excess of purchase price over fair
value of the acquired net assets. The fair value of assets acquired is as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">600</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Leasehold improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">400</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The main factors that have contributed to the determination of the consideration paid
are: (a)&nbsp;presence of store in a key geographic location; (b)&nbsp;space of the store that is very large
for a central location (the space is about square meter 1,000); (c)&nbsp;advertising of Natuzzi&#146;s
&#147;trademark&#148; and &#147;product&#148; in the heart of Milan shopping area.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2005 the Company incorporated two new subsidiaries, Natuzzi Sweden AB and Natuzzi Japan KK,
which provide sales support for the Group in the respective country.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During December&nbsp;2004 the Company sold 100% of the outstanding common shares of Spagnesi S.p.A.
to a third party, for cash consideration of 5,475. Spagnesi S.p.A. was a manufacturing facility
located in the North of Italy (near to Florence), specialized in the production of a particular
line of traditional leather sofas. As of the date of the disposal all products of this enterprise
were bought by Natuzzi. In particular, on the basis of the disposal agreement Natuzzi continued to
buy up to 12.000 products from Spagnesi S.p.A. at current market prices for a certain period.
However, the Company was under no obligation to make such purchases.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2004 Style and Comfort S.r.l. was merged into Natuzzi S.p.A..
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In January&nbsp;2004 the Company incorporated a new subsidiary, Natuzzi Germany Gmbh, which
provides sales support for the Group in Germany.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2004 the Company incorporated two new subsidiaries Nacon S.r.l. and Italholding S.r.l..
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On November&nbsp;23, 2004 the Company acquired 100% of Divani Due S.r.l., based in Verona, for cash
consideration of 100. This acquired enterprise has a network of 5 stores mainly located in the
North of Italy. The acquisition was accounted for using the purchase method, resulting in a
goodwill of 1,251, which represents the excess of purchase price over the fair value of
</DIV>

<P align="center" style="font-size: 10pt">F - 9
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;net liabilities assumed. The following table summarizes the estimated fair value of the
assets acquired and the liabilities assumed at the date of acquisition.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">353</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,251</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other non current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">377</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(369</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(142</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase price</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,470</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The purchase price is composed by the consideration paid 100, plus elimination of trade
receivables from Divani Due S.r.l. of 1,370. In addition, Divani Due S.r.l. recorded for the years
ended December&nbsp;31, 2005, 2004 and 2003 net sales of 3,151, 190 and 1,535. The results of this
business acquisition have been included in the consolidated statement of earnings from the date of
acquisition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In January&nbsp;2003 the Company incorporated a new subsidiary, Natuzzi Benelux S.A., which
provides sales support for the Group in Belgium, Holland and Luxembourg.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On May&nbsp;7, 2003 the Company acquired 100% of the outstanding common shares of Natuzzi United
Kingdom Limited (Natuzzi UK Group), based in London, ultimate parent company of the Kingdom of
Leather Group (&#147;KOL&#148; or &#147;KOL Group&#148;), a leading UK upholstered furniture specialist with a network
of 14 stores, mainly located in England. The primary reason for this acquisition was the
opportunity to increase market share in the United Kingdom. The factors that contributed to the
determination of the price were the presence of stores in key geographic locations and the presence
of a well-placed sales force. The acquisition was accounted for using the purchase method and it
resulted in a goodwill of 9,179, which represents the excess of purchase price over fair value of
net liabilities assumed. The following table summarizes the estimated fair value of the assets
acquired and the liabilities assumed at date of acquisition.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,324</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,179</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other non current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,008</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(17,911</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(267</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase price</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,333</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The pre-acquisition results for 2003 of this business acquisition have been included in the
consolidated statements of earnings of the Company for the entire year ended at December&nbsp;31, 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Italian GAAP as of December&nbsp;31, 2004 the above goodwill was impaired. For additional
information refer to note 24.
</DIV>

<P align="center" style="font-size: 10pt">F - 10
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;6, 2003 the Company acquired 100% of the shares of Minuano Nordeste SA
(Minuano), at a price of 4,298, of which 2,149 was paid in cash, with the balance to be paid in
installments before the end of 2006. At December&nbsp;31, 2005 and 2004 this payable is included in
other liabilities (see notes 13 and 17). The main reason for this acquisition was that Minuano had
signed an agreement with the Brazilian government whereby it will enjoy certain export incentives
until 2015. At the time of the acquisition the subsidiary was dormant. During 2004 this subsidiary
started and completed the construction of facilities for the production of leather upholstery
furniture under the &#147;Italsofa&#148; brand. The acquisition resulted in a goodwill of 4,053, which
represents the excess of purchase price over the fair value of acquired net assets. The fair value
of assets acquired and liabilities assumed were as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current and non current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">253</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,053</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current and non current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase price</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,298</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In an effort to maximize the efficiency of the Group&#146;s organizational structure, at an
extraordinary general meeting held on July&nbsp;15, 2002, the Company&#146;s shareholders approved the merger
of Creazioni Ellelle S.p.A., Divani e Poltrone Italia S.r.l., Expan Italia S.r.l., Nagest S.r.l.,
Softaly S.r.l., Soft Cover S.r.l. and Spagnesi International S.r.l. into the Company (the Company
owned 100% of the share capital of all these companies prior to the merger). The merger became
effective on January&nbsp;1, 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2003 the subsidiaries Italsofa Hong-Kong Ltd, D.L.S. S.r.l., Natuzzi Argentina, Finat
Ltd and Natex S.r.l. were wound up.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>2. Basis of preparation and principles of consolidation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The financial statements utilized for the consolidation are the financial statements of each
Group company at December&nbsp;31, 2005, 2004 and 2003. The 2005, 2004 and 2003 financial statements
have been approved by the respective shareholders of the relevant companies. The 2005 consolidated
financial statements have been approved by the directors of the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The financial statements of subsidiaries are adjusted, where necessary, to conform to
Natuzzi&#146;s accounting principles and policies, which are consistent with Italian legal requirements
governing financial statements considered in conjunction with established accounting principles
promulgated by the Italian Accounting Profession. The consolidated financial statements are
classified in accordance with the presentations generally used in international practice.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Established accounting principles in the Republic of Italy vary in certain significant
respects from generally accepted accounting principles in the United States of America. Information
relating to the nature and effect of such differences is presented in note 27 to the consolidated
financial statements.
</DIV>

<P align="center" style="font-size: 10pt">F - 11
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The consolidated financial statements include all affiliates and companies that Natuzzi
directly or indirectly controls, either through majority ownership or otherwise. Control is
presumed to exist where more than one-half of a subsidiary&#146;s voting power is controlled by the
Company or the Company is able to govern
the financial and operating policies of a subsidiary or control the removal or appointment of
a majority of a subsidiary&#146;s board of directors. Where an entity either began or ceased to be
controlled during the year, the results of operations are included only from the date control
commenced or up to date control ceased. However, the pre-acquisition results of an acquired entity
could be reflected in the operating results of the acquiring entity provided the acquisition is
completed within 6&nbsp;months of the beginning of the acquiring entity&#146;s fiscal year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The assets and liabilities of subsidiaries are consolidated on a line-by-line basis and the
carrying value of intercompany investments held is eliminated against the related shareholder&#146;s
equity accounts. The minority interests of consolidated subsidiaries are separately classified in
the consolidated balance sheets and statements of earnings. All intercompany balances and
transactions are eliminated in consolidation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>3. Summary of significant accounting policies</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The significant accounting policies followed in the preparation of the consolidated financial
statements are outlined below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>a) Foreign currency transactions</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Foreign currency transactions are recorded at the exchange rates applicable at the transaction
dates. Assets and liabilities denominated in foreign currency are remeasured at year-end exchange
rates. Foreign exchange gains and losses resulting from the remeasurement of these assets and
liabilities are included in other income (expense), net, in the consolidated statements of
earnings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>b) Forward exchange contracts</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group enters into forward exchange contracts (known in Italian financial markets as
domestic currency swaps) to manage its exposure to foreign currency risks. The Company does not
enter into these contracts on a speculative basis, nor is hedge effectiveness constantly monitored.
As a consequence of this, forward exchange contracts are not used to hedge any on &#151; or off-balance
sheet items. Therefore, at December&nbsp;31, 2005, 2004 and 2003 all unrealized gains or losses on such
contracts are recorded in &#147;Other income (expense), net&#148;, in the consolidated statements of
earnings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>c) Financial statements of foreign operations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The financial statements of the foreign subsidiaries expressed in the foreign currency are
translated directly into euro as follows: (i)&nbsp;year-end exchange rate for assets and liabilities,
(ii)&nbsp;historical exchange rates for share capital and retained earnings, and (iii)&nbsp;average exchange
rates
</DIV>

<P align="center" style="font-size: 10pt">F - 12
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">during the year for revenues and expenses. The resulting exchange differences on
translation is recorded as a direct adjustment to shareholders&#146; equity.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During September&nbsp;2005, effective as of December&nbsp;31, 2005, the Italian Accounting Profession
has changed the Italian accounting standard No. 17, &#147;<I>Consolidated Financial Statements</I>&#148;, with regard
to the translation of the financial statements of a foreign subsidiary expressed in a foreign
currency.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the previous accounting standard an Italian parent company was allowed to translate the
financial statements of a foreign subsidiary expressed in a foreign currency using the following
two methodologies:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;if the foreign subsidiary was considered an integral part of the parent company due to
various factors including intercompany transactions, financing, and cash flow indicators, its
financial statements expressed in the foreign currency was translated directly into euro from the
local currency as follows: (i)&nbsp;year-end exchange rate for monetary assets and liabilities, (ii)
historical exchange rates for non monetary assets and liabilities, share capital and retained
earnings, and (iii)&nbsp;average exchange rates during the year for revenues and expenses except for
those revenues and expenses related to assets and liabilities translated at historical exchange
rates. The resulting exchange differences on translation were recognized in other income (expense),
net, in the consolidated statements of earnings;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;if the foreign subsidiary was not considered an integral part of a parent company, its
financial statements expressed in the foreign currency was translated directly into euro as
follows: (i)&nbsp;year-end exchange rate for assets and liabilities, (ii)&nbsp;historical exchange rates for
share capital and retained earnings, and (iii)&nbsp;average exchange rates during the year for revenues
and expenses. The resulting exchange differences on translation were recorded as a direct
adjustment to shareholders&#146; equity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As indicated above, effective as of December&nbsp;31, 2005, the Italian Accounting Profession has
eliminated the option (a)&nbsp;indicated above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Therefore, under Italian GAAP as from December&nbsp;31, 2005 an Italian parent company must
translate the financial statements of a foreign subsidiary expressed in a foreign currency using
only option (b)&nbsp;indicated above. This means that the financial statements of a foreign subsidiary
expressed in the foreign currency must be translated directly into euro as follows: (i)&nbsp;year-end
exchange rate for assets and liabilities, (ii)&nbsp;historical exchange rates for share capital and
retained earnings, and (iii)&nbsp;average exchange rates during the year for revenues and expenses. The
resulting exchange differences on translation have to be recorded as a direct adjustment to
shareholders&#146; equity. This approach effectively ignores the operating environment of the foreign
entity, in particular if the local currency is also the functional currency.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At December&nbsp;31, 2005 the change in the application of this accounting principle resulted in an
increase of 3,544 of shareholders&#146; equity, with no effect on the net loss. Had the new Italian
standard not been adopted in 2005, the Company would have recognized, in 2005, a foreign
</DIV>

<P align="center" style="font-size: 10pt">F - 13
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">exchange gain of 1,684 in the consolidated statement of earnings. The comparative
financial statements of prior years have not been adjusted to apply the new Italian GAAP foreign
currency translation standard retrospectively.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>d) Cash and cash equivalents</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company classifies as cash and cash equivalents cash on hand, amounts on deposit and on
account in banks and cash invested temporarily in various instruments with maturities of three
months or less at time of purchase.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>e) Marketable debt securities</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Marketable debt securities are valued at the lower of cost or market value determined on an
individual security basis. A valuation allowance is established and recorded as a charge to other
income (expense), net, for unrealized losses on securities. Unrealized gains are not recorded until
realized. Recoveries in the value of securities are recorded as part of other income (expense),
net, but only to the extent of previously recognized unrealized losses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gains and losses realized on the sale of marketable debt securities were computed based on a
weighted-average cost of the specific securities being sold.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Realized gains and losses are charged to other income (expense), net.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>f) Accounts receivable and payable</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Receivables are stated at nominal value net of an allowance for doubtful accounts. Payables
are stated at face value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>g) Inventories</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Raw materials are stated at the lower of cost (determined under the specific cost method for
leather hides and under the weighted-average method for other raw materials) and replacement cost.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Goods in process and finished goods are valued at the lower of production cost and net
realizable value. Production cost include direct production costs and production overhead costs.
The production overhead costs are allocated to inventory based on the manufacturing facility&#146;s
normal capacity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>h) Property, plant and equipment</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Property, plant and equipment is stated at historical cost, except for certain buildings which
were revalued in 1983, 1991 and 2000 according to Italian revaluation laws. Maintenance and repairs
are expensed; significant improvements are capitalized and depreciated over the useful life of the
related assets. The cost or valuation of fixed assets is depreciated on the straight-line method
over the estimated useful lives of the assets (refer to note 9). The related depreciation
</DIV>

<P align="center" style="font-size: 10pt">F - 14
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">expense is allocated to cost of goods sold, selling expenses and general and administrative
expenses based on the usage of the assets.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>i) Treasury shares</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Treasury shares are accounted for as a non-current assets and an amount equal to the cost of
shares acquired is reclassified from retained earnings to an undistributed treasury shares reserve
(see note 19). Treasury shares are stated at cost and when a permanent impairment loss exists at
the balance sheet date a valuation allowance is established and recorded as a charge to other
income (expense), net.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>j) Other assets</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other assets in the consolidated financial statements primarily include trademarks and
patents, goodwill and certain deferred costs. These assets are stated at the lower of amortized
cost or recoverable amount. The carrying amount of other assets are reviewed to determine if they
are in excess of their recoverable amount, based on discounted cash flows, at the consolidated
balance sheet date. If the carrying amount exceeds the recoverable amount, the asset is written
down to the recoverable amount.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Trademarks, patents and goodwill are amortized on a straight-line basis over a period of five
years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>k) Impairment of long-lived assets and long-lived assets to be disposed of</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company reviews long-lived assets, including intangible assets with estimable useful
lives, for impairment whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future discounted cash flows expected to be
generated by the asset. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the assets exceeds the fair
value of the assets. Estimated fair value is generally based on either appraised value or measured
by discounted estimated future cash flows. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>l) Income taxes</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income taxes are accounted for under the asset and liability method. Deferred tax assets and
liabilities are recognized for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss. Deferred tax assets are reduced by a valuation allowance to an amount
that is more likely than not to be realized. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that includes the
enactment date.
</DIV>

<P align="center" style="font-size: 10pt">F - 15
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>m) Government grants</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Capital grants compensate the Group for the partial cost of an asset and are part of the
Italian government&#146;s investment incentive program, under which the Group receives amounts generally
equal to a percentage of the aggregate investment made by the Group in the construction of new
manufacturing facilities, or in the improvement of existing facilities, in designated areas of the
country.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Capital grants from government agencies are recorded when there is reasonable assurance that
the grants will be received and that the Group will comply with the conditions applying to them.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Until December&nbsp;31, 2000 capital grants were recorded, net of tax, within reserves in
shareholders&#146; equity. As from January&nbsp;1, 2001 all new capital grants are recorded in the
consolidated balance sheet initially
as deferred income and subsequently recognized in the consolidated statement of earnings as
revenue on a systematic basis over the useful life of the related asset.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition when capital grants are received after the year in which the related assets are
acquired, the depreciation of capital grants is recognized as income as follows: (a)&nbsp;the
depreciation of the grants related to the amortization of the assets recorded in statements of
earnings in the years prior to the date in which the grants are received, is recorded in other
income (expense), net; (b)&nbsp;the depreciation of the grants related to the amortization of the assets
recorded in statements of earnings of the year, is recorded in net sales (see note 24).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At December&nbsp;31, 2005 and 2004 the deferred income for capital grants shown in the consolidated
balance sheet amounts to 14,779 and 12,485, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The amortization of these grants recorded in net sales of the consolidated statement of
earnings for the years ended December&nbsp;31, 2005, 2004 and 2003, amounts to 1,239, 864 and 868,
respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cost reimbursement grants relating to training and other personnel costs are credited to
income when received from government agencies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>n) Employees&#146; leaving entitlement</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Leaving entitlements represent amounts accrued for each Italian employee that are due and
payable upon termination of employment, assuming immediate separation, determined in accordance
with applicable Italian labour laws. The Group accrues the full amount of employees&#146; vested benefit
obligation as determined by such laws for leaving entitlements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under such Italian labour laws, upon termination of an employment relationship, the former
employee has the right to receive termination benefits for each year of service equal to the
employee&#146;s gross annual salary, divided by 13.5. The entitlement is increased each year by an
amount corresponding to 75% of the rise in the cost of living index plus 1.5 points.
</DIV>

<P align="center" style="font-size: 10pt">F - 16
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The expense recorded for the leaving entitlement for the years ended December&nbsp;31, 2005,
2004 and 2003 was 6,877, 7,435 and 6,776, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The number of workers employed by the Group totalled 7,846 and 6,832 at December&nbsp;31, 2005 and
2004, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>o) Net sales</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company recognizes revenue on sales at the time products are shipped from the
manufacturing facilities, and when the following criteria are met: persuasive evidence of an
arrangement exists; the price to the buyer is fixed and determinable; and collectibility of the
sales price is reasonably assured.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenues are recorded net of returns and discounts. Sales returns and discounts are estimated
and provided for in the year of sales. Such allowances are made based on historical trends. The
Company has the ability to make a reasonable estimate of such allowances due to large volumes of
homogeneous transactions and historical experience.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>p) Shipping and handling costs</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shipping and handling costs sustained to transport products to customers are expensed in the
periods incurred and are included in selling expenses. Shipping and handling expenses recorded for
the years ended December&nbsp;31, 2005, 2004 and 2003 were 69,730, 70,329 and 68,194, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>q) Advertising costs</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Advertising costs are expensed in the periods incurred and are included in selling expenses.
Advertising expenses recorded for the years ended December&nbsp;31, 2005, 2004 and 2003 were 31,273,
33,855 and 32,114, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>r) Commission expense</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commissions payable to sales representatives and the related expenses are recorded at the time
shipments are made by the Group to customers. Commissions are not paid until payment for the
related sale&#146;s invoice is remitted to the Group by the customer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>s) Contingencies</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Liabilities for loss contingencies are recorded when it is probable that a liability has been
incurred and the amount of the loss can be reasonably estimated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>t) Use of estimates</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The preparation of financial statements in conformity with established accounting policies
requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the financial
</DIV>

<P align="center" style="font-size: 10pt">F - 17
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">statements and reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>u) Earnings per share</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic earnings per share is calculated by dividing net earnings attributable to ordinary
shareholders by the weighted-average number of ordinary shares outstanding during the period after
considering the effect of outstanding treasury shares. Diluted earnings per share included the
effects of possible issuance of ordinary shares under share grants and option plans in the
determination of the weighted average number of ordinary shares outstanding during the period. In
2005, share grants and options of 139,520 were excluded as their effect was antidilutive. In 2003
there were no share grants and options outstanding. The following table provides the amounts used
in the calculation of earnings per share:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net earnings (loss)&nbsp;attributable to
ordinary shareholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14,624</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,353</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,300</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted-average number of ordinary
shares outstanding during the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,681,628</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,681,628</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,681,628</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Increase resulting from assumed conversion
of share grants and options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted-average number of ordinary
shares and potential shares outstanding
during the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,681,628</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,709,204</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,681,628</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>4. Cash and cash equivalents</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents are analyzed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash on hand</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">510</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">272</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bank accounts in Euro</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,491</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,033</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bank accounts in foreign currency</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,699</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,948</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Money market instruments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">87</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89,723</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">87,340</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F - 18
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
(Expressed in thousands of euros except as otherwise indicated)
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>5. Marketable debt securities</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Details regarding marketable debt securities are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign corporate bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Italian government bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Further information regarding the Group&#146;s investments in marketable debt securities is as follows:</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Gross unrealized</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 0px solid #000000">Fair</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">Cost</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">Gains</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">Losses</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">value</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign corporate bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Italian government bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Gross unrealized</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 0px solid #000000">Fair</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">Cost</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">Gains</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">Losses</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">value</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign corporate bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Italian government bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proceeds from sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Realized gains</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Realized losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The contractual maturity of the Group&#146;s marketable debt securities at December&nbsp;31, 2005 is
between 1 &#150; 5&nbsp;years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>6. Trade receivables, net</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Trade receivables are analyzed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">North American customers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,257</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,841</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other foreign customers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,546</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Domestic customers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,781</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,743</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Trade bills receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,863</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">128,767</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">142,993</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Allowance for doubtful accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,159</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,434</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total trade receivables, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">123,608</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">137,559</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F - 19
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Trade receivables are due primarily from major retailers who sell directly to their
customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No single customer accounted for more than 5% of the company&#146;s sales in 2005, 2004 and 2003 or
accounts receivable at December&nbsp;31, 2005 and 2004. The Company insures with a third party its
collection risk in respect of a significant portion of accounts receivable outstanding balances,
and estimates an allowance for doubtful accounts based on the insurance in place, the credit
worthiness of its customers as well as general economic conditions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table provides the movements in the allowance for doubtful accounts:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,434</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,662</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,727</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Charges-bad debt expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,326</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,297</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,441</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Reductions-write off of uncollectible accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,601</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,525</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(506</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,434</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,662</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Trade receivables denominated in foreign currencies at December&nbsp;31, 2005 and 2004 totalled
66,744 and 66,336, respectively. These receivables consist of the following:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">U.S. dollars</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,549</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,257</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Canadian dollars</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,405</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,729</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Australian dollars</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,853</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,431</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">British pounds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,470</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,744</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other currencies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,467</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,175</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66,744</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66,336</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>7. Other receivables</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other receivables are analyzed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">VAT</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,867</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,289</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Government capital grants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,798</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,890</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Receivable from tax authorities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,343</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,269</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Advances to suppliers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,264</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,506</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,984</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,215</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,169</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F - 20
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The VAT receivable includes value added taxes and interest thereon reimbursable to
various companies of the Group. While currently due at the balance sheet date, the collection of
the VAT receivable may extend over a maximum period of up to two years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The receivable for capital grants represents amounts due from government agencies related to
capital expenditures that have been incurred.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The receivable from the tax authorities represents principally advance taxes paid in excess of
the amounts due and interest thereon.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>8. Inventories</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories are analyzed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Leather and other raw materials</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68,481</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,763</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goods in process</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,294</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,916</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Finished products</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,915</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,922</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">115,690</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">112,601</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>9. Property, plant and equipment and accumulated depreciation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fixed assets are listed below together with accumulated depreciation.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Cost or</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Accumulated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Annual rate of</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">valuation</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">depreciation</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">depreciation</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Land</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,235</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Industrial buildings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">189,978</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(35,543</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">3&#151;10</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Machinery and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">118,097</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(69,968</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">11.5&#151;25</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Airplane</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,075</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,611</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">6</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Office furniture and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,472</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18,033</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">12&#151;20</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Retail gallery and stores furnishings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,070</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,339</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">25&#151;35</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Transportation equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,762</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,354</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">20&#151;25</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Leasehold improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,133</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,206</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">10&#151;20</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Construction in progress</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,442</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Advances to suppliers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">583</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">407,847</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(145,054</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Cost or</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Accumulated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Annual rate of</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">valuation</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">depreciation</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">depreciation</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Land</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,149</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Industrial buildings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">164,283</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(30,084</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">3&#151;10</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Machinery and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">112,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(57,861</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">11.5&#151;25</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Airplane</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,075</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,167</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">6</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Office furniture and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,025</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(15,619</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">12&#151;20</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F - 21
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Cost or</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Accumulated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Annual rate of</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">valuation</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">depreciation</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">depreciation</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Retail gallery and stores furnishings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,965</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,126</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">25&#151;35</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Transportation equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,725</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,920</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">20&#151;25</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Leasehold improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,676</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,480</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">10&#151;20</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Construction in progress</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,867</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Advances to suppliers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,197</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">389,262</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(117,257</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Construction in progress relates principally to manufacturing facilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>10. Other assets</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other assets consist of the following:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,277</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,061</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity in affiliated enterprises</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,867</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,650</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,274</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,884</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total, gross</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,418</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,595</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less impairment losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,119</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less accumulated amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,802</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12,248</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,616</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,228</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At December&nbsp;31, 2005 and 2004 the net book value of goodwill may be analyzed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross carrying amount</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,277</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,061</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less impairment losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,119</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less accumulated depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,155</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,449</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net book value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,122</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,493</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At December&nbsp;31, 2005 and 2004 the net book value of goodwill arising from business
acquisitions amounts to 9,122 and 4,493, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At December&nbsp;31, 2005 and 2004 investments in affiliated enterprises are accounted under the
equity method.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the impairment losses related to December&nbsp;31, 2004 of 6,119, refer to note 24.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>11. Short-term borrowings</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Short-term borrowings consist of the following:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bank borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,255</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bank overdrafts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,553</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,317</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,727</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,572</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F - 22
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While bank overdrafts are payable on demand, bank borrowings consist of unsecured line of
credit agreements with banks and have various short maturities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At December&nbsp;31, 2005 and 2004 the short-term borrowings included 4,174 and 5,482 denominated
in foreign currencies, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The weighted average interest rates on the above-listed short-term borrowings at December&nbsp;31,
2005 and 2004 are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bank borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">4.92</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3.45</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bank overdrafts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5.10</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">4.75</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Credit facilities available to the Group, including amounts guaranteed under surety bonds,
amounted to 92,974 and 108,992 at December&nbsp;31, 2005 and 2004, respectively. The unused portion of
these facilities amounted to 85,247 and 103,420 at December&nbsp;31, 2005 and 2004, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>12. Accounts payable-trade</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable-trade totalling 73,533 and 83,737 at December&nbsp;31, 2005 and 2004,
respectively, represent principally amounts payable for purchases of goods and services in Italy
and abroad, and includes 23,072 and 25,881 at December&nbsp;31, 2005 and 2004, respectively, denominated
in foreign currencies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>13. Accounts payable-other</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable-other are analyzed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for returns and warranties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,896</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,477</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Advances from customers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,785</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,422</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cooperative advertising and quantity discount</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,018</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,663</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Withholding taxes on payroll and on others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,375</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,367</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Payable to third parties for business acquisition</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">860</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">859</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Payable to minority interest for dividends</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">593</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">648</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,241</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,917</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,768</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,353</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>14. Taxes on income</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Italian companies are subject to two income taxes at the following rates:
</DIV>

<P align="center" style="font-size: 10pt">F - 23
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">IRES (state tax)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">33.00</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">33.00</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">34.00</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">IRAP (regional tax)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">4.25</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">4.25</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">4.25</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;12, 2003, the Italian Government approved the legislative decree n. 344 which
enacted certain changes in the fiscal legislation for fiscal years beginning on or after January&nbsp;1,
2004. The principal change made was the introduction of the new state income tax IRES which
replaced IRPEG, with the simultaneous elimination of the dual income tax system. The enacted IRES
tax rate for 2005 and 2004 is 33% of taxable income. IRES is a state tax and is calculated on the
taxable income determined on the income before taxes modified to reflect all temporary and
permanent differences regulated by the tax law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result of these new tax rules, the Company adjusted the effect of changes in IRPEG tax
rates on net deferred tax assets during the year ended December&nbsp;31, 2003, as it includes the
enactment date. These changes in tax rates resulted in a decrease of net deferred tax assets by 55
as of December&nbsp;31, 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Such tax law did not modify the existing IRAP regime. IRAP is a regional tax and each Italian
region has the power to increase the current rate of 4.25% by a maximum of 1.00%. In general, the
taxable base of IRAP is a form of gross profit determined as the difference between gross revenues
(excluding interest and dividend income) and direct production costs (excluding labour costs,
interest expenses and other financial costs).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Italian investment incentive schemes for under-industrialized regions, certain of the
Group&#146;s operating entities were entitled to enjoy a full exemption from IRPEG and a significant
part of IRAP for ten years. A very significant portion of the Group&#146;s consolidated earnings before
minority interest in 2003 was derived from companies entitled to some extent to the aforementioned
exemptions, the most significant of which expired in 2003. In addition, as from 2003 certain
foreign subsidiaries (Italsofa Shanghai Ltd, Softaly Shanghai Ltd, Italsofa Bahia Ltd, Minuano
Nordeste S.A. and Italsofa Romania) enjoy significant tax benefits, such as corporate income tax
exemptions or reductions of the corporate income tax rates effectively applicable, the most
significant of which will expire in 2012. The tax reconciliation table reported below demonstrates
the effect of such &#147;tax exempt income&#148; on the Group&#146;s 2005, 2004 and 2003 income tax charge.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Approximately 69.4%, 55.1% and 57.3% respectively, of the Group&#146;s consolidated earnings (loss)
before taxes were generated by domestic Italian operations during 2005, 2004 and 2003. However,
consolidated earnings (loss)&nbsp;before taxes and minority interest are analyzed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,144</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,878</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,319</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,586</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,208</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,640</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,730</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,086</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,959</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F - 24
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The effective income tax rates for the years ended December&nbsp;31, 2005, 2004 and 2003 were
26.5%, 48.9% and 18.5%, respectively. The actual income tax expense differs from the &#145;expected&#146;
income tax expense (computed by applying the state tax, which is 33% for 2005 and 2004, 34% for
2003, to income before income taxes and minority interest) as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected income (loss)&nbsp;tax charge at full tax rates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,871</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,908</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,626</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effects of:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Tax exempt income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,954</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,664</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19,080</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Aggregate effect of different tax
rates in foreign jurisdictions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,442</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,796</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(863</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Italian regional tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,727</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,954</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,819</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Non-deductible expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,187</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,075</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Depreciation and impairment of goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">396</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,931</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">570</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Effect of net change in valuation allowance
established against deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,157</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,119</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,180</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Tax effect of unremitted earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">405</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,011</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Tax effect of change in tax rates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Actual tax charge</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,110</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,501</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total taxes for the years ended December&nbsp;31, 2005, 2004 and 2003 relate to earnings from operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total income taxes for the years ended December&nbsp;31, 2005, 2004 and 2003 were allocated as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Italian</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,593</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,769</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,812</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,817</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,532</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,890</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,410</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,301</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,702</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Italian</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,260</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(760</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">393</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,040</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">109</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">406</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total (b)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,300</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(651</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">799</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total (a &#043; b)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,110</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,501</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The tax years from January&nbsp;1, 2000 for the majority of the Italian and Foreign companies are
open to assessment for additional taxes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The tax effects of temporary differences that give rise to significant portions of the
deferred tax assets and deferred tax liabilities at December&nbsp;31, 2005 and 2004 are presented below:
</DIV>

<P align="center" style="font-size: 10pt">F - 25
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Tax loss carryforwards</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,937</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,490</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Inventory obsolescence</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,490</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Provision for returns and discounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,873</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">796</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Allowance for doubtful accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,594</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,515</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Provision for sales representatives</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">555</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">816</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Provision for contingent liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">368</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">368</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other temporary differences</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,456</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total gross deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,527</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,441</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Less valuation allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,153</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,990</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,374</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,451</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unremitted earnings of subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,535</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,130</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Government grants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(658</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(809</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Revenue recognition</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(303</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(712</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other temporary differences</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(182</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,404</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total deferred tax liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,678</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,055</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,396</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A valuation allowance has been established for most of the tax loss carryforwards.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The valuation allowance for deferred tax assets as of December&nbsp;31, 2005 and 2004 was 13,153
and 8,990, respectively. The net change in the total valuation allowance for the years ended
December&nbsp;31, 2005 and 2004 was an increase of 4,163 and 930, respectively. In assessing the
realizability of deferred tax assets, management considers whether it is more likely than not that
some portion or all of the deferred tax assets will not be realized. The ultimate realization of
deferred tax assets is dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the scheduled reversal of
deferred tax liabilities, projected future taxable income, and the tax planning strategies in
making this assessment. Based upon the level of historical taxable income and projections for
future taxable income over the periods during which the deferred tax assets are deductible,
management believes it is more likely than not that the Company will realize the benefits of these
deductible differences, net of the existing valuation allowances at December&nbsp;31, 2005. The amount
of the deferred tax asset considered realizable, however, could be reduced in the near term if
estimates of future taxable income during the carryforward period are reduced.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net deferred income tax assets are included in the consolidated balance sheets as follows:
</DIV>

<P align="center" style="font-size: 10pt">F - 26
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">Current</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">Non current</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">Total</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,655</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,872</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,527</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Valuation allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,153</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,153</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,655</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,719</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,374</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,023</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(655</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,678</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,632</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,064</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,696</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">Current</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">Non current</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">Total</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,585</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,856</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,441</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Valuation allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,990</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,990</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,585</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,866</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,451</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,358</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,697</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,055</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,227</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">169</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,396</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The tax loss carryforwards of the Group total 49,356 and expire as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">547</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,979</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,372</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,458</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,356</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2005, taxes that are due on the distribution of the portion of
shareholders&#146; equity equal to unremitted earnings of most of the subsidiaries is 1,535 (1,130 at
December&nbsp;31, 2004). The Group has provided for such taxes as the likelihood of distribution is
probable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group has not provided for such taxes, amounting to 155 (240 at December&nbsp;31, 2004), for
some subsidiaries for which the likelihood of distribution is remote and earnings are deemed to be
permanently reinvested.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>15. Salaries, wages and related liabilities</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Salaries, wages and related liabilities are analyzed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Salaries and wages</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,954</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,643</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Social security contributions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,298</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,066</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Vacation accrual</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,831</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,023</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,083</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,732</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>16. Long-term debt</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Long-term debt at December&nbsp;31, 2005 and 2004 consists of the following:
</DIV>

<P align="center" style="font-size: 10pt">F - 27
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2.25% long-term debt payable in annual equal instalments
with final payment due May&nbsp;30, 2015</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,699</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,166</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.0% long-term debt payable in semi-annual equal
instalments with final payment due October&nbsp;2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,309</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,884</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">4.0% long-term debt payable in quarterly equal instalments
with final payment due in September&nbsp;2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Others with various maturity dates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">495</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,569</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less current instalments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(426</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(571</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term debt, excluding current instalments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,582</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,998</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loan maturities after 2006 are summarized below:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,368</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">252</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">259</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">266</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,437</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,582</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At December&nbsp;31, 2005 long-term debt denominated in foreign currencies amounts to 1,309 (3,278
at December&nbsp;31, 2004).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest expense related to long-term debt for the years ended December&nbsp;31, 2005, 2004 and
2003 was 139, 110 and 155 respectively. Interest expense is paid with the related instalment
(quarterly, semi-annual or annual).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>17. Other liabilities</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other liabilities consist of:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for contingent liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,868</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,308</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Termination indemnities for sales agents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,490</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,191</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Payable to third parties for business acquisition</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">860</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,358</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,359</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F - 28
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>18. Minority interest</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Minority interest shown in the accompanying consolidated balance sheet at December&nbsp;31, 2005 is
709 (916 at December&nbsp;31, 2004).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>19. Shareholders&#146; equity</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The share capital is owned as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mr.&nbsp;Pasquale Natuzzi</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">47.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">47.7</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Miss Anna Maria Natuzzi</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2.6</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2.6</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mrs.&nbsp;Annunziata Natuzzi</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2.5</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Public investors</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">47.2</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">47.2</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An analysis of the reserves is as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Legal reserve</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,199</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,199</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Monetary revaluation reserve</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,344</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,344</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Government capital grants reserve</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,749</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,749</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,292</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,292</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The number of ordinary shares issued at December&nbsp;31, 2005 and 2004 is 54,681,628,
respectively. The par value of one ordinary share is euro 1.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In July&nbsp;2000, the shareholders of the Company approved a share repurchase program to buy-back
up to 4&nbsp;million shares or 51,646. The Company spent 23,234 in 2000 and 14,594 in 2001 to repurchase
shares. The Company repurchased 1,782,700 shares in 2000 at an average cost of US$ 11.3 per share
and 1,061,200 shares in 2001 at an average cost of US$ 12.3 per share. As of December&nbsp;31, 2003 the
repurchase program is expired. Under Italian GAAP, the purchase of shares was accounted for as a
non-current asset and an amount equal to the cost of shares acquired was reclassified from retained
earnings to an undistributed treasury shares reserve.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During an extraordinary general meeting on November&nbsp;21, 2003 shareholders approved the
cancellation of all treasury shares. On the basis of the Italian civil code this decision became
effective on February&nbsp;21, 2004. As a consequence, as from this date the Company has reduced
shareholders&#146; equity by the amount of 37,828.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Italian law requires that 5% of net income of the parent company and each of its consolidated
Italian subsidiaries be retained as a legal reserve, until this reserve is equal to 20% of the
issued share capital of each respective company. The legal reserve may be utilized to cover losses;
any portion which exceeds 20% of the issued share capital is distributable as dividends. The
combined legal reserves totalled 12,378 and 12,329 at December&nbsp;31, 2005 and 2004, respectively.
</DIV>


<P align="center" style="font-size: 10pt">F - 29
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 12pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No taxes would be payable on the distribution of the monetary revaluation reserve and
government capital grants reserve.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The cumulative translation adjustment included in shareholders&#146; equity related to translation
of the Group&#146;s foreign assets and liabilities at December&nbsp;31, 2005 was a credit of 3,544.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>20. Share grants and options</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order to provide incentives to certain personnel, the shareholders of the Company on July,
23 2004 approved in its Shareholders&#146; Ordinary and Extraordinary Meeting the guidelines of a share
incentive plan in favor of Natuzzi Group&#146;s managers subject to assignment of Natuzzi S.p.A. shares.
The 2004 plan will cover the period 2005-2009. During this period the Company will assign
performance share grants and performance share options related to the achievement of pre-determined
levels of individual, enterprise and share price targets related to the years 2004 and 2005. The
maximum number of shares to be issued in connection with the plan will be 3,000,000, each with a
nominal value of &#128; 1.00, of which 500,000 in the form of restricted stock units and the
remaining from the conversion of stock options. The Shareholders&#146; Meeting has delegated to the
Board of Directors the regulation and management of the 2004 plan, and the responsibility for the
issuance of the options and grants under the 2004 plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the 2004 plan an employee is entitled to grants of restricted stock units and options if
certain performance targets are met. In particular, the Plan provides for: (a)&nbsp;grants of restricted
stock units for achievement of pre-determined objectives (management by objectives or MBOs) in 2004
and 2005, which vest and settle if the applicable performance targets are achieved, with respect to
the 2004 MBOs, in 2006 and 2007, and, with respect to 2005 MBOs, in 2007 and 2008; (b)&nbsp;grants of
options that only become exercisable if MBOs in 2004 and 2005 are achieved; and (c)&nbsp;the opportunity
for participants to receive additional 50% options for combined achievement of 2004 and 2005 MBOs
and the targeted price of the Company&#146;s share (during a reference period) on the New York Stock
Exchange.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order for an employee to obtain the additional 50% options based on 2004 MBOs, the
following conditions have to be met (first tranche): (a)&nbsp;achievement of 2004 MBOs, and the
arithmetic mean of the Company&#146;s American Depositary Shares (ADS)&nbsp;during the period from October&nbsp;1,
2005 and December&nbsp;31, 2005 equal or greater than U.S. dollars 15. Similarly, in order for an
employee to obtain the additional 50% options based on 2005 MBOs, the following conditions have to
be met (second tranche): achievement of 2005 MBOs, and the arithmetic mean of the Company&#146;s
American Depositary Shares (ADS)&nbsp;during the period from October&nbsp;1, 2007 and December&nbsp;31, 2007 equal
or greater than U.S. dollars 24.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The share grants to be issued for the achievement of 2004 MBOs would be issued in two equal
installments during January&nbsp;2006 and 2007. Similarly for the achievement of 2005 MBOs the share
grants would be issued in two equal installments during January&nbsp;2007 and 2008. The vesting period
for these grants is considered to be reference year (2004 or 2005), as continuation of employment
after that date is not a condition for the said share grants.
</DIV>

<P align="center" style="font-size: 10pt">F-30
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The share options to be issued have an exercise price of euro 8.51 (U.S. dollars 10.04 at
December&nbsp;31, 2005 exchange rate), calculated in accordance with fiscal law in force. An employee
would be entitled to share options and additional options on the following dates: 50% of 2004 MBOs
and 50% of first tranche in January&nbsp;2006; remaining 50% of 2004 MBOs, 50% of the first tranche and
50% of 2005 MBOs in January&nbsp;2007; remaining 50% of 2005 MBOs and 50% of the second tranche in
January&nbsp;2008; remaining 50% of second tranche in January&nbsp;2009. If the employee is not on employment
on the above dates, he or she is not entitled to the remaining options. Therefore vesting dates for
the options is determined to be the above dates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The status of the share grants and options under the plan, as of December&nbsp;31, 2005 and 2004,
is as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">MBO 2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">MBO 2004</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Number of share grants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,577</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">113,820</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Number of options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">165,946</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">369,752</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Number of additional options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82,973</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">304,496</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">483,572</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On the basis of the plan the exercise price for the share grants is zero, while for the
options and additional options is euro 8.51 (U.S. dollars 10.04 at December&nbsp;31, 2005 exchange
rates). At December&nbsp;31, 2005 and 2004 the market price of Natuzzi&#146;s shares is euro 5.93 (U.S.
dollars 7.00 at December&nbsp;31, 2005 exchange rate) and euro 7.96 (U.S. dollars 10.85 at December&nbsp;31,
2004 exchange rates), respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Italian GAAP the Company does not record in the consolidated statement of earnings the
compensation expense related to share based compensation plans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>21. Commitments and contingent liabilities</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Several companies of the Group lease manufacturing facilities and stores under non-cancellable
lease agreements with expiry dates through 2023. Rental expense recorded for the years ended
December&nbsp;31, 2005, 2004 and 2003 was 13,970, 11,976 and 11,046, respectively. As of December&nbsp;31,
2005, the minimum annual rental commitments are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,443</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,513</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,456</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,436</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,424</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,371</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,643</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-31
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain banks have provided guarantees at December&nbsp;31, 2005 to secure payments to third
parties amounting to 8,245 (6,092 at December&nbsp;31, 2004). These guarantees are unsecured and have
various maturities extending through December&nbsp;31, 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;1996, the Company and the &#147;Contract Planning Service&#148; of the Italian Ministry of
the Industrial Activities signed a &#147;Program Agreement&#148; with respect to the &#147;Natuzzi 2000 project&#148;.
In connection with this project, Natuzzi Group prepared a multi-faceted program of industrial
investments for the increase of the production capacity of leather and fabric upholstered furniture
in the area close to its headquarters in Italy. According to this &#147;Program Agreement&#148;, Natuzzi
should have realized investments for 295,156 and at the same time the Italian government should
have contributed in the form of capital grants for 145,455. During 2003 Natuzzi revised its growth
and production strategy due to the strong competition of products realized by competitors in
countries like China and Brazil. Therefore, as a consequence of this change in the economic
environment in 2003 Natuzzi requested to the Italian Ministry of the Industrial Activities the
revision of the original &#147;Program Agreement&#148; as follows: reduction of the investment to be realized
from 295,156 to 69,772, and reduction of the related capital grants from 145,455 to 34,982. During
April&nbsp;2005 the Company received from the Italian Government the final approval of the &#147;Program
Agreement&#148; confirming these revisions. Natuzzi received under the aforementioned project capital
grants in 1997 and 2005 for 27,072 and 7,910, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The capital grants are secured by surety bonds for 26,005 from a bank. These surety bonds are
unsecured and will expire when the Italian Ministry of Industrial Activities releases the final
approvals of all investments made.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In prior years the Company and certain Italian subsidiaries, on the basis of the Italian law,
for the personnel employed under the contract scheme referred to as &#145;training and work&#146; enjoyed an
exemption for the social contribution due to the National Institute for Social Security (&#145;<I>Istituto
Nazionale per la Previdenza Sociale</I>&#146; or &#145;INPS&#146;) for a certain period. During 2004, the European
Court of Justice decided that these grants were not in conformity with European Union law and
regulations in force about competition. As a consequence of this disposition the European
Commission has established that Italy has to recover from its enterprises all the social
contribution not paid from November&nbsp;1995 to May&nbsp;2001 for the above work contracts. Therefore, the
Italian National Institute for Social Security has communicated to the Company and certain Italian
Subsidiaries to reimburse all the social contribution due and not paid, amounting to 16,000, by end
of February&nbsp;2005. The Company, based on the advice of its legal consultants, did not pay the
amounts claimed back and, at the same time, has activated a legal action against the National
Institute for Social Security in order to obtain the cancellation of the above request of 16,000.
The Company intends to vigorously defend its position. The Company believes that the probability of
a favorable final outcome is very high. Therefore, the Company for this liability recorded a
provision of 475 in the Consolidated Financial Statements as of December&nbsp;31, 2005 and 2004, as this
amount is considered the probable final liability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group is also involved in a number of claims (including tax claims) and legal actions
arising in the ordinary course of business. In the opinion of management, the ultimate disposition
</DIV>

<P align="center" style="font-size: 10pt">F-32
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">of these matters, after considering amounts accrued, will not have a material adverse effect on the Group&#146;s consolidated financial position or results of operations.

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>22. Segmental and geographical information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group operates in a single industry segment, that is, the design, manufacture and
marketing of contemporary and traditional leather and fabric upholstered furniture. It offers a
wide range of upholstered furniture for sale, manufactured in production facilities located in
Italy and abroad (Romania, Brazil and China).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net sales of upholstered furniture analyzed by coverings are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Leather upholstered furniture</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">498,942</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">547,923</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">550,029</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fabric upholstered furniture</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95,895</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">117,598</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">123,921</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">594,837</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">665,521</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">673,950</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Within leather and fabric upholstered furniture, the Company offers furniture in the following
categories: stationary furniture (sofas, loveseats and armchairs), sectional
furniture, motion furniture, sofa beds and occasional chairs, including recliners and massage
chairs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following tables provide information upon the net sales of upholstered furniture and of
long-lived assets by geographical location. Net sales are attributed to countries based on the
location of customers. Long-lived assets consist of property, plant and equipment.
</DIV>

<P align="center" style="font-size: 10pt">F-33
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Sales of upholstered furniture</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">United States of America</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">207,215</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">238,807</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">280,770</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Italy</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67,020</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73,017</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,277</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">England</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,805</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83,391</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80,409</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Spain</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,668</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,557</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,045</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Canada</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,608</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,175</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,910</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">France</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,622</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,026</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,393</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Germany</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,329</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,743</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,392</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Belgium</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,761</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,956</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,959</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Australia</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,543</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,414</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,356</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Holland</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,654</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,075</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Norway</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,271</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,084</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ireland</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,188</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,419</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,760</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other countries (none greater than 2%)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86,153</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">87,790</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,591</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">594,837</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">665,521</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">673,950</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Long lived assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Italy</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">144,398</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">149,449</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Romania</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,046</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,026</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Brazil</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,677</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,819</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">China</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,490</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,377</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">United States of America</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,789</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,105</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other countries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,393</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,229</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">262,793</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">272,005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, the Group also sells minor volumes of excess polyurethane foam, leather
by-products and certain pieces of furniture (coffee table, lamps and rugs) which, for 2005, 2004
and 2003 totalled 75,089, 87,913 and 95,629, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No single customer accounted for more than 5% of net sales in 2005, 2004 or 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>23. Cost of sales</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cost of sales is analyzed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Opening inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">112,601</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97,518</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84,081</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">295,277</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">335,432</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">355,867</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Labor</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">108,327</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">107,173</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">104,495</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Third party manufacturers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,340</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,943</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,859</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other manufacturing costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,637</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,136</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,980</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Closing inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(115,690</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(112,601</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(97,518</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">459,492</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">484,601</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">508,764</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-34
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>24. Other income (expense), net</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other income (expense), net is analyzed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,857</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,375</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,701</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expense and bank commissions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,803</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,961</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,317</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest (expense)&nbsp;income, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(586</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">384</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gains (losses)&nbsp;on foreign exchange, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,211</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,809</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrealized exchange
gains (losses) on domestic currency swaps</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,767</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,101</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,276</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gains (losses)&nbsp;on foreign exchange</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,556</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,292</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,340</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Losses on securities, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(50</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(754</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,462</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,548</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,339</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,960</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,892</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,631</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Gains (losses)&nbsp;on foreign exchange are related to the following:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net realized gains (losses)&nbsp;on
domestic currency swaps</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,269</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,973</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,369</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net realized gains (losses)&nbsp;on accounts
receivable and payables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,434</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,052</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,585</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left: 15px; text-indent:-15px">Net unrealized gains (losses)&nbsp;on
accounts receivable and payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,046</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,730</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(17,720</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,211</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,809</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other, net consists of the following:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Revenue for capital grants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,380</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Export incentive</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Penalties to landlords</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(658</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Impairment loss of goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,119</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Write off of fixed assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,770</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,311</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain on disposal of subsidiary</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,419</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Impairment loss on fixed assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,292</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pre-acquisition loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,694</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">915</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,537</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">259</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,462</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,548</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,339</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-35
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Revenue for capital grants</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2005, as indicated in note 21, Natuzzi received under the aforementioned project
&#147;Natuzzi 2000&#148; additional capital grants amounting to 7,910. A part of these capital grants,
amounting to 4,380, is related to depreciation of property, plant and equipment recorded in the
consolidated statements of earnings in the years prior to 2005. Therefore, for this reason the
amount of 4,380 has been classified under the caption &#147;other income (expense), net&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An other portion of these capital grants, amounting to 356, has been classified in net sales
as they relate to the depreciation of 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The remaining portion of 3,174 has been classified in the consolidated balance sheet at
December&nbsp;31, 2005 as deferred income, and it will be charged to statements of earnings as revenue
on a systematic basis over the useful life of the related asset.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Export incentive benefit</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2005, the Company received an export incentive benefit of 2,100. This incentive is
measured on the basis of the export sales realized during a certain period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Penalties to landlords</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has charged to other income (expense), net of 2005 the provision set up for
the one time penalties, amounting to 658, that it expects to negotiate with the landlords of
several store located in England, for the termination of the related operating lease contracts
before the term specified in the lease agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Pre-acquisition loss for Koine&#232; S.r.l.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The pre-acquisition loss related to Koine&#232; S.r.l. business acquisition, amounting to 495,
has been eliminated in the consolidated statements of earnings for the year ended at December&nbsp;31,
2005 (see also note 27 (f)).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Impairment loss of goodwill</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The impairment loss for goodwill of 6,119 is related to Natuzzi UK Group (see note 1).
Natuzzi UK Group revised its growth strategy as a consequence of the actual and forecasted critical
situation in the United Kingdom market, and the decision of the Company to redesign its
distribution strategy in this country. As a result of this revision, the carrying value of the
goodwill related to such reporting unit as of December&nbsp;31, 2004 was impaired. The fair value of
such reporting unit as of December&nbsp;31, 2004 was determined on the basis of the methodology so
called &#147;Unlevered Discounted Cash
Flow&#148;. The comparison of the fair value with the carrying value of this reporting unit
resulted in the determination of an impairment in value of 6,119.
</DIV>

<P align="center" style="font-size: 10pt">F-36
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Gain on disposal of subsidiary</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2004 the Company sold 100% of the outstanding common shares of Spagnesi
S.p.A. to a third party, for a cash consideration of 5,475. The gain recorded in the consolidated
statements of earnings in other income (expense), net is 3,419 (see also note 1 and note 27 (r)).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Impairment loss of long lived assets</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has evaluated the impairment of long lived assets in accordance with its
accounting policy (whenever the events or changes in circumstances indicate that the carrying
amount of an asset may be not recoverable). Based on such analysis in 2003 the Company recorded an
impairment loss of 4,292.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Pre-acquisition loss for Natuzzi UK Group</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The pre-acquisition loss related to the Natuzzi UK Group acquisition, amounting to 1,694,
has been eliminated in the consolidated statement of earnings for the year ended at December&nbsp;31,
2003 (see also note 27 (f)).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>25. Financial instruments and risk management</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A significant portion of the Group&#146;s net sales, but only approximately 40% of its costs, are
denominated in currencies other than the euro, in particular the U.S. dollar. The remaining costs
of the Group are denominated principally in euros. Consequently, a significant portion of the
Group&#146;s net revenues are exposed to fluctuations in the exchange rates between the euro and such
other currencies. The Group uses forward exchange contracts (known in Italy as domestic currency
swaps) to reduce its exposure to the risks of short-term declines in the value of its foreign
currency denominated revenues. The Group uses such domestic currency swaps to protect the value of
its foreign currency denominated revenues, and not for speculative or trading purposes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Group is exposed to credit risk in the event that the counterparties to the domestic
currency swaps fail to perform according to the terms of the contracts. The contract amounts of the
domestic currency swaps described below do not represent amounts exchanged by the parties and,
thus, are not a measure of the exposure of the Group through its use of those financial
instruments. The amounts exchanged are calculated on the basis of the contract amounts and the
terms of the financial instruments, which relate primarily to exchange rates. The immediate credit
risk of the
Group&#146;s domestic currency swaps is represented by the unrealized gains or losses on the
contracts. Management of the Group enters into contracts with creditworthy counter-parties and
believes that the risk of material loss from such credit risk to be remote. The table below
summarizes in euro equivalent the contractual amounts of forward exchange contracts used to hedge
principally future cash flows from accounts receivable and sales orders at December&nbsp;31, 2005 and
2004:
</DIV>

<P align="center" style="font-size: 10pt">F-37
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">U.S. dollars</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72,496</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66,108</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">British pounds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,783</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,451</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Canadian dollars</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,698</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,629</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Australian dollars</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,744</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,173</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Norwegian kroner</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,928</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,774</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Swedish kroner</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,441</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,932</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Japanese yen</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,504</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,740</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Swiss francs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">656</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,240</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Danish kroner</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">940</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">140,095</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">172,987</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table presents information regarding the contract amount in euro equivalent
amounts and the estimated fair value of all of the Group&#146;s forward exchange contracts. Contracts
with unrealized gains are presented as &#145;assets&#146; and contracts with unrealized losses are presented
as &#145;liabilities&#146;.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Contract</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Unrealized</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Contract</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Unrealized</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">amount</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">gains (losses)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">amount</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">gains (losses)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,075</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">392</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">159,584</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,191</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94,020</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,159</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,403</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(90</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">140,095</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,767</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">172,987</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,101</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At December&nbsp;31, 2005 and 2004, the forward exchange contracts had a net unrealized loss of
4,767 and a net unrealized gain of 7,101, respectively. These amounts are recorded in other income
(expense), net in the consolidated statements of earnings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The carrying value of forward exchange contracts is determined based on the unrealized loss
and gain of such contracts recorded in the consolidated financial statements. Unrealized gains
(losses)&nbsp;on forward exchange contracts is determined by using residual maturity rate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Refer to notes 3 (b)&nbsp;for the Group&#146;s accounting policy on forward exchange contracts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>26. Fair value of financial instruments</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table summarizes the carrying value and the estimated fair value of the Group&#146;s
financial instruments:
</DIV>

<P align="center" style="font-size: 10pt">F-38
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Carrying</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Fair</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Carrying</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Fair</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">value</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">- Marketable debts securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">- Long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,614</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,569</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,829</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents, receivables, payables and short-term borrowings approximate fair
value because of the short maturity of these instruments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Market value for quoted marketable debt securities is represented by the securities exchange
prices at year-end. Market value for unquoted securities is represented by the prices of comparable
securities, taking into consideration interest rates, duration and credit standing of the issuer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fair value of the long-term debt is estimated based on cash flows discounted using current
rates available to the Company for borrowings with similar maturities.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>27.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Application of generally accepted accounting principles in the United States of
America</B></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The established accounting policies followed in the preparation of the consolidated financial
statements (Italian GAAP) vary in certain significant respects from those generally accepted in the
United States of America (US GAAP).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The calculation of net earnings (loss)&nbsp;and shareholders&#146; equity in conformity with US GAAP is
as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Reconciliation of net earnings (loss):</B>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net earnings (loss)&nbsp;under Italian GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14,624</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,353</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,300</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Adjustments to reported income:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(a)&nbsp;Revaluation of property,
plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(b)&nbsp;Derivative and hedging activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,713</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(c)&nbsp;Government grants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,119</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">612</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">673</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(d)&nbsp;Revenue recognition</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,804</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">966</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,482</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(l)&nbsp;Goodwill and intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(249</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(925</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,033</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(m)&nbsp;Share grants and options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">136</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,140</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(n)&nbsp;Translation of foreign financial statements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,684</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(o)&nbsp;Penalties to landlords</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">658</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax effect of US GAAP adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(446</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">860</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">225</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net earnings (loss)&nbsp;in conformity with US GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,889</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,753</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,027</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic earnings (loss)&nbsp;per share in conformity
with US GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.13</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.70</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted earnings (loss)&nbsp;per share in conformity
with US GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.13</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.70</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-39
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Reconciliation of Shareholders&#146; equity :</B>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="font-size: 8pt">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD colspan="2" align="center" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD colspan="2" align="center" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shareholders&#146; equity under Italian GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">473,025</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">487,933</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(a)&nbsp;Revaluation of property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(615</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(644</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(c)&nbsp;Government grants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(15,489</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18,608</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(d)&nbsp;Revenue recognition</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,645</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,449</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(l)&nbsp;Goodwill and intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,898</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,387</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(n)&nbsp;Translation of foreign financial statements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,860</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(o)&nbsp;Penalties to landlords</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">658</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax effect of US GAAP adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,916</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shareholders&#146; equity in conformity with US GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">453,682</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">464,535</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The differences which have a material effect on net earnings (loss)&nbsp;and/or shareholders&#146;
equity are disclosed as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Certain property, plant and equipment have been revalued in accordance with Italian
laws. The revalued amounts are depreciated for Italian GAAP purposes. US GAAP does not allow for
such revaluations, and depreciation is based on historical costs. The revaluation primarily relates
to industrial buildings. The adjustment to net earnings (loss)&nbsp;and shareholders&#146; equity represents
the reversal of excess depreciation recorded under Italian GAAP on revalued assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Under US GAAP, SFAS 133 established comprehensive accounting and reporting standards for
derivative instruments and hedging activities. SFAS 133 requires that an entity record all
derivatives, freestanding and certain embedded derivatives, as either assets or liabilities in the
statement of financial position. This statement also
defines and allows companies to apply hedge accounting to its designated derivatives under
certain instances, provided an entity meets the strict documentation criteria of SFAS 133. It also
requires that all derivatives be marked to market on an ongoing basis. Along with the derivatives,
in the case of qualifying hedged, the underlying hedged items, are also to be marked to market.
These market value adjustments are to be included either in the income statement or other
comprehensive income, depending on the nature of the hedged transaction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company does not currently qualify for hedge criteria under SFAS 133 and has not used
hedge accounting for Italian GAAP in 2005, 2004 and 2003 (see note 3(a) and (b)). In particular,
the Company does not formally document all relationships between its hedging
</DIV>

<P align="center" style="font-size: 10pt">F-40
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">instruments (forward
exchange contracts known in Italian financial markets as domestic currency swaps) and its hedged
items which includes linking all derivatives that are designated as foreign-currency hedges to
specific accounts receivable on the balance sheet or to specific firm committents or forecasted
transactions. The Company also does not formally assess, both at the hedge&#146;s inception and on an
ongoing basis, whether the derivatives that are used in hedging its transactions are highly
effective in offsetting changes in fair values of its hedged items.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result under Italian GAAP and US GAAP at December&nbsp;31, 2005, 2004 and 2003, the Company
accounted for all its derivative financial instruments at their fair value and all its accounts
receivable in foreign currency were remeasured at year end exchange rates. All marked to market
adjustments were recorded in the income statement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The adjustment to net earnings for the year ended on December&nbsp;31, 2003 represents the reversal
of the US GAAP difference related 2002. This difference was due to the hedge accounting followed by
Natuzzi under Italian GAAP which did not qualify for hedge accounting under US GAAP.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Under Italian GAAP until December&nbsp;31, 2000 government grants related to capital
expenditures were recorded, net of tax, within reserves in shareholders&#146; equity. Subsequent to that
date such grants have been recorded as deferred income and recognized in the statement of earnings
as revenue or other income, as appropriate under Italian GAAP (see note 3(m)), on a systematic
basis over the useful life of the asset.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under US GAAP, such grants, when received, are classified either as a reduction of the cost of
the related fixed asset or as a deferred credit and amortized over the estimated remaining useful
lives of the assets. The amortization is treated as a reduction of depreciation expense and
classified in the statement of earnings according to the nature of the asset to which the grant
relates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The adjustments to net income (loss)&nbsp;represent mainly the annual amortization of the pre
December&nbsp;31, 2000 capital grants determined based over the remaining useful life of the related
fixed assets. The adjustments to shareholders&#146; equity are to reverse the amounts of capital grants
credited directly to equity for Italian GAAP purposes, net of the amounts of amortization of such
grants for US GAAP purposes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of deferred income related to grants recognized as revenues under Italian GAAP of
1,239, 864 and 868 for the years ended December&nbsp;31, 2005, 2004 and 2003 respectively would be
reclassified to depreciation expense and recorded in cost of goods sold under US GAAP, in the
period such amounts are recognized.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, under Italian GAAP the Company recorded in other income (expenses), net (see note
24) for the year ended December&nbsp;31, 2005 revenues for grants amounting to 4,380. Under US GAAP this
amount would be reclassified to depreciation expense and recorded in cost of goods sold, in the
period such amounts are recognized.
</DIV>

<P align="center" style="font-size: 10pt">F-41
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Under Italian GAAP, the Group recognizes sales revenue, and accrued costs associated
with the sales revenue, at the time products are shipped from its manufacturing facilities located
in Italy and abroad. A significant part of the products is shipped from factories directly to
customers under terms that risks and ownership are transferred to the customer when the customer
takes possession of the goods. These terms are &#145;delivered duty paid&#146;, &#145;delivered duty unpaid&#146;,
&#145;delivered ex quay&#146; and &#145;delivered at customer factory&#146;. Delivery to the customer generally occurs
within one to six weeks from the time of shipment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;US GAAP requires that revenue should not be recognized until it is realized or realizable and
earned, which is generally at the time delivery to the customer occurs and the risks of ownership
pass to the customer. Accordingly, the Italian GAAP for revenue recognition is at variance with US
GAAP. The principal effects of this variance on the accompanying consolidated balance sheet as of
December&nbsp;31, 2005 and 2004 and related consolidated statements of earnings for each of the years in
the three-year period ended December&nbsp;31, 2005 are indicated below:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Effects</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Effects</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Variation</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Increase</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Increase</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>for</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 0px solid #000000"><B>Consolidated balance sheet</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000"><B>(Decrease)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000"><B>(Decrease)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Trade receivables, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(33,106</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(36,623</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,517</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,711</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,549</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(838</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total effect on current assets (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,395</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,074</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,679</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounts payable-trade</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,750</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,625</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(125</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,468</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,535</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,067</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total effect on current liabilities (b)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,218</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,160</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">942</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total effect on shareholders&#146; equity (a-b)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,177</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,914</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,737</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 0px solid #000000"><B>Consolidated statement of earnings</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,517</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,640</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">741</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,679</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,995</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,068</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,804</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">966</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,482</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total effect on net earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,737</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,778</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">917</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;During 2003 (see note 1) the Company acquired a 100% interest in each of the following
two entities: Natuzzi UK Group and Minuano Nordeste SA. Both acquisitions were accounted for as
business combinations under Italian GAAP. The Natuzzi UK Group acquisition qualifies as a business
combination under US GAAP in accordance with the provisions of SFAS
</DIV>

<P align="center" style="font-size: 10pt">F-42
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">141. However, in accordance
with EITF 98-3 the acquisition of 100% interest in Minuano Nordeste SA does not qualify as an
acquisition of a business. Therefore, under Italian GAAP the Minuano acquisition was considered to
be a business acquisition, while under US GAAP the same has been accounted as an asset acquisition
which did not result in goodwill. Management has determined that the difference between purchase
price and the fair value of the net tangible assets acquired is due to export incentive benefit
that this entity is entitled to upon completion of its manufacturing facilities and export of the
furniture manufactured in Brazil. The export incentive is available until 2015. The related
deferred tax liabilities were established by using the &#147;simultaneous equations method&#148;. The excess
of purchase price over the fair value of net assets acquired, recorded as goodwill under Italian
GAAP, has been allocated to intangible assets under US GAAP, as follows:
</DIV>



<P align="center" style="font-size: 10pt">F-43
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">US GAAP</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">IT GAAP</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">Difference</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current and non current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">253</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">253</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,141</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,141</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,053</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,053</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current and non current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,088</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,088</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase price</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,298</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,298</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;Under Italian GAAP the pre-acquisition results of an acquired entity can be reflected in
the operating results of the acquiring entity provided the acquisition was completed within 6
months of the beginning of the acquiring entity&#146;s fiscal year. Although, the pre-acquisition
revenues and costs of the acquired entity may be included in the statement of earnings of the
acquiring company, the resulting pre-acquisition net income or loss is eliminated. The following
pre-acquisition amounts of Koine&#232; S.r.l. and Natuzzi UK Group (see note 1) were included in the
Italian GAAP consolidated statement of earnings for the years ended December&nbsp;31, 2005 and 2003:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Koine&#232; S.r.l.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Natuzzi UK Group</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">943</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,945</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(483</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,798</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">460</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,147</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(417</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,066</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">General and administrative expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(175</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,113</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(132</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,032</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other income, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(132</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,481</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss before taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(551</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">551</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under US GAAP the above pre-acquisition amounts would not be included in the consolidated
statement of earnings for the years ended December&nbsp;31, 2005 and 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;During 2005 (see note 1) the Company acquired 100% of the equity interest of Koine&#232;
S.r.l., and the purchase price was 2,019. Koine&#232; is an Italian entity that was operating seven
stores under &#147;Divani &#038; Divani by Natuzzi&#148; trade name. The stores are located in the Abruzzo and
Marche regions of Italy. This acquisition was accounted for as business combination under Italian
GAAP. This acquisition qualifies as a business combination under US GAAP. However, under Italian
GAAP the difference between purchase price and the fair value of the net assets acquired was
allocated to goodwill,
while under US GAAP the same difference was allocated
</DIV>

<P align="center" style="font-size: 10pt">F-44
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">in part to goodwill and in part to
intangibles. The allocation of purchase price under US GAAP and Italian GAAP is summarized as
follows:
</DIV>


<P align="center" style="font-size: 10pt">F-45
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">US GAAP</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">IT GAAP</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">Difference</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">985</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,664</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(679</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Order backlog</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,082</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,082</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other non current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,634</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,634</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(403</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(403</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,080</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,080</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(306</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(306</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase price</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,019</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,019</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The acquired order backlog has been recognized in full in the statement of earnings of 2005,
as it relates to one time orders that became revenue soon after the acquisition and before December
31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;During 2005 (see note 1) the Company acquired a business composed by seven stores
&#147;Divani &#038; Divani by Natuzzi&#148; located in Rome, and the purchase price was 4,810. This acquisition
was accounted for as business combination under Italian GAAP. This acquisition qualifies as a
business combination under US GAAP. However, under Italian GAAP and US GAAP the difference between
purchase price and fair value of the net assets acquired was allocated to goodwill. The allocation
of purchase price under US GAAP and Italian GAAP is summarized as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">US</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">IT</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">GAAP</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">GAAP</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">Difference</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,709</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,709</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fixed Assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">221</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">221</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Leasehold improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">313</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">313</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(143</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(143</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase price</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,810</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,810</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;On December&nbsp;23, 2005 (see note 1) the Company acquired an entity for which its sole asset
was a store located in the centre of Milan&#146;s main shopping and commercial area. The cash
consideration paid by the Company for this acquisition was 1,000. At the time of acquisition there
were no employees, inventory or revenues associated with this asset. Further, in January&nbsp;2006 the
Company started some constructions works in order to set up in the store the Natuzzi&#146;s layout
selling system. The Company expects to start trading in the store at beginning of May&nbsp;2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Italian GAAP the acquisition of this store was considered to be a business acquisition,
while under US GAAP the same has been accounted as an asset acquisition in accordance with EITF
98-3, which did not result in a goodwill. Natuzzi&#146;s management
has determined that the difference between purchase price and the fair value of the net
tangible assets
</DIV>

<P align="center" style="font-size: 10pt">F-46
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">acquired is due to the key location of the store acquired. Therefore, under US GAAP
this intangible of 957 is depreciated over the term of the operating lease agreement. The related
deferred tax liabilities are established by using &#147;simultaneous equations method&#148;.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table reports the allocation of the purchase price both under US and Italian
GAAP:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">US GAAP</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">IT GAAP</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">Difference</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(600</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">957</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">957</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Leasehold improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(357</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(357</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)&nbsp;Under Italian GAAP, the Company amortizes the goodwill arising from business
acquisitions on a straight-line basis over a period of five years. US GAAP states that goodwill
acquired in a purchase business combination completed after July&nbsp;1, 2001 is not amortized, but
instead tested for impairment at least annually in accordance with provisions of SFAS No.&nbsp;142.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, under Italian GAAP, the Company has allocated certain intangible assets, having
definite lives and arising from a business acquisition and asset acquisition, under the caption
goodwill. Under US GAAP the Company would have classified such as intangible assets, would have
amortized these over their estimated useful lives to their residual values, and would have reviewed
these for impairment in accordance with SFAS No.&nbsp;144.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The changes in the carrying amount of goodwill, intangibles assets and deferred taxes arising
from business and asset acquisitions completed after July&nbsp;1, 2001, are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 0px solid #000000">Goodwill</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 0px solid #000000">Intangibles</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 0px solid #000000">Deferred taxes</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">US</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Italian</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">US</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Italian</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">US</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Italian</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">528</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">337</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Acquisition of Natuzzi UK Group</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,179</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,179</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Acquisition of Minuano</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,053</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,141</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,088</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,329</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Impairment losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(528</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(232</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,179</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,141</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,088</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Acquisition of Divani Due S.r.l.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,251</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,251</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,647</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(512</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Impairment losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(9,179</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,119</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,251</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,493</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,629</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,914</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Acquisition of Koine&#232; S.r.l.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">985</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,664</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,082</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(403</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Acquisition of stores in Rome</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,709</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,709</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Acquisition of a store in Milan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">957</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(357</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fulfilment of order backlog</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,082</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">403</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,344</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(511</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(23</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,945</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,122</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,075</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,097</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(23</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-47
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management has evaluated the carrying value of goodwill for impairment purposes in
accordance with the provisions of SFAS 142. Based on that evaluation, on a reporting unit basis, as
at December&nbsp;31, 2005, 2004 and 2003 goodwill is impaired to the extent of nil, 9,179 and 528,
respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The impairment loss for goodwill of 9,179 is related to Natuzzi UK Group (see notes 1 and 24).
Natuzzi UK Group revised its growth strategy as a consequence of the actual and forecasted critical
situation in the United Kingdom market, and the decision of the Company to redesign its
distribution strategy in this country. As a result of this revision, the carrying value of the
goodwill related to such reporting unit as of December&nbsp;31, 2004 was less than the fair value of the
reporting unit impaired. The fair value of such reporting unit as of December&nbsp;31, 2004 was
determined on the basis of the methodology so called &#147;Unlevered Discounted Cash Flow&#148;. The
comparison of the implied fair value of goodwill with the carrying value of goodwill resulted in
the determination of an impairment in value of 9,179. The difference between impairment recognized
under Italian GAAP (6,119) and US GAAP (9,179) is attributable to the classification and
amortization difference discussed above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)&nbsp;Under Italian GAAP the Company does not record in the consolidated statement of earnings
the compensation expense related to share based compensation plans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under US GAAP, the provisions of Statement of Financial Accounting Standards No.&nbsp;123 (SFAS No.
123), <I>Accounting for Stock Based Compensation</I>, allow entities to continue to apply the provisions
of Accounting Principles Board Opinion (APB)&nbsp;No.&nbsp;25 &#147;Accounting for Stock Issued to Employees&#148; for
the accounting of compensation expense for its share based compensation plans, and requires certain
pro-forma disclosures for employee share options granted as if the fair value based methods defined
in SFAS No.&nbsp;123 had been applied. For US GAAP purpose, the Company has elected to apply the
provisions of APB Opinion No.&nbsp;25 and related interpretations and to provide the pro-forma
disclosure provisions of SFAS No.&nbsp;123 for its share grants and options plan. Compensation expense
is recorded in the financial statements on the measurement date only if the market value of the
underlying shares exceeds the exercise price.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For US GAAP purpose the Company employees share based awards are considered variable under APB
Opinion no. 25. Accordingly, the Company is recognizing the intrinsic values (resulting from the
excess of the market price of the underlying shares at December&nbsp;31, 2005 and 2004 over the exercise
price) as a compensation cost in the consolidated statement of earnings over the vesting period of
the shares and options, as identified in note 20. For US GAAP purposes, in 2005 and 2004 the
Company recorded an income of 136 and a cost of 1,140, respectively.
</DIV>

<P align="center" style="font-size: 10pt">F-48
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under current Italian tax legislation, issuance of shares to satisfy share based compensation
plans does not result in a deduction for tax purposes and, as such, no deferred taxation impacts
have been recognized for US GAAP.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s pro forma net earnings for the years ended December&nbsp;31, 2005 and 2004 had
compensation expense, relating to Natuzzi&#146;s share based compensation plan been recorded in
accordance with SFAS No.&nbsp;123 is presented below:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net earnings (loss)&nbsp;in conformity with US GAAP, as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,889</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,753</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock-based employee compensation, as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(136</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,140</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock-based employee compensation expense under fair value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(756</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,284</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pro forma net earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,781</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,609</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The average fair value of shares, options and additional options granted during 2004 was
approximately euro 7.86 per share, euro 2.05 per option and euro 0.02 per additional option,
respectively. The fair value of each share, option and additional option is estimated using a
pricing binomial model, that considers the following assumptions or variables:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected life and performance related conditions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="1" align="right" nowrap>2 years &#150; 5.3 years</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected volatility of the underlying share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">23</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected dividend yield of the underlying share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Risk-free interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">2.43% - 3.79</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s pro forma earnings per share for the year ended December&nbsp;31, 2005 and 2004, had
compensation expenses relating to Natuzzi&#146;s share based compensation plan, been recorded in
accordance with SFAS 123 is presented below:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">As reported</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Pro-forma</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic loss per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.13</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.14</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted loss per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.13</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.14</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000">As reported</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000">Pro-forma</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic earnings per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.34</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted earnings per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.34</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)&nbsp;Under Italian GAAP, effective on December&nbsp;31, 2005, the financial statements of the
foreign subsidiaries expressed in a foreign currency (which is deemed to be the functional
currency) are translated directly into euro as follows: (i)&nbsp;year-end exchange rate for assets and
liabilities, (ii)&nbsp;historical exchange rates for share capital and retained earnings, and (iii)
average
</DIV>

<P align="center" style="font-size: 10pt">F-49
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">exchange rates during the year for revenues and expenses. The resulting exchange
differences on translation is recorded as a direct adjustment to shareholders&#146; equity (see note 3).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under US GAAP as of December&nbsp;31, 2005 the Natuzzi&#146;s foreign subsidiaries financial statements
have been translated on the basis of the guidance included in SFAS No.&nbsp;52. Under US GAAP, foreign
subsidiaries are considered to be an integral part of Natuzzi due to various factors including
significant intercompany transactions, financing, and cash flow indicators. Therefore, the
functional currency for these foreign subsidiaries is the functional currency of the parent, namely
the euro. As a result all monetary assets and liabilities are remeasured, at the end of each
reporting period, using euro and the resulting gain or loss is recognized in the consolidated
statements of earnings. For all non monetary assets and liabilities, share capital and retained
earnings historical exchange rates are used. The average exchange rates during the year are used
for revenues and expenses, except for those revenues and expenses related to assets and liabilities
translated at historical exchange rates. The resulting exchange differences on translation are
recognized in the statements of earnings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At December&nbsp;31, 2005 the US GAAP difference arises due to the requirement to use the local
currency as the functional currency under Italian GAAP as compared to US GAAP, which requires that
the functional currency to be determined based on certain indicators which may, or may not result
in the local currency being determined to be the functional currency. Consequently, reported in the
US GAAP reconciliation is an adjustment to income of 1,684 and to shareholders&#146; equity of 1,860. In
prior years the functional currency of foreign subsidiaries was, for Italian GAAP purposes, deemed
to be the parent company&#146;s functional currency (the &#147;Euro&#148;) consistent with US GAAP.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)&nbsp;Under Italian GAAP in 2005 Natuzzi has charged to other income (expense), net one time
penalties, amounting to 658, that it expects to negotiate, in 2006, with the landlords of several
stores for the termination in 2006 of the related operating lease contracts before the term
specified in the lease agreements (see note 24). Under US GAAP, considering the guidance of SFAS
No.&nbsp;146, these penalties should be reversed out of the consolidated statements of earnings for the
year ended at December&nbsp;31, 2005, and should be recognized at the &#147;cease-use date&#148;, that Natuzzi
expects to occur sometime during 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p)&nbsp;During 2005, 2004 and 2003 the Company under Italian GAAP has recognized impairment loss
and write-off of tangible and intangible assets of 2,770, 8,063 and of 4,292, respectively, as part
of non operating income. Under US GAAP such impairment charge would be included as part of
operating income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q)&nbsp;Under Italian GAAP certain costs paid to resellers are reflected as part of selling
expenses. Under US GAAP, in accordance with EITF 01-09, these costs should be recorded as a
reduction of net sales. Such expenses include advertising contributions paid to resellers which
amounted at December&nbsp;31, 2005, 2004 and 2003 to 2,311, 3,376 and 3,284, respectively.
</DIV>

<P align="center" style="font-size: 10pt">F-50
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r)&nbsp;During 2004, under Italian GAAP the Company has recognized the gain on disposal of the
subsidiary Spagnesi S.p.A. (see also note 1 and 24), amounting to 3,419, as part of non operating
income in the caption other income (expense), net. Under US GAAP, the disposal in not considered a
&#147;discontinued operation&#148;, and the gain should be recorded as part of operating income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(s)&nbsp;Under Italian GAAP, the Company includes its warranty cost as a component of selling
expenses in the statement of operations. Under US GAAP, warranty costs would be included as a
component of cost of goods sold. For the years ended December&nbsp;31, 2005, 2004 and 2003 warranty cost
amounting to 3,168, 2,995 and 2,655, respectively, would be reclassified from selling expenses to
cost of goods sold under US GAAP.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(t)&nbsp;In 2005 the Company under Italian GAAP has recognized certain export incentive of 2,100
under the caption other income (expense), net (see note 24). Under US GAAP such revenue would be
included as part of operating income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Comprehensive Income</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has adopted SFAS No.&nbsp;130, <I>Reporting Comprehensive Income</I>, which established
standards for the reporting and presentation of comprehensive income and its components in a full
set of financial statements. Comprehensive income/(loss) generally encompasses all changes in
shareholders&#146; equity (except those arising from transactions with owners). The Company&#146;s
comprehensive income (loss)&nbsp;does not differ from its US GAAP net income (loss).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Recent US Accounting pronouncements relevant for the Company are as follows:</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SFAS No.&nbsp;151:</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In November&nbsp;2004, the FASB issued SFAS No.&nbsp;151, &#147;<I>Inventory Costs</I>&#148; (SFAS 151), which is an
amendment of Accounting Research Bulletin No.&nbsp;43, &#147;Inventory Pricing.&#148; SFAS 151 clarifies that
abnormal amounts of idle facility expense, freight,
handling costs and wasted materials (spoilage)&nbsp;should be recognized as current period charges.
The provisions of SFAS 151 are effective for inventory costs incurred beginning January&nbsp;1, 2006,
and are applied on a prospective basis. The Company does not expect the adoption of SFAS 151 to
have a significant impact on the Company&#146;s consolidated financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SFAS No.&nbsp;153:</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2004, the FASB issued SFAS Statement No.&nbsp;153, &#147;<I>Exchanges of Nonmonetary Assets&#148;</I>,
which eliminates an exception in APB 29 for nonmonetary exchanges of similar productive assets and
replaces it with a general exception for exchanges of nonmonetary assets that do not have
commercial substance. This Statement will be effective for the Company for nonmonetary asset
exchanges occurring on or after January&nbsp;1, 2006. Application of this statement will not have an
impact on the consolidated financial statements of the Company.
</DIV>

<P align="center" style="font-size: 10pt">F-51
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SFAS No.&nbsp;123 R:</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2004, the FASB issued SFAS No.123 (revised 2004), &#147;<I>Share-Based Payment&#148;</I>, which is
a revision of SFAS No.123, <I>Accounting for Stock-Based Compensation</I>. SFAS No.123(R) supersedes APB
Opinion No.&nbsp;25, <I>Accounting for Stock Issued to Employees</I>, and amends SFAS No.&nbsp;95, <I>Statement of Cash
Flows</I>. Generally, the approach in SFAS No.123(R) is similar to the approach described in SFAS No.
123. However, SFAS No.123(R) requires all share-based payments to employees, including grants of
employee stock options, to be recognized in the income statement based on their fair values. Pro
forma disclosure is no longer an alternative. The Company intends to adopt the &#147;modified
prospective&#148; method in which compensation cost is recognized beginning with the effective date (a)
based on the requirements of SFAS No.123(R) for all share-based payments granted or modified after
the effective date and (b)&nbsp;based on the requirements of SFAS No.123 for all awards granted to
employees prior to the effective date of SFAS No.123(R) that remain unvested on the effective date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As permitted by SFAS No.123, the company currently accounts for share-based payments to
employees using the APB Opinion No.&nbsp;25 intrinsic-value method. Accordingly, the adoption of the
SFAS No.123(R) fair value method will affect the Company&#146;s results of operations. The Company has
not yet determined the impact, if any, that the adoption of SFAS 123 (R)&nbsp;will have on the Company&#146;s
consolidated financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>FASB interpretation No.&nbsp;47:</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In March&nbsp;2005, the FASB issued FASB Interpretation (FIN)&nbsp;No.&nbsp;47 &#147;<I>Accounting for Conditional
Asset Retirement Obligations&#148;</I>, which clarifies that a liability (at fair value) must be recognized
for asset retirement obligations when it has been incurred if the amount can be reasonably
estimated, even if settlement of the liability is conditional
on a future event. FIN 47 is effective as of December&nbsp;31, 2005. The Company currently does not
have any assets retirement obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>EITF 04-1:</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In October&nbsp;2004, the EITF reached a consensus on EITF 04-1, &#147;<I>Accounting for Preexisting
relationships between the Parties to a Business Combination</I>&#148;. EITF 04-1 addresses various elements
connected to a business combination between two parties that have a pre-existing relationship and
the settlement of the pre-existing relationship in conjunction with the business combination. The
Company applied the provisions of EITF 04-1 to business combinations consummated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SFAS No.&nbsp;154:</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May&nbsp;2005, the FASB issued SFAS 154, &#147;<I>Accounting Changes and Error Corrections &#150; a
Replacement of APB Opinion No.&nbsp;20 and FASB Statement No.&nbsp;3</I>&#148;. SFAS 154 requires retrospective
application to prior period financial statements of changes in accounting principle, unless it is
impracticable to determine either the period-specific effects or the cumulative effect of the
change. SFAS 154 also redefines &#147;restatement&#148; as the revising of previously issued financial
</DIV>

<P align="center" style="font-size: 10pt">F-52
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Natuzzi S.p.A. and Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></FONT><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">statements to reflect the correction of an error. This statement is effective for accounting changes and corrections of errors made in fiscal years beginning after December&nbsp;15, 2005.

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>EITF 05-06:</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In June&nbsp;2005 the EITF reached a consensus on EITF 05-6, &#147;<I>Determining the amortization period
for leasehold improvements&#148;</I>. The issue is how to determine the amortization period for leasehold
improvements acquired subsequent to inception of lease, including leasehold improvement acquired in
a business combination. For both cases the Task Force reached the consensus that the leasehold
improvements acquired should be amortized over the shorter of the useful life of the assets and the
hypothetical lease term. This consensus does not apply to pre-existing improvements and it is
effective for reporting periods beginning after June&nbsp;29, 2005. The Company does not believe that
the adoption of EITF 05-6 will have a significant impact on the consolidated financial statements.
</DIV>

<P align="center" style="font-size: 10pt">F-53
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="172"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SIGNATURES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of Section&nbsp;12 of the Securities Exchange Act of 1934, the
registrant certifies that it meets all of the requirements for filing on Form 20-F and has duly
caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NATUZZI S.<FONT style="font-variant: SMALL-CAPS">p.</FONT>A.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(REGISTRANT)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/s/ Ernesto Greco</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Ernesto Greco<BR>
Chief Executive Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Date: June&nbsp;30, 2006
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="173"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;Index</B>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">1.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>English translation of the by-laws (<I>Statuto</I>) of the Company, as amended and restated as of
January&nbsp;24, 2006.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">2.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Deposit Agreement dated as of May&nbsp;15, 1993, as amended and restated as of December&nbsp;31, 2001,
among the Company, The Bank of New York, as Depositary, and owners and beneficial owners of
ADRs (incorporated by reference to the Form 20-F filed by Natuzzi S.p.A. with the Securities
and Exchange Commission on July&nbsp;1, 2002, file number 1-11854).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">8.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>List of Significant Subsidiaries.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">12.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Chief Executive Officer Certification pursuant to Section&nbsp;302 of the Sarbanes-Oxley Act of
2002.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">12.2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Chief Financial Officer Certification pursuant to Section&nbsp;302 of the
Sarbanes-Oxley Act of 2002.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">13.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Certifications pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of 2002.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-1.1
<SEQUENCE>2
<FILENAME>y22510exv1w1.htm
<DESCRIPTION>EX-1.1: BY-LAWS
<TEXT>
<HTML>
<HEAD>
<TITLE>EX-1.1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;1.1</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>BY
LAWS OF THE STOCK COMPANY &#147;NATUZZI S.p.A.&#148;</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>of &#147;NATUZZI S.P.A.&#148;</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Article&nbsp;1. Name</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>1</B>. Incorporated hereby is a stock company having the name &#147;NATUZZI S.p.A.&#148;
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;2. Head Office</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2. </B>The company has its legal headquarters in Bari. Secondary headquarters may be established
or eliminated at other locations in Italy or abroad, pursuant to resolutions adopted by its
managing body.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;3. Corporate purpose</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>3. </B>The corporate purpose is the production and sale of sofas and armchairs, furniture in
general, furniture products, as well as the production, manufacture and sale of raw materials and
semi-finished products destined for such use.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The company also has, as non-prevalent purposes and with regard to the companies constituting
part of the group, the following activities:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>-</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the management of the group&#146;s information services, administration and commercial
systems;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>-</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the production of software and hardware;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>-</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the consultancy and organization related to management problems, research and
development of marketing and commercial penetration, import-export and company problems
of an economic nature;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>-</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>training services for managers, executives, employees and factory workers;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>-</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the development and creation of industrial prototypes, brand names and patents,
graphics and publicity;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>-</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the granting of financing in any form;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>-</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>foreign exchange transactions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>-</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the collection, payment and transfer of funds;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>-</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>financial coordination; budgetary, strategic and administrative planning;
coordination of purchases, product engineering and development and marketing;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>-</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the construction, purchase, management, licensing and leasing of industrial,
commercial and production premises; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>-</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the purchase, management, licensing and leasing of machinery, equipment and other
tools.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All financial activities legally reserved to banks or investment institutions are strictly
excluded.
</DIV>



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Furthermore the company may carry out, again within the &#147;Natuzzi S.p.A.&#148; group, activities
related to the installation, maintenance, revision of technological plants and mechanical,
hydraulic, thermal, electric systems, of telephone networks, electricity and transfer lines.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, the company may acquire participations and interests in other companies or
enterprises of any kind, in Italy or abroad, as a stable investment and not for the purpose of
placement of securities, and may undertake all operations that the managing body deems necessary or
useful to the attainment of the purposes of the company, including the grant of personal guaranties
(&#147;<I>fideiussioni</I>&#148;) and other guaranties.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;4. Duration</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>4. </B>The duration of the company is up until 31.12.2050.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;5. Domicile</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5. </B>The domicile of the shareholders insofar as it concerns their relations with the company
shall be the one indicated in the shareholders&#146; ledger.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;6. Capital and shares</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>6. </B>The share capital is fifty-four million, seven hundred thirty eight thousand and five
hundred and thirty-eight euro (&#128;54,738,538) and is divided into fifty-four million, seven
hundred thirty eight thousand and five hundred and thirty-eight (54,738,538) shares, each with a
nominal value of one euro (&#128;1.00).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The extraordinary Meeting held on 23<SUP style="font-size: 85%; vertical-align: text-top">rd</SUP> July&nbsp;2004 authorized the managing body to
implement, within five days from the registration of the resolution in the Register of Companies,
an increase in the share capital without consideration (&#147;<I>a titolo gratuito</I>&#148;), up to a maximum
amount of five hundred thousand euro (&#128;500,000.00), and an increase in the share capital with
consideration (&#147;<I>a pagamento</I>&#148;), up to a maximum amount of euro three million (&#128;3,000,000.00) to
implement the Incentive Plan that such Meeting created at the benefit of the company&#146;s and its
affiliates&#146; employees.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The shares are represented by share certificates. Each share carries one vote in the general
meeting of shareholders.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;7. Participation Certificates (&#147;</B><B><I>Strumenti finanziari</I></B><B>&#148;)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.1 </B>The company may issue participation certificates (&#147;<I>strumenti finanziari</I>&#148;), having attached
economic or administrative rights, <I>vis-&#224;-vis </I>contributions by shareholders or third parties,
including activities or services.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.2 </B>The participation certificates shall be issued by the extraordinary meeting of
shareholders.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.3 </B>The resolution issuing the participation certificates shall establish the
characteristics of the certificates thereof with regards to the contribution by each holder,
specifying the rights attached to the certificate and the penalties in the event of failure to make
the relevant contribution.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.4 </B>The participation certificates issued <I>vis-&#224;-vis </I>the contribution of services and
</DIV>




<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt">activities are not transferable.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.5 </B>The participation certificates are represented by registered credit instruments.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;8. Bonds</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>8.1 </B>The Company may issue bonds, which may be convertible or non <B>-</B>convertible into shares.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>8.2 </B>The bondholders must choose a common representative. Article&nbsp;29 of these by-laws shall
apply, where compatible, to bondholders meetings.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;9. Segregated Assets</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>9.1 </B>The company may segregate one or more pools of assets for the carrying out of a specific
business in accordance with articles 2447-<I>bis </I>and subsequent articles of the civil code.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>9.2 </B>The resolution segregating the relevant pool of assets shall be adopted by the
extraordinary meeting, in accordance with article 16 of these by-laws.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;10. Loans</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>10. </B>The company may obtain from its shareholders loans free of charge or against payment, with
or without the obligation to reimburse, in compliance with applicable rules, with special reference
to the rules regulating the collection of public savings.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;11. Shares and domicile of shareholders</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>11.1 </B>The shares are registered and freely transferable.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;12. Withdrawal</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>12.1 </B>Each shareholder not approving resolutions in connection with the following subject
matters shall have the right to withdraw from the company by tendering all or part of their shares:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>amendment of the clause of these by-laws concerning the corporate purpose, in the
event that such amendment entails a material change in the activities carried out by the
company;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>transformation of the company from a stock corporation into another legal entity;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>transfer of the legal headquarters abroad;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>revocation of the state of winding up;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">e)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>modification of the rules determining the value of the shares in case of
withdrawal;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">f)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>modifications of the by-laws related to the voting rights attached to shares or
the rights to attend the meetings;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">g)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>elimination of one or more triggering events for withdrawal pursuant to these
by-laws.</TD>
</TR>


</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Should the company be subject to direction and coordinating powers pursuant to articles 2497
and subsequent articles of the civil code, shareholders shall have the right to withdraw from the
company by tendering their shares in the events set forth in article 2497-<I>quater </I>of the civil code.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>12.2 </B>The shareholder must notify his or her intention to withdraw in writing, by registered
mail, to the managing body.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The registered mail must be sent within fifteen days from the registration in the register of
companies of the resolution triggering the right of withdrawal, and include the details of the
withdrawing shareholder, his or her elected domicile in relation to this procedure, the number and
the class of the shares for which the right of withdrawal is exercised.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If the event triggering the withdrawal does not arise from a resolution by the shareholders&#146;
meeting, the right of withdrawal shall be exercised no later than thirty days from the date in
which the shareholder has become aware of such event.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The shares for which the right to withdraw is exercised may not be transferred and the
relevant certificates, where issued, must be deposited at the registered office of the company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The exercise of the right to withdraw must be recorded in the shareholders&#146; ledger.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Withdrawal rights may not be exercised and, if already exercised, shall cease to have effect,
in the event that the company revokes the resolution that triggers such withdrawal rights.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>12.3 </B>Shareholders shall have the right to liquidate the shares for which withdrawal is
requested.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The value of the shares shall be established by the directors, having heard the opinion of the
board of statutory auditors and the external auditor, taking into account the equity and financial
position of the company and its perspectives in terms of income, as well as the market value of the
shares, if any.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The managing body must prepare and deposit at the registered office of the company, within
fifteen days prior to the meeting and addressing the subject matters triggering the right to
withdraw, the documentation necessary to determine the value of the shares in accordance with the
abovementioned criteria.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each shareholder shall have the right to inspect the documentation related to the evaluation
indicated above and obtain a copy at his or her own expense.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the event that the shareholder that intends to withdraw, in the notice for exercising the
right of withdrawal, opposes the liquidation value determined by the managing body, the liquidation
value shall be established, within ninety days of the exercise of the right of withdrawal, through
a sworn report by an expert nominated by the President of the Tribunal in whose jurisdiction the
company has its offices, who shall also decide on the procedural costs, upon the request made by
the most diligent party. Article&nbsp;1349, first paragraph of the civil code shall apply.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>12.4 </B>The directors shall offer on a preemptive basis the rights to acquire the shares of the
withdrawing shareholders to the other shareholders, pro-rata with the number of shares they hold.
</DIV>



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If convertible bonds are outstanding, such preemptive rights shall also pertain to the holders
of convertible bonds, together with shareholders, on the basis of the relevant exchange ratio.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The offer of the abovementioned rights must be deposited with the register of companies within
fifteen days from the final determination of the value for the liquidation, with a term for the
exercise of such right of no less than thirty days from the deposit of the offer.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Those who exercise such rights, so long as they make a specific request, shall have the right
of pre-emption for the acquisition of the shares for which the relevant rights have not been
exercised (art. 2437-quater, 3&#176;paragraph, of the civil code).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The shares for which the relevant pre-emptive rights have not been exercised may be placed by
the managing body with third parties.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In case the shares of the shareholder that has asserted the right to withdrawal remain unsold
the shareholder shall be reimbursed, if available reserves exist, through a repurchase by the
company of its own shares, that may also occur in prejudice of the prescriptions set forth by
article 2357, third paragraph, of the civil code.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Should no reserves be available, an extraordinary meeting of shareholders must be called in
order to resolve either upon the reduction of the share capital, or the winding up of the company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The prescriptions set forth by article 2445, second, third and fourth paragraphs, shall apply
to the resolution reducing the share capital; should the creditors&#146; right of opposition be
affirmed, the company shall be wound up.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;13. Sole Shareholder</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>13.1 </B>If the shares belong to a sole shareholder or if the sole shareholder, changes, the
directors, in compliance with article 2362 of the civil code, shall deposit, for registration in
the register of companies, a statement indicating, if an individual, the first name and the family
name, the date and place of birth, the domicile, and the nationality of such shareholder, or, if
not an individual, the entity name, its date of
organization, and its office.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>13.2 </B>Whenever the plurality of shareholders is established or re-established, the directors
must deposit a statement describing such event for the registration in the register of companies.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>13.3 </B>The sole shareholder, or the person ceasing to be the sole shareholder, may fulfill the
publicity obligations pursuant to the previous paragraphs.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>13.4 </B>The statements set forth in the previous paragraphs must be deposited with the Register
of Companies within thirty days from the relevant registration in the shareholders&#146; ledger and, in
any case, must indicate the date of such registration.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;14. Subjection to management and control powers</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>14. </B>The company must indicate if it is subject to management and coordination powers exercised
by other entities in all acts and correspondence, as well as through the registration within the
relevant section of the register of companies as indicated by article 2497-
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>bis</I>, second paragraph,
of the civil code.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;15. Powers of the ordinary meeting</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>15.1 </B>The ordinary meeting shall resolve upon the subject matters provided for in the
applicable laws and in these by-laws. In particular, the ordinary meeting may approve a regulation
concerning the functioning of the meeting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>15.2 </B>The following powers shall strictly be reserved for the ordinary meeting:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>approval of the financial statements;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>appointment and revocation of directors; appointment of statutory auditors and
of the chairman of the board of statutory auditors and, when required, of the external
auditor;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">c.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>determination of the compensation for directors and statutory auditors, without
prejudice to the prescriptions set forth in the following article 39;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">d.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>determination of the responsibilities of directors and statutory auditors.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;16. Powers of the extraordinary meeting</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>16.1 </B>The extraordinary meeting shall resolve upon:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the amendments to the by-laws, with the exception of article 31.2 of these
by-laws;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the appointment, revocation and determination of the powers of liquidators;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">c.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the issuance of participation certificates pursuant to article 7 of these
by-laws;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">d.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the creation of segregated pools of assets pursuant to article 9 of these by- laws;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">e.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the distribution of profits to the company&#146;s employees or to the employees of the
company&#146;s affiliates by way of issuance of shares or of special classes of shares;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">f.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the distribution of profits to the company&#146;s employees or to the employees of the
company&#146;s affiliates by way of issuance of participation certificates;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">g.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all the other subject matters provided for in the applicable laws and in these
by-laws.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>16.2 </B>The empowerment of the managing body to resolve upon certain subject matters that,
according to applicable laws, fall within the powers of the meeting of shareholders, such as the
subject matters set forth in article 31.2 of these by-laws, but not to the prejudice of the main
competence of the shareholders&#146; meeting, which shall maintain its powers to resolve upon such
subject matters.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;17. Call of the meeting</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>17.1 </B>The meeting must be called by the managing body at least once a year, within one hundred
and twenty days from the end of the fiscal year or within one hundred and eighty days from such
date, should the company prepare consolidated financial statements or should
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt">particular needs or
circumstances occur in relation to the structure and the corporate purpose.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>17.2 </B>The meeting represents the totality of shareholders and its resolutions, made in
compliance with applicable laws and with these by-laws, shall bind all shareholders, including
absent or dissenting shareholders.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The meeting may also be called outside of the company&#146;s registered office or abroad.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>17.3 </B>In the event the directors cannot call a meeting or in the event that they fail to call a
meeting, the meeting may be called by the board of statutory auditors, or through a decree by the
competent tribunal upon request of shareholders representing at least one tenth of the share
capital.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>17.4 </B>The notice convening the shareholders&#146; meeting must include:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>-</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the place in which the meeting shall be carried out as well as the places in
which it may be connected through telecommunication devices;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>-</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the date and time of the meeting;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>-</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the items on the agenda;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>-</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any other item prescribed by law.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>17.5 </B>The meeting shall be called by publication, at least fifteen days before the meeting, of
the relevant notice of call in one of the following newspapers: &#147;<I>Il Sole 24 ore</I>&#148;; &#147;<I>Corriere della
Sera</I>&#148; or &#147;<I>La Repubblica</I>&#148;.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;18. Call of second and subsequent meeting</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>18.1 </B>The notice of call may include the date, time and place of a second call, and also of a
subsequent call, if the previous meetings do not reach the quorums prescribed by the law. The
second and the subsequent call may be held within thirty days from the date indicated for the first
call.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;19. General meeting</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>19.1 </B>Even in the absence of a formal call, the meeting is duly established when the entire
share capital is represented and when the majority of the members of the managing body and of the
board of statutory auditors are present.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In this hypothesis each participant may oppose the discussion (and the resolution) of any item
for which he or she considers that he or she has not been sufficiently informed.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;20. Ordinary meeting: definition of the quorum</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>20.1 </B>On first call, the ordinary meeting is duly established with shares, present or
represented, amounting to at least half of the share capital.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>20.2 </B>On second or subsequent call, the ordinary meeting is duly established regardless of the
portion of share capital represented.
</DIV>



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>20.3 </B>On first, second and subsequent calls the resolution of an ordinary meeting is passed by
the absolute majority of the shares present or represented at that meeting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;However, the resolution renouncing the bringing of suit against the directors or authorizing a
settlement of a suit previously brought against the directors cannot be validly adopted when at
least one fifth of the share capital is dissenting.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;21. Extraordinary meeting: definition of the quorum</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>21.1 </B>On first call resolutions of the extraordinary meeting are passed by a majority
representing more than half of the share capital.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>21.2 </B>On second call the extraordinary meeting is duly convened with at least one third of the
share capital and its resolutions are passed by two thirds of the share capital present or
represented in that meeting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;However, the resolutions on the following subject matters shall be carried out by a majority
of at least one third of the share capital:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>amendment of the corporate purpose;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>transformation of the company into another legal entity, mergers, de-mergers, in
hypotheses other than the ones contemplated by article 31.3, letter a);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">c.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>early winding up;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">d.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>extension of the duration;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">e.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>cancellation of the state of winding up;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">f.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>transfer of the registered office abroad;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">g.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>issuance of preference shares.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;22. Rules for the calculation of the quorum</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>22.1 </B>Shares without voting rights shall not be included in the calculation of the quorums
necessary to validly establish the meetings.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>22.2 </B>Treasury shares and company&#146;s shares held by subsidiaries are included in the calculation
of the quorum necessary to validly establish the meeting, as well as for the calculation of the
quorum required to validly pass the resolution, and do not have any voting right attached.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>22.3 </B>Shares whose voting rights cannot be exercised are included in the calculation of the
quorum necessary to validly establish the meeting; the same shares (without prejudice to any
different provision provided for by applicable laws) and shares whose voting rights have not been
exercised, further to a statement made by the shareholder asserting his or her conflict of interest
in the relevant resolution, are not included in the calculation of the majority necessary for the
approval of the relevant resolution.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;23. Postponement of the meeting</B>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>23. </B>Intervening shareholders, representing at least one third of the share capital, have the
right to request a postponement of the meeting for no longer than five days, if they state that
they have not been sufficiently informed of the subject matters specified in the agenda.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;24. Eligibility to attend the meeting and to vote</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>24.1 </B>Shareholders that are going to attend the meeting (in accordance, inter alia, with the
fulfillments indicated in paragraph 3 of article 2370 of the civil code) must deposit their shares
(or certificates), at least five days before the date of the meeting, at the registered office or
at one of the banks indicated in the notice of call, in order to give proof of their right to
participate and to vote at the meeting. The shares must be immediately collected after the deposit
has been made.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>24.2 </B>Each share entitles to one vote at the meeting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>24.3 </B>Holders of shares that do not carry voting rights have the right to receive the notice of
call.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;25. Shareholder representation at a meeting</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Proxies</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>25.1 </B>Without prejudice to the prohibitions set forth in article 2372 of the civil code, each
shareholder may appoint proxies, by means of a written proxy. The company shall maintain the
written proxy on its records.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>25.2 </B>The proxy may be issued for several meetings; it may not be issued without indication of
the name of the representative and it shall always be revocable, notwithstanding any contrary
agreement. The representative may only be replaced by a person specifically indicated in the proxy.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>25.3 </B>If a shareholder has conferred a proxy to a company, the legal representative of such
company shall represent the shareholder during the meeting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Alternatively, the company may delegate one of its employees or collaborators.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>25.4 </B>Proxies may not be issued to employees, statutory auditors, members of the managing body,
or the external auditor.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>25.5 </B>Proxies may not be issued to subsidiaries, nor to their employees, statutory auditors,
members of the managing bodies and external auditors.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;26. Chairman and secretary of the meeting.</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Recording of the minutes</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>26.1 </B>The meeting is chaired by the sole director, by the chairman of the board of directors
or, in his absence, by a person nominated by the intervening shareholders.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>26.2 </B>Those present at the meeting shall appoint a secretary, not necessarily a
</DIV>



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">shareholder,
and, if necessary, one or more scrutinizers, not necessarily a shareholder. The support of the
secretary shall not be required if the report is arranged by a notary public.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>26.3 </B>The chairman of the meeting shall be in charge of ascertaining that the meeting is
validly established, of ascertaining the identity and right to participate of the shareholders
present, of regulating the carrying out of the meeting and announcing the results of the
resolutions.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>26.4 </B>With regards to the carrying out of the works of the meeting, the order for interventions
and the methods to discuss upon the items on agenda, the Chairman shall have the power to propose
procedures that may nevertheless be modified by an absolute majority of the intervening holders of
shares carrying voting rights.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>26.5 </B>The minutes of the meeting must be prepared in a manner consistent with the duties in
connection with their timely deposit and publication and must be undersigned by the chairman, the
secretary or the notary public.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>26.6 </B>The minutes must indicate:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the date of the meeting;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the identity of the participants and the share capital that they represent (even
through an exhibit/addendum);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the procedures adopted for the resolutions and results thereof;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the identity of the voters with an indication as to whether they have voted for,
against or they have abstained from voting, even through an addendum;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">e)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>upon the specific request of the participants, a brief summary of their
declarations with regards to the items on the agenda.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;27. Meeting procedures</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Carrying out of items on the agenda</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>27.1 </B>The meeting must be carried out with such procedures so that all of those who have the
right to attend may be aware, in real time, of the <B>transactions </B>for which they have been called
upon to resolve.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>27.2 </B>Meetings may be carried out in the presence of audio-video conferences as long as:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>-</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all people attending the meeting may be identified and their right to take part
in may be verified;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>-</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the Chairman of the meeting, even through the chairman&#146;s office may regulate the
hearings and may ascertain and announce the results of the votes;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>-</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all the participants are allowed to follow the discussions, intervene in real
time in the discussions and take part simultaneously in the vote;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>-</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the person in charge of recording the minutes must be able to understand/hear the</TD>
</TR>


</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>events to be indicated in the report;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>-</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the notice of call indicates the places from which an external link has been
prepared in order to allow shareholders to participate.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With the fulfillment of the requirements above, the meeting is deemed to be established in the
location in which the Chairman of the meeting, together with the secretary, is located, in order to
proceed with the preparation and undersigning of the minutes in the relevant book.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;28. Method of voting</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>28.1 </B>Secret voting is not permitted. Any vote which is not connected to any shareholder is
considered unexercised.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;29. Special meetings</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>29.1 </B>If more than one class of shares or participation certificates exists, each holder has
the right to attend the relevant special meeting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>29.2 </B>All provisions indicated in these by-laws with regards to the meeting and shareholders,
with reference to the meeting procedure, shall also apply to special meetings, to bondholders&#146;
meetings and to meetings of holders of participation certificates.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>29.3 </B>The special meeting shall appoint and remove the common representative.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>29.4 </B>Apart from any initiative by the common representative, the call of the special meeting
may occur upon the initiative of the company or upon a specific request by members representing at
least one twentieth of the votes which may be exercised in the relevant special meeting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>29.5 </B>If the Company holds treasury shares or bonds, it cannot participate to the relevant
special meeting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>29.6 </B>Directors and statutory auditors have the right to attend the special meeting without
having the right to vote.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>29.7 </B>Resolutions of the meeting may be challenged in accordance with articles 2377 and 2379 of
the civil code. Those having the right to vote shall also have the right to act individually, in
the event that the special meeting has not resolved upon the relevant subject matter.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>29.8 </B>Articles 2417 and 2418 of the civil code shall apply to the common representative.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>29.9 </B>The rules governing the extraordinary meetings shall apply with regards to the
formalities and the majorities prescribed for the special meetings.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;30. Annulment of the resolutions of the meeting</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>30.1 </B>The legal action for the annulment of the resolutions may be commenced by the directors,
by the board of statutory auditors or by dissenting, absent or abstained shareholders,
</DIV>



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt">holding,
even collectively, at least five percent of the share capital having voting rights in the
challenged resolution.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;31. Duties and powers of the managing body</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>31.1 </B>The management of the company belongs exclusively to directors, who shall carry out all
the actions necessary for the achievement of the corporate purpose, it being understood that for
certain actions specific authorization from the shareholders&#146; meeting shall be required pursuant to
statutory prescriptions.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>31.2 </B>Furthermore, the managing body shall also be in charge of the following:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the resolution approving a merger in the cases indicated in articles 2505,
2505-bis, 2506-ter last paragraph of the civil code;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the setting-up and cancellation of secondary offices;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the indication of directors who are legal representative of the company;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">e)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the transfer of the registered office to another location within the national
territory.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The minutes of the directors&#146; resolution that increases the share capital shall be drafted by
a notary public and shall be deposited and registered within the register of companies in
accordance with article 2436 of the civil code.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;32. Non compete</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>32. </B>Directors are prohibited from competing with the company pursuant to article 2390 of the
civil code.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;33. Composition of the managing body</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>33. </B>The company is run by a sole director or by a board of directors composed of seven to
eleven members.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;34. Appointment and replacement of the managing body</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>34.1 </B>The ordinary meeting shall establish the number of members of the managing body and shall
resolve upon their appointment.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>34.2 </B>Directors shall be appointed for the period established at their appointment and, in any
case, for no longer than three fiscal years and they may be re-appointed. Their term in office
shall expire on the date of the meeting called for the approval of the financial statements
relating to the last fiscal year of their office.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>34.3 </B>If, during the fiscal year, one or more directors are to retire, the others may replace
them through a resolution approved by the board of statutory auditors, so long as the majority of
the board of directors is composed by directors appointed by the meeting (or indicated in the deed
of incorporation). Directors who have been appointed by the board shall remain in the office until
the subsequent shareholders meeting is held.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>34.4 </B>If the majority of the directors appointed by the meeting (or indicated in the deed
</DIV>



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt">of
incorporation) were to retire, the remaining directors shall call a shareholders meeting in a
timely manner in order to replace the retired directors.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>34.5 </B>The term of office of the Directors appointed pursuant to paragraph 4 above shall expire
at the same time of the preexisting directors.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>34.6 </B>If the sole director or all of the directors cease to be in office, a meeting for the
appointment of the director or of the entire board must be called in a prompt manner by the board
of statutory auditors, which shall be in charge of carrying out the activities related to the
ordinary course of business.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;35. Chairman of the board of directors</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>35.1 </B>During the first meeting after its appointment, the board of directors may designate a
chairman and a vice chairman among its members, if such
designation has not been already done at the shareholders&#146; meeting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>35.2 </B>The chairman of the board of directors shall call the board of directors, shall establish
its agenda, shall coordinate the works of the board and shall ensure that all the directors are
duly informed about the items mentioned in the agenda.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;36. Delegated members</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>36.1 </B>The board of directors may delegate, within the limits set forth in article 2381 of the
civil code, all or part of its powers to one or more of its members, establishing the boundaries of
such powers and the compensation for the relevant director.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>36.2 </B>The board shall have the right to control and arrogate (to itself the) operations that
are included in the delegation of powers, as well as the power to revoke such delegation.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>36.3 </B>The delegated members shall not bear the duties indicated in article 2381,fourth
paragraph, of the civil code.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>36.4 </B>The delegated bodies shall report to the board of directors and the board of statutory
auditors, at least every one hundred and eighty days.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>36.5 </B>The managing body may appoint chief executives and define their powers.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;37. Resolutions of the board of directors</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>37.1 </B>Meetings of the board shall be held in the location indicated in the notice convening the
meeting, in the registered offices or in any other location, at any time the chairman may consider
it necessary.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>37.2 </B>Notice must be sent at least five days before the date of the meeting by means of a
letter sent by fax, telegram or e-mail.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>37.3 </B>In case of emergencies, notice may be sent by fax, telegram or e-mail at least two days
in advance.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>37.4 </B>The board is validly established with the presence of the majority of appointed directors
and shall resolve through a favorable vote of the absolute majority of present
</DIV>



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt">directors. In case
of tie, the vote of the Chairman shall prevail.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Directors who have abstained or have declared a conflict of interest shall not be considered
in the calculation of the majority necessary for the resolution to be adopted.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>37.5 </B>The board may be called and may validly resolve, even through the use of means of
telecommunications, as long as the guarantees and the methods indicated in article 27, points 1 and
2, of these by-laws are met.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>37.6 </B>The board of directors is validly established when, even in the absence of a formal
notice, all of appointed directors and the board of statutory auditors are
present.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>37.7 </B>The meetings of the board shall be chaired by the chairman, by the vice chairman and in
their absence by the oldest director.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>37.8 </B>Votes cannot be given by proxy.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;38. Company representation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>38.1 </B>The representation of the company is the responsibility of the sole director or the
chairman of the board of directors.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>38.2 </B>Furthermore, representative powers may also be given through power of attorney attributed
by the board, within the boundaries provided for thereto.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The managing body, to which representation is granted, may appoint, within the limits granted,
attorneys-in-fact either for general purposes or for specific transactions or categories of
transactions.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In any case, when the attorney-in-fact appointed by the board does not belong to such body,
the representation of the company shall be governed by the general provisions concerning power of
attorney.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>38.3 </B>The representation of a company to be wound up shall be granted to the liquidator or the
chairman of the board of liquidators and to any other possible part of the board of liquidators
with the methods and terms defined during appointment.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;39. Directors compensation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>39.1 </B>Members of the board of directors shall be refunded all the expenses borne during their
office and shall receive a compensation determined by the shareholders&#146; meeting that appoints them.
The meeting may determine an aggregate sum as a cap for the remuneration of the all directors,
including those with special duties.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>39.2 </B>The amount to be paid to directors with special duties shall be defined by the board of
directors, after hearing the opinion of the board of statutory auditors, in compliance with the cap
defined by the meeting.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;40. Board of statutory auditors</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>40.1 </B>The board of statutory auditors shall control the observance of the prescriptions of the
law and of these by-laws, shall make sure that the company is run in accordance with
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">principles of
correct management having particular regard to the suitability of the organizational,
administrative and accounting systems adopted by the company. The board of statutory auditors shall
have the responsibility of auditing the company&#146;s accounts when such duties are not fulfilled by an
external auditor.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>40.2 </B>The shareholders&#146; meeting shall appoint the board of statutory auditors, which shall be
composed of three permanent auditors and two temporary
auditors, and it shall appoint the chairman for the entire duration of their office and shall
resolve upon their compensation.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>40.3 </B>For the entire duration of their office the statutory auditors must meet the requirements
indicated in article 2399 of the civil code. The loss of such requirements shall imply the
immediate removal of the statutory auditor and his or her replacement by the oldest temporary
auditor.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>40.4 </B>Statutory auditors shall remain in the office until the date of the meeting called for
the approval of financial statements relating to the third fiscal year of their office. Expiration
of their office shall take place from the date of the appointment of a new board of statutory
auditors.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>40.5 </B>The board of statutory auditors shall be convened at least once every ninety days upon
the initiative of its chairman. The board shall be validly established with the presence of the
majority of the board of statutory auditors and shall validly resolve through a favorable majority
vote of its members.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>40.6 </B>Meetings may also be held by the use of telecommunication means, in compliance with the
methods indicated in article 27 of these by-laws.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;41. The external auditor</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>41.1 </B>The external auditor or the audit firm in charge of the auditing the company&#146;s accounts,
whether appointed pursuant to legal requirements, shall have the following responsibilities:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>-</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to audit the regular book-keeping and the correct entering of management events
during the financial year, at least once every three months;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>-</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to control that the financial statements and, if drawn up, the consolidated
accounts of the group correspond to the results of the entries and with checks which
have been carried out, and if they comply with the relevant applicable provisions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>-</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to deliver an opinion upon the truth and accuracy of the financial statements of
the company and, if any, of the group.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>41.2 </B>The audit activity on the company&#146;s accounts shall be registered in a book to be kept at
the registered office of the company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>41.3 </B>Upon the appointment of the external auditor, the shareholders meeting must also
establish its compensation for the entire duration of its appointment, which in any case may not
exceed three fiscal years.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>41.4 </B>For the entire duration of their office the external auditor or the auditing
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt">company must
meet the requirements indicated in article 2409-quinquies of the civil code. If they do not meet
such requirements, they shall step down from office and it shall not be possible to re-appoint
them. In case of forfeiture of the external auditor, the directors must promptly call a meeting in
order to appoint a new external auditor.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>41.5 </B>The external auditor shall remain in office until the date of the approval of financial
statements relating to the third fiscal year of their term in office, and they may be re-appointed.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;42. Financial statements and dividends</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>42.1 </B>Each fiscal year shall end on December&nbsp;31.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>42.2 </B>The net profit resulting from the financial statements &#151; after a deduction of at least 5%
(five per cent) intended for the legal reserve until such legal reserve reaches one fifth of the
share capital &#151; shall be distributed between shareholders in proportion to the shares held by each
shareholder, unless the meeting resolves to provide for some extraordinary reserves.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;43. Termination and winding up</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>43.1 </B>The company shall be dissolved upon the occurrence of the following events:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>expiration of the duration provided for in these by-laws;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>achievement of the corporate purpose or unexpected impossibility of achieving it,
unless the meeting, called in case of necessity, resolves upon a relevant amendment to
the by-laws;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>impossibility to function or the continued inactivity of the shareholders&#146;
meeting;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>reduction in the share capital below the minimum threshold provided for by-law,
without prejudice to the prescriptions set forth in article 2447 of the civil code;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">e)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the hypothesis contemplated by article 2437-quater of the civil code;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">f)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any resolution of the extraordinary meeting; expressly providing for the
dissolving of the company; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">g)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any other event provided for by law.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>43.3 </B>In all the cases of termination, the managing body must fulfill the publicity
requirements prescribed by the law within thirty days from the date of the event triggering the
termination.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>43.4 </B>The extraordinary meeting, called by the managing body, shall appoint one or more
liquidators and shall establish:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the number of liquidators;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>in the case that more than one liquidator is appointed, the rules governing the
operations of the liquidators, referring to the rules governing the operations of the
board of directors when possible;</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the parties with the responsibility of legally representing the company;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the standards according to which the winding up should be carried out; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">e)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any possible limitation on the powers of the liquidators.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Article&nbsp;44. Jurisdiction</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>44.1 </B>Any dispute that may arise between the Company and its shareholders, directors,
liquidators pursuant to these by-laws, shall fall within exclusive jurisdiction of the Tribunal of
Bari.
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-8.1
<SEQUENCE>3
<FILENAME>y22510exv8w1.htm
<DESCRIPTION>EX-8.1: LIST OF SIGNIFICANT SUBSIDIARIES
<TEXT>
<HTML>
<HEAD>
<TITLE>EX-8.1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;8.1</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>List of Significant Subsidiaries:</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="32%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Percentage of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>ownership</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Registered office</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Activity</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Italsofa Bahia Ltd</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">97.99</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bahia, Brazil</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(1)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Minuano Nordeste S.A.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Pojuca, Brazil</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(1)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Italsofa Shanghai Ltd</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Shanghai, China</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(1)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Softaly Shanghai Ltd</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Shanghai, China</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(1)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Italsofa Romania</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Baia Mare, Romania</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(1)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natco S.p.A.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">99.99</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bari, Italy</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(2)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">I.M.P.E. S.p.A.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">90.83</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Qualiano, Italy</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(3)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Divani Due S.r.l.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Verona, Italy</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(4)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Koine&#233; S.r.l.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Montesilvano, Italy</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(4)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nacon S.p.A.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bari, Italy</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(4)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Americas Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">High Point, NC, USA</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(4)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Iberica S.A.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Madrid, Spain</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(4)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Switzerland AG</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">97.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Kaltbrunn, Switzerland</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(4)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Nordic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Copenaghen, Denmark</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(4)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Benelux S.A.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Geel, Belgium</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(4)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Germany Gmbh</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Dusseldorf, Germany</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(4)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Sweden AB</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Stockholm, Sweden</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(4)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Japan KK</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Tokyo, Japan</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(4)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Services Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">London, UK</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(4)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">La Galleria Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">London, UK</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(4)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Kingdom of Leather Trustees
Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">London, UK</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(5)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Netherlands Holding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amsterdam, Holland</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(5)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi United Kingdom Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">London, UK</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(5)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Trade Service S.r.l.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bari, Italy</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(6)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Kingdom of Leather Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">London, UK</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(7)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Italholding S.r.l.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bari, Italy</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(7)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Lagene S.r.l.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bari, Italy</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(7)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Asia Ltd</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Hong-Kong, China</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(7)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Manufacture and distribution</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Intragroup leather dyeing and finishing</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Production and distribution of polyurethane foam</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>Distribution</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD>Investment holding</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(6)</TD>
    <TD>&nbsp;</TD>
    <TD>Transportation services</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(7)</TD>
    <TD>&nbsp;</TD>
    <TD>Not operational</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.1
<SEQUENCE>4
<FILENAME>y22510exv12w1.htm
<DESCRIPTION>EX-12.1: CERTIFICATION
<TEXT>
<HTML>
<HEAD>
<TITLE>EX-12.1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">






<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;12.1</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>I, Ernesto Greco</B><B><I>, </I></B><B>certify that:</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">1. I have reviewed this annual report on Form 20-F of Natuzzi S.p.A.;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">2. Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this
report;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">3. Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of operations
and cash flows of the company as of, and for, the periods presented in this report;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">4. The company&#146;s other certifying officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules&nbsp;13a-15e and 15d-15e) for the
registrant and have:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Designed such disclosure controls and procedures, or caused such disclosure controls
and procedures to be designed under our supervision, to ensure that material information
relating to the company, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being
prepared;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Evaluated the effectiveness of the company&#146;s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on such
evaluation; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Disclosed in this report any change in the company&#146;s internal control over financial
reporting that occurred during the period covered by the annual report that has materially
affected, or is reasonably likely to materially affect, the company&#146;s internal control
over financial reporting; and</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">5. The company&#146;s other certifying officers and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the company&#146;s auditors and the audit
committee of the company&#146;s board of directors (or persons performing the equivalent function);
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the company&#146;s ability to record, process, summarize and report financial information; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Any fraud, whether or not material, that involves management or other employees who
have a significant role in the company&#146;s internal controls over financial reporting.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="33%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="56%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Ernesto Greco<BR>
<DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Ernesto Greco</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Chief Executive Officer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">June&nbsp;30, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.2
<SEQUENCE>5
<FILENAME>y22510exv12w2.htm
<DESCRIPTION>EX-12.2: CERTIFICATION
<TEXT>
<HTML>
<HEAD>
<TITLE>EX-12.2</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;12.2</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>I, Nicola V.M. Dell&#146;Edera</B><B><I>, </I></B><B>certify that</B>:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>I have reviewed this annual report on Form 20-F of Natuzzi S.p.A.;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the company as of, and for, the periods presented in this report;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The company&#146;s other certifying officers and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules&nbsp;13a-15e and
15d-15e) for the registrant and have:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information
relating to the company, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being
prepared;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Evaluated the effectiveness of the company&#146;s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on such evaluation;
and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Disclosed in this report any change in the company&#146;s internal control over financial
reporting that occurred during the period covered by the annual report that has materially
affected, or is reasonably likely to materially affect, the company&#146;s internal control over
financial reporting; and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The company&#146;s other certifying officers and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the company&#146;s auditors and the
audit committee of the company&#146;s board of directors (or persons performing the equivalent
function);</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the company&#146;s ability to record, process, summarize and report financial information; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Any fraud, whether or not material, that involves management or other employees who have
a significant role in the company&#146;s internal controls over financial reporting.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="33%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="56%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Nicola V.M. Dell&#146;Edera
<DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Nicola V.M. Dell&#146;Edera</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Chief Financial Officer a.i.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">June&nbsp;30, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13.1
<SEQUENCE>6
<FILENAME>y22510exv13w1.htm
<DESCRIPTION>EX-13.1: CERTIFICATIONS
<TEXT>
<HTML>
<HEAD>
<TITLE>EX-13.1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;13.1</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Certification Pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of 2002</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a)&nbsp;and (b)&nbsp;of Section
1350, Chapter&nbsp;63 of Title 18, United States Code), each of the undersigned officers of Natuzzi
S.p.A. (the &#147;Company&#148;), does hereby certify, to such officer&#146;s knowledge, that:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Annual Report on Form 20-F for the fiscal year ended December&nbsp;31, 2004 of the Company
fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of
1934 and information contained in the Form 20-F fairly presents, in all material respects, the
financial condition and results of operations of the Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Dated: June&nbsp;30, 2006
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/s/ Ernesto Greco</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Ernesto Greco</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Executive Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Dated: June&nbsp;30, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/s/ Nicola V.M. Dell&#146;Edera</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Nicola V.M. Dell&#146;Edera</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Financial Officer a.i.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The foregoing certification is being furnished solely pursuant to section 906 of the
Sarbanes-Oxley Act of 2002 (subsections (a)&nbsp;and (b)&nbsp;of Section&nbsp;1350, Chapter&nbsp;63 of Title 18, United
States Code) and is not being filed as part of the Form 20-F or as a separate disclosure document.
</DIV>



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
