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<SEC-DOCUMENT>0001362310-07-001204.txt : 20070702
<SEC-HEADER>0001362310-07-001204.hdr.sgml : 20070702
<ACCEPTANCE-DATETIME>20070702061355
ACCESSION NUMBER:		0001362310-07-001204
CONFORMED SUBMISSION TYPE:	20-F
PUBLIC DOCUMENT COUNT:		6
CONFORMED PERIOD OF REPORT:	20061231
FILED AS OF DATE:		20070702
DATE AS OF CHANGE:		20070702

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:		07952851

	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>c70715e20vf.htm
<DESCRIPTION>FORM 20-F
<TEXT>
<HTML>
<HEAD>
<TITLE>Filed by Bowne Pure Compliance</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; margin-left: .25in; width: 7.5in">
<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: 10pt"><B>UNITED STATES SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>
<DIV align="Center" style="font-size: 12pt; margin-top: 0pt"><B>Washington, D.C. 20549</B><BR>
<DIV align="center"><DIV style="font-size: 10pt; margin-top: 20pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>
</DIV>
<DIV align="center" style="font-size: 24pt; margin-top: 10pt"><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: 10pt">
    <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</B></TD>
</TR>
</TABLE>
</DIV>
<DIV align="Center" style="font-size: 10pt; margin-top: 10pt"><B>or</B>
<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 10pt">
    <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="center" style="font-size: 10pt; margin-top: 10pt; margin-left: 12%"><B>For the Fiscal Year Ended: <B>December&nbsp;31, 2006</B>
</B>
</DIV>
<DIV align="Center" style="font-size: 10pt; margin-top: 10pt"><B>or</B>
</DIV>
<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 10pt">
    <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="center" style="font-size: 10pt; margin-top: 10pt; margin-left: 12%"><B>For the Transition Period from&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; to
</B>
</DIV>
<DIV align="Center" style="font-size: 10pt; margin-top: 10pt"><B>or</B>
</DIV>
<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 10pt">
    <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: 10pt"><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></B>
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 10pt; 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: 10pt"><B>Commission file number: 1-11854</B>
</DIV>
<DIV align="center" style="font-size: 24pt; margin-top: 10pt"><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: 10pt"><B>NATUZZI S.p.A.</B>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 0pt">(Translation of Registrant&#146;s name into English)
</DIV>

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

<DIV align="Center" style="font-size: 10pt; margin-top: 0pt">(Jurisdiction of incorporation or organization)
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 10pt"><B>Via Iazzitiello 47, 70029 Santeramo, Italy</B>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 1pt">(Address of principal executive offices)<BR>
<DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 1pt">Securities registered or to be registered pursuant to Section 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 <BR>
Ordinary Shares with a par value of <FONT face="'Times New Roman',times,serif">&#128;</FONT>1.0 each</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>New York Stock Exchange<BR>
New York Stock Exchange*</B></TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 5%"><U><B>* Not for trading, but only in connection with the registration of the American
Depositary Shares</B></U>
</DIV>
<DIV style="margin-top: 10pt">
<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="5%" nowrap align="left">-</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Securities registered or to be registered pursuant to Section 12(g) of the Act: <B>None</B></DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="5%" nowrap align="left">-</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: <B>None</B></DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="5%" nowrap align="left">-</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Outstanding shares of each of the issuer&#146;s classes of capital or common stock as of December&nbsp;31, 2006: <B>54,738,538 Ordinary
Shares</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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: 10pt">Yes <FONT face="Wingdings">&#111;</FONT> No <FONT face="Wingdings">&#254;</FONT>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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: 10pt">Yes <FONT face="Wingdings">&#111;</FONT> No <FONT face="Wingdings">&#254;</FONT>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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: 10pt">Yes <FONT face="Wingdings">&#254;</FONT> No <FONT face="Wingdings">&#111;</FONT>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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">Large accelerated filer <FONT face="Wingdings">&#111;</FONT> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accelerated filer <FONT face="Wingdings">&#254;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Non-accelerated filer <FONT face="Wingdings">&#111;</FONT></DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 5%">Indicate by check mark which financial statement item the registrant has elected to follow.
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 10pt">Item&nbsp;17 <FONT face="Wingdings">&#111;</FONT> Item&nbsp;18 <FONT face="Wingdings">&#254;</FONT>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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: 10pt">Yes <FONT face="Wingdings">&#111;</FONT> 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;

<P align="center" style="font-size: 10pt">&nbsp;
</DIV></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; margin-left: .25in; width: 7.5in">
<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="tocpage"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>TABLE OF CONTENTS</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="77%">&nbsp;</TD>
    <TD width="3%">&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">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD align="center" style="border-bottom: 1px solid #000000"><B>Page</B></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">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="#110">Introduction</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="#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">10</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">13</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">18</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">23</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">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="#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">26</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:30px; text-indent:-15px"><A href="#124">Item&nbsp;4A. 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">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="#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>
<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 Commercial 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>
<!-- End Table Body --></TABLE>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<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; margin-left: .25in; width: 7.5in">
<DIV align="center">
<DIV align="center" style="font-size: 10pt"><B>TABLE OF CONTENTS<BR>
(Continued)</B></DIV>
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="77%">&nbsp;</TD>
    <TD width="3%">&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">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD align="center" style="border-bottom: 1px solid #000000"><B>Page</B></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:45px; text-indent:-15px"><A href="#130">Related Party Transactions</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:45px; text-indent:-15px"><A href="#131">Product and Retail 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:45px; text-indent:-15px"><A href="#132">Trend Information and Guidance</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:45px; 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:45px; text-indent:-15px"><A href="#135">Compensation of Directors and Officers</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:45px; text-indent:-15px"><A href="#136">Share Ownership</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:45px; text-indent:-15px"><A href="#137">Statutory 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:45px; text-indent:-15px"><A href="#138">External Auditors</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:45px; text-indent:-15px"><A href="#139">Employees</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: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">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:45px; text-indent:-15px"><A href="#141">Major Shareholders</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:45px; text-indent:-15px"><A href="#142">Related Party Transactions</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="#143">Item&nbsp;8. Financial Information</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:45px; text-indent:-15px"><A href="#144">Consolidated Financial Statements</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:45px; 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:45px; 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:45px; text-indent:-15px"><A href="#147">Dividends</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="#148">Item&nbsp;9. The Offer and Listing</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53</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:45px; text-indent:-15px"><A href="#149">Trading Markets and Share Prices</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53</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">55</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:45px; text-indent:-15px"><A href="#151">By-laws</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55</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:45px; text-indent:-15px"><A href="#152">Certain Contracts</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:45px; text-indent:-15px"><A href="#153">Exchange Controls</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:45px; text-indent:-15px"><A href="#154">Taxation</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64</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:45px; text-indent:-15px"><A href="#155">Documents on Display</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69</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">69</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="#157">Item&nbsp;12. Description of Securities Other than Equity Securities</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>
<!-- End Table Body --></TABLE>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<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; margin-left: .25in; width: 7.5in">
<DIV align="center" style="font-size: 10pt"><B>TABLE OF CONTENTS</B><BR>
(Continued)</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="77%">&nbsp;</TD>
    <TD width="3%">&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">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD align="center" style="border-bottom: 1px solid #000000"><B>Page</B></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"><B>72</B></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">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="#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">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="#161">Item&nbsp;15.T Controls and Procedures</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="#162">Item&nbsp;16. &#091;Reserved&#093;</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="#163">Item&nbsp;16.A Audit committee financial expert</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="#164">Item&nbsp;16.B Code of Ethics</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="#165">Item&nbsp;16.C Principal Accountant Fees and Services</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="#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">76</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">76</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"><B>77</B></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">77</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">77</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">77</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><TD colspan="9"><FONT size="2">&nbsp;<A HREF="c70715exv1w1.htm">Exhibit 1.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="c70715exv8w1.htm">Exhibit 8.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="c70715exv12w1.htm">Exhibit 12.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="c70715exv12w2.htm">Exhibit 12.2</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="c70715exv13w1.htm">Exhibit 13.1</A></FONT></TD></TR>
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</DIV>
<DIV align="left">
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</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt">iii
</DIV>
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<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; margin-left: .25in; width: 7.5in">
<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>PRESENTATION OF FINANCIAL AND OTHER INFORMATION</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">In this annual report, references to &#147;<FONT face="'Times New Roman',times,serif">&#128;</FONT>&#148; or &#147;euro&#148; are to the euro 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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;29, 2006 of U.S.$ 1.3197 per euro.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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; text-indent: 5%">&nbsp;

<P align="center" style="font-size: 10pt">1
</DIV>
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<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; margin-left: .25in; width: 7.5in">
<DIV align="left">
<A name="101"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>PART I</B>
</DIV>
<DIV align="left">
<A name="102"></A>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Item&nbsp;1. Identity of Directors, Senior Management and Advisers</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 5%">Not applicable.
</DIV>
<DIV align="left">
<A name="103"></A>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Item&nbsp;2. Offer Statistics and Expected Timetable</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 5%">Not applicable.
</DIV>
<DIV align="left">
<A name="104"></A>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><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: 10pt"><B>Selected Financial Data</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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; text-indent: 5%">&nbsp;

<P align="center" style="font-size: 10pt">2
</DIV>
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<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; margin-left: .25in; width: 7.5in">
<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="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" 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>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</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>2006</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>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" 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="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" 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">(millions of euro, except for Ordinary Share)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" 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="2" style="border-bottom: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Share)<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</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">871.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">660.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">594.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">665.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">674.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">734.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other(2) </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75.2</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>
</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>
    <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">970.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">735.4</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>
</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">(647.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(490.5</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>
</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">323.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">244.9</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>
</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">(245.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(186.2</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>
</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">(55.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(42.2</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>
</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>&nbsp;</TD>
    <TD align="right">21.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16.5</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other income (expense), net(3) (4) (5)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.8</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>
</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>&nbsp;</TD>
    <TD align="right">25.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.3</TD>
    <TD>&nbsp;</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>
</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">(9.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7.1</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>
</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>&nbsp;</TD>
    <TD align="right">16.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.2</TD>
    <TD>&nbsp;</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>
</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">0.1</TD>
    <TD>&nbsp;</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">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>
</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>&nbsp;</TD>
    <TD align="right">16.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.3</TD>
    <TD>&nbsp;</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>
</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>&nbsp;</TD>
    <TD align="right">0.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.23</TD>
    <TD>&nbsp;</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>
</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>&nbsp;</TD>
    <TD align="right">19.1</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">(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>
</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 align="left">$</TD>
    <TD align="right">0.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">0.26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">(0.13</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">0.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">0.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">1.68</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <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">54,733,796</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,733,796</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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <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">
    <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">Current assets </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">537.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">407.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">384.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">389.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">383.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">402.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total assets </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">890.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">674.7</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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current liabilities </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">175.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">133.0</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>
</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 align="right">3.2</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">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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <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">0.6</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Shareholders&#146; equity </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">631.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">478.9</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>
</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">Shareholders&#146; equity </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">618.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">468.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">453.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">464.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">452.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">432.3</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>

<DIV style="margin-top: 10pt">
<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><DIV style="text-align: justify">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;29, 2006 of U.S.$ 1.3197 per euro.</DIV></TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">2)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Sales included under &#147;Other&#148; principally consist of sales of polyurethane foam and leather to
third parties and sales of living room accessories.</DIV></TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">3)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">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; 2006 Compared to 2005&#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.</DIV></TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">4)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">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 (d)&nbsp;to the
Consolidated Financial Statements. In addition, other income (expense), net, in 2005 was positively
affected by revenues for capital grants. See Note 24 to the Consolidated Financial Statements
included in Item&nbsp;18 of this annual report.</DIV></TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">5)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Other income (expense), net, in 2006 was negatively affected by the provisions for contingent
liabilities. See Note 24 to the Consolidated Financial Statements included in Item&nbsp;18 of this
annual report.</DIV></TD>
</TR>
</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<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; margin-left: .25in; width: 7.5in">
<DIV align="left">
<A name="106"></A>
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Exchange Rates</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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; 2006 Compared to 2005&#148; and Item&nbsp;11, &#147;Quantitative and
Qualitative Disclosures about Market Risk&#148;.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" 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="2" 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 style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>At Period End</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">2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">0.9495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">1.0485</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">1.1411</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">1.2597</TD>
    <TD>&nbsp;</TD>
</TR>
<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 align="center">1.2478</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">1.3538</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">1.2400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">1.1842</TD>
    <TD>&nbsp;</TD>
</TR>
<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="center">1.2661</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">1.3197</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="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" 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="2" style="border-bottom: 1px solid #000000"><B>High</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>Low</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">29-Dec-06 </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">1.3327</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">1.3073</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">31-Jan-07 </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">1.3286</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">1.2904</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">28-Feb-07 </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">1.3246</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">1.2933</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">30-Mar-07 </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">1.3374</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">1.3094</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">30-Apr-07 </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">1.3660</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">1.3363</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">31-May-07 </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">1.3616</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">1.3419</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>

<DIV style="margin-top: 10pt">
<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><DIV style="text-align: justify">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.</DIV></TD>
</TR>
</TABLE>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 5%">The effective Noon Buying Rate on June&nbsp;25, 2007 was 1.3450 (Source: Bloomberg).
</DIV>
<DIV align="left">
<A name="107"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Risk Factors</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>The Group has a recent history of losses; the Group&#146;s future profitability and financial
condition depend on its ability to successfully restructure its operations &#151; </B>The Group experienced
a 50.7% decrease in earnings in 2004, and net losses totaling <FONT face="'Times New Roman',times,serif">&#128;</FONT>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 conditions, and a generally unfavorable
economy in Italy and Europe, as well as negative results achieved by some non-performing foreign
retail units, particularly in the United Kingdom, specific
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt">4
</DIV>
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<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; margin-left: .25in; width: 7.5in">
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">inefficiencies in the Group&#146;s
manufacturing operations and the higher impact of fixed costs resulting from a decrease in net
sales in 2004 and 2005. Although the Group reported net earnings of <FONT face="'Times New Roman',times,serif">&#128;</FONT>12.3&nbsp;million in 2006,
primarily due to a reduction in order backlog and notwithstanding a weak business environment,
during the first three months of 2007 the Group had net losses of <FONT face="'Times New Roman',times,serif">&#128;</FONT>4.7&nbsp;million. For more
information, see Item&nbsp;5, &#147;Trend Information and Guidance&#148;. There is no guarantee that the Group
will be able to achieve or maintain profitability in the future.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 restructuring plan aims to recover the Group&#146;s profitability and increase its
competitiveness by reducing manufacturing costs in Italy, increasing overall efficiencies and
closing non-performing retail units in order to streamline the Company&#146;s cost structure. 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">In 2006, the Group derived 37.2% of its leather- and fabric-upholstered furniture net sales
from the United States and the Americas and 55.5% 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><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 86.8% of net sales of upholstered
furniture in 2006 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
materials, and consumer preferences may change. There can be no assurance that the current market
for leather-upholstered furniture will not decrease.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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. Some of the Group&#146;s competitors offer
extensively advertised, well-recognized branded products.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<P align="center" style="font-size: 10pt">5
</DIV>
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<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; margin-left: .25in; width: 7.5in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 prices, which increases
price competition in the industry. In particular, manufacturers in China, Eastern Europe and South
America have increased competition in the promotional or lower-priced segment of the market.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><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 2006, approximately 47% of the Group&#146;s net sales, but only approximately
40% 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>The price of the Group&#146;s principal raw material is difficult to predict </B>- Leather is used in
approximately 85% 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 the level of demand in a number of different sectors, including: footwear, leather,
automotive, furniture and clothing. 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><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 derived significant
benefits from the Italian Government&#146;s investment incentive programs for under-industrialized
regions in Southern Italy, including tax benefits, subsidized loans and capital grants. See Item
4, &#147;Information on the Company &#150;Incentive Programs and Tax Benefits.&#148; In recent years, the Italian
Parliament replaced these incentive programs with an investment incentive program for all
under-industrialized regions in Italy, which is currently being implemented by the Group through
grants and research and development benefits. There are no indications at this time that the
Italian Government will implement new initiatives to support companies located in
under-industrialized regions in Italy. Therefore, 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>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt">6
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>The Group has material weaknesses in its internal control over financial reporting &#151; </B>The Group
has identified the material weaknesses in its internal control over financial reporting described
in Item&nbsp;15 of this Annual Report and has determined that its internal control over financial
reporting was not effective as of December&nbsp;31, 2006. The Group intends to remediate all such
material weaknesses by the time the Group files its Annual Report on form 20-F for the year ending December
31, 2007. There can be no assurance, however, that the Group will effectively remediate all
material weaknesses by that time or that additional material weaknesses will not arise in the
future. The existence of material weaknesses in internal control over financial reporting may
undermine the Group&#146;s ability to ensure reliable financial reporting and result in misstatements in
the Group&#146;s financial statements.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><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 47.5% of the issued and outstanding Ordinary Shares of the
Company (52.6% 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>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt">7
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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: 10pt"><B>Forward Looking Information</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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>
<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<P align="center" style="font-size: 10pt">8
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">
<DIV align="left">
<A name="109"></A>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><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: 10pt"><B>Introduction</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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, 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 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 45% 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, 2007, 124 <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, 2007, through
159 <I>Natuzz</I>i and <I>Divani &#038; Divani by Natuzzi </I>stores.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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
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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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: 10pt"><B>Organizational Structure</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 5%">As at April&nbsp;30, 2007, the Company&#146;s principal operating subsidiaries were:
</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="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" 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">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" 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" nowrap>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" nowrap>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" nowrap>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" nowrap>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" nowrap>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" nowrap>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" nowrap>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">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" nowrap>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">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" nowrap>Bari, Italy</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(4)</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>



<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<P align="center" style="font-size: 10pt">9
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" 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">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" 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">
    <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" nowrap>High Point, NC, USA</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 Iberica S.A.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>Madrid, Spain</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 Switzerland AG</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">97.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>Kaltbrunn, Switzerland</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 Nordic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>Copenaghen, Denmark</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 Benelux S.A.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>Geel, Belgium</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 Germany Gmbh</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>Dusseldorf, Germany</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 Sweden AB</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>Stockholm, Sweden</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 Japan KK</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>Tokyo, Japan</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 Services Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>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">La Galleria Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>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">Natuzzi Netherlands Holding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>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" nowrap>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">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" nowrap>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" nowrap>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" nowrap>Bari, Italy</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(5)</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>
<DIV style="margin-top: 10pt">
<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><DIV style="text-align: justify">Manufacture and distribution</DIV></TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Intragroup leather dyeing and finishing</DIV></TD>
</TR>

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

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

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

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Distribution</DIV></TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Investment holding</DIV></TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(6)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Transportation services</DIV></TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(7)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Dormant</DIV></TD>
</TR>
</TABLE>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">See Note 1 to the Consolidated Financial Statements for further information on the Company&#146;s
subsidiaries.
</DIV>

<DIV align="left">
<A name="112"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Strategy</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><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, 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>

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

<P align="center" style="font-size: 10pt">10
</DIV>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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. In June&nbsp;2006 the Group obtained an extension of the temporary work force
reduction to cover the period June&nbsp;2006 &#150; June&nbsp;2008 in order to recover profitability and
efficiency, specifically in the Italian plants. The Group has agreed with the Italian Unions that
no more than 508 workers will be affected by the temporary work force reduction during the period.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">On June&nbsp;12, 2007, the Group announced that, in light of the still challenging business
conditions affecting all major markets and the adverse currency trend that are depressing the order
flow, it would reduce temporarily the production working time at its Italian plants (from 8 to 5
hours per shift) for 13&nbsp;weeks.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>Brand Portfolio Strategy</B>: The Group is expanding in all price segments of the leather and
non-leather upholstered furniture market. The Group has divided its extensive product range into
two different brands, Natuzzi and Italsofa, in an effort to address specific market segments and
increase its sales and profitability.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>i) The Natuzzi brand </B>offers high -end and high quality products, with detailed designs and
customized materials and finishes. It aims to position itself as the brand that helps consumers
rediscover the home as a welcoming place, a place
of happiness and well-being. The Group wants to establish an &#147;aspirational&#148; image through the
style and quality of its products, and the concepts and communications in its stores. The Group
wants to maintain a broad target market by bringing consumers around the world product collections
filled with beautiful, Italian-style living room design through its stores and galleries.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">From the identification of consumer needs and market trends, to the delivery of the living
room in the consumer&#146;s home, Natuzzi directly controls 92% of the production and distribution value
chain to guarantee ultimate quality at the most competitive prices. All models are designed in the
Style Center in Italy and are primarily manufactured in the Group&#146;s Italian factories.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">In the last quarter of 2005 and the beginning of 2006, the Group moved some of the production
for its most popular Natuzzi-brand models in the United States to its manufacturing facilities
outside of Italy in order to increase profitability and avoid raising prices in response to the
weak U.S. dollar. This offer includes limited models and covers in leathers and microfibers, but
no &#147;Total Look&#148; furnishings.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>ii) The Italsofa brand</B>, in the medium segment of the market, aims to position itself as the
brand that offers quality products at competitive prices through current and additional wholesale
channels. The Brand includes a wide range of sofas and armchairs in leather and microfiber, which
are available in different versions. Products are designed in Italy and manufactured at the Group&#146;s
factories in China, Brazil and Romania to provide the best possible value in the market.
</DIV>

<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<P align="center" style="font-size: 10pt">11
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 prices, which increases
price competition in the industry. In particular, manufacturers in China, Eastern Europe and South
America have increased competition in the lower-priced segment of the market.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">In response to the actions and strength of the Group&#146;s competitors and the inherent
fragmentation in some markets in which it competes, the Group will continue to focus its efforts on
improving product quality, design and reliable customer service.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><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 leads in the leather-upholstered furniture segment in the United States,
with an 8.1% market share, and in Europe, with 4.9%. The Group continues to focus on sales and
expand the Natuzzi retail distribution outside its core markets.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><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 and an increase in the number of <I>Natuzzi Stores </I>and <I>Natuzzi Galleries</I>
worldwide. See
&#147;&#151;Markets&#148;. As of April&nbsp;30, 2007, there were 284 <I>Natuzzi Stores </I>worldwide, including <I>Divani
and Divani by Natuzzi </I>stores. The
<I>Natuzzi Galleries </I>program was launched in 2002 and the number of
galleries worldwide reached 547 as of April&nbsp;30, 2007. By using the same creative concepts and
internal decorations in <I>Natuzzi Stores </I>and <I>Natuzzi Galleries</I>, the Group has created a coherent
identity for the Natuzzi brand. The Group plans to open additional <I>Natuzzi Stores </I>and <I>Natuzzi</I>
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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>Product diversification </B>- The Group is the only Italian manufacturing company in the designer
furniture and home decoration industry capable of offering consumers carefully developed,
coordinated living rooms through its &#147;Total Look&#148; offer. The Total Look offer is conceived in
accordance with the latest trends in design, materials and colors, and includes high quality sofas,
furnishings and accessories, all of which are developed in -house and presented in harmonic and
personalized solutions. The Group has taken a number of steps to broaden its product lines,
including the development of new models, such as modular and motion frames, and the introduction of
new materials and colors, including exclusive fabrics and microfibers. See &#147;&#151; Products.&#148;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">In addition to its microfibers collection, the Group has also launched Alcantara <SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Elegance,
an exclusive covering produced for the Natuzzi Group by Alcantara S.p.A.. In order to add to its
already vast offerings in upholstered furniture, the Group has begun to invest in its furnishings
and accessories offerings. In 2006, the Group specifically focused on the wall units that complete
the living room environment offering. The Group believes that expanding its Total Look offerings
will strengthen its relationships with the world&#146;s leading distribution chains, which are
interested in offering branded packages. The Group has invested in Natuzzi Style Center in
Santeramo, Italy, to serve as a creative hub for the Group&#146;s design activities.
</DIV>

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

<P align="center" style="font-size: 10pt">12
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">

<DIV align="left">
<A name="113"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Manufacturing</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">As at April&nbsp;30, 2007, the Group operated 10 production facilities in Italy. Seven of the
facilities are engaged in upholstery cutting and sewing and assembly of finished and semi-finished
products, and employed, as at April&nbsp;30, 2007, 2,371 workers 37.8% of whom are not directly involved
in production. These seven facilities are located either in, or within a 25-mile radius of
Santeramo, where the Group&#146;s headquarters are located. Assembly operations at the Group&#146;s
production facilities also include leather cutting and sewing and attaching foam and covering to
frames.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">In July&nbsp;2006, the Company initiated an industrial restructuring program to improve the flow of
production logistics and simplify job assignments in order to increase productivity while improving
product quality.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Operations at all of the Group&#146;s production facilities are normally conducted Monday through
Friday with two eight-hour shifts per day. See &#147;&#151;&#150; &#145;Improving efficiency and reducing operating
costs&#146;&#148;.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The Group produces, directly and by subcontracting, 9 grades of leather in approximately 15
finishes and 118 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 the manufacture
of most Natuzzi-branded leather products, while split leather is used in addition to top grain
leather in the manufacture of some Natuzzi-branded products and most Italsofa 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">One of the Group&#146;s production facilities, which is located near Naples and employed 59 workers
as at April&nbsp;30, 2007, 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
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<P align="center" style="font-size: 10pt">13
</DIV>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">and is sold under the &#147;Eco-Flex<SUP style="font-size: 85%; vertical-align: text-top">TM</SUP>&#148;
trademark. 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; trademark. As a result of intensive R&#038;D activity, the Company has
developed a new family of highly resilient materials. The new polymer matrix is safer than others
available in the market because of its improved flame resistance, and it is more
environmentally-friendly because it can be disposed of without releasing harmful by-products and
because the raw materials used to make it cause less harmful environmental impacts during handling
and storage.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The Group currently manufactures the Italsofa Collection outside Italy at plants located in
Brazil, China and Romania. If orders exceed production capacity at these plants, Italsofa products
are also manufactured in the Company subcontractor&#146;s Italian plants.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 one of the two plants in China, while the land and buildings of the remaining
production facilities are leased from lessors, with whom the Group enjoys long-term relationships.
Although the lease terms vary in lengths, Italian law provides that any such lease must have a
minimum term of six years. 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>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 11% of Natuzzi&#146;s production during the year ended on December&nbsp;31, 2006).
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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The Group purchases hides from slaughterhouses and tanneries located mainly in Italy, Brazil,
Germany, Colombia, Ireland, Australia, India, 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 26 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>

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

<P align="center" style="font-size: 10pt">14
</DIV>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">During 2006 and the first quarter of 2007, the prices paid by the Group continued increasing,
especially in the Brazilian market. Factors influencing the leather price increase included a
reduction in red meat consumption, unfavorable exchange rates of the currencies in the markets
where we operate and the high demand for hides from the Far East Markets, which reduced the
availability of hides for European markets and raised purchase prices for hides. The Group is
continuing to research new suppliers and sources of cattle hides in order to minimize the effect of
this phenomenon.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 12 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.
All microfibers in the highest price category are purchased from the Group&#146;s Japanese supplier.
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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 2006 and the beginning of 2007, fabric
prices were stable due to long-term relationships with suppliers and the large volumes purchased by
the Group, despite 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>

<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<P align="center" style="font-size: 10pt">15
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 other
European countries, while some hand-made products (such as carpets) are made in India.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>&#147;Supply-chain Management&#148;</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>Procurement Policies and Operations integration. </B>In order to improve customer service and
reduce industrial costs, the Company defined a new policy for handling suppliers and supply
logistics in January&nbsp;2006. All of the sub-departments working in the Logistics Direction department
have been reorganized to maximize efficiency throughout the supply-chain. Logistics Direction now
coordinates periodic meetings amongst all of its working groups in order to identify areas of
concern that arise in the supply-chain, and identify solutions that will be acceptable to all
groups. Logistics Direction is responsible for strictly monitoring the proposed solutions in order
to ensure their effectiveness. Additionally, in order to improve access to supply-chain information
throughout the Group, the Logistics Direction department, with the support of the Information
Systems department, has created a new portal that allows the Logistics direction and other
departments (such as Customer Service and Sales) to monitor the movement of goods through the
supply-chain.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>Production planning (order management, production, procurement)</B>. The Group&#146;s commitment to
reorganizing procurement logistics has led to:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">1) a reduction of the production planning cycle from four to three weeks, enabling a swifter
response to customer orders;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">2) a 40% reduction in the size of the Group&#146;s inventory of raw materials and/or components,
particularly those pertaining to coverings. This reduction has contributed to the Group&#146;s decrease
in costs of goods sold. This positive impact was made possible by both the development of software
that allows more detailed production programming and broader access by suppliers themselves, and a
more general reorganization of supplier relationships. Suppliers are now able to provide assembly
lines with requested components within four hours. As a consequence of
these improvements, the Group has reduced the amount of storage space used for semi-products
by 80%;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">3) the planning and partial completion of the industrial reorganization of the local
production center.
</DIV>

<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<P align="center" style="font-size: 10pt">16
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 5%">The Group plans procurements of raw material and components:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 5%">i) &#147;on demand&#148; for those codes (identification numbers for components) that require a
shorter lead time for order completion than the standard production planning cycle for
customers orders.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 5%">This system allows the Group to handle a higher number of product combinations (in terms
of models, versions and coverings) for customers all over the world, while maintaining a
high level of service and minimizing inventory size. Procuring raw materials and
components &#147;on demand&#148; sets the risk of obsolescence at zero.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 5%">ii) &#147;upon forecast&#148; for all those codes requiring a long lead time for the order
completion.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 5%">Since April&nbsp;2006, the Group has been utilizing a new forecast methodology, developed in
cooperation with a consulting firm. The current system balances the Group&#146;s desire to
maintain low inventory levels against the Sales Department&#146;s needs for flexibility in
filling orders, all the while maintaining high customer satisfaction levels.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Special production programs, requiring lead time shorter than three weeks, are only available
to a restricted group of customers, for a limited group of collections and product combinations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Lead times can be longer than those mentioned above when a high number of unexpected orders is
received.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Delivery times vary depending on the place of discharge (transport lead times vary widely
depending on the distance between the final destination and the production plant).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 while minimizing handling and transportation costs.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>Load optimization. </B>With the aim of decreasing costs and safeguarding product quality, the
Group attains optimum load levels for shipping by using a software developed through a research
partnership with the University of Bari and the University of Copenhagen, completed in June, 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">This software manages customers&#146; orders to be shipped by sea with the goal of maximizing the
number of orders shipped in full containers. If a customer&#146;s order does not make optimal use of
container space, revisions to the order
quantities are suggested. This activity, which was previously a prerogative of Headquarters,
has been almost completely transferred to High Point.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">As far as the load composition by truck is concerned, the Group is currently planning a
software development project designed to minimize total transport costs by taking into account
volume and route optimization for customers&#146; orders in defined areas.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt">17
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>Transportation</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 2006, the Group shipped 13,611 containers (40&#146;hc) to overseas countries
and approximately 9,573 full load mega-trailer trucks to European destinations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">In order to guarantee the best price and quality of transportation services, the Group deals
directly with shipping companies and logistic operators without working through intermediaries.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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">
<A name="114"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Products</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The Group is committed to the conception, prototyping, production and commercialization of a
wide range of upholstered furniture in both leather and fabric in three different styles that
reflect the different tastes and lifestyles of the consumer: Casual, Urban and Vintage.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The classification into three stylistic concepts, each of them characterized by particular
colors, ambiance and emotions, allows the Group to establish an immediate connection with different
targets consumers.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The wide range of offerings, even within a single style, enables the Company to reach
different market segments, maintain awareness of its consumers&#146; needs and keep pace with market
trends.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The new models are the result of a constant flow of information that stems from the market,
whose needs are analyzed, filtered and translated by the product managers into a brief, including
specific styles, functions and price points. This brief is then passed to the design team, which
works with the prototyping department to swiftly meet the market demand. The development process
also takes into account specific requirements from key customers (mass dealers), who express their
needs for changes to the existing product offerings, in accordance with their market analyses.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The need for brand consolidation has given rise to the need for cooperation with external
sources for the creation of new models. The Company takes advantage of synergies with studios,
which have developed new ideas, particularly in the high-end collection.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 products in
382 different models<SUP style="font-size: 85%; vertical-align: text-top">1</SUP>, 9 leather grades in 15 leather finishes and 118 colors; 6 fabric
grades in 45 fabric finishes and 205 colors, together with 4 different accent articles (pillows,
pouf, armchairs matching particular models of sofas and ottomans) in 14 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).
</DIV>
<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 10pt">
<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><DIV style="text-align: justify">Last update December&nbsp;2006</DIV></TD>
</TR>
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<P align="center" style="font-size: 10pt">18
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The Group&#146;s products are divided into two Brands, the Natuzzi brands, that is divided into two
collections, and the Italsofa brand.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The Pasquale Natuzzi Collection represents the high-end 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.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The Natuzzi Retail Collection represents the medium-high end segment, which better expresses
the Casual, Vintage and Urban styles. The wide offering (212 different models), the compositions&#146;
versatility and the coverings&#146; personalization are the strengths of this collection.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The Italsofa brand represents the medium-low segment. There are currently 102 models in this
collection. Based on the results of this collection, the Group offers different coverings for
Italsofa products in different markets. For the Americas and the Asia Pacific market, leather
coverings are offered in 4 grades, 15 finishes and 85 colors, and microfiber coverings are offered
in 2 grades, 2 finishes and 25 colors. By contrast, in EMEA (Europe, Middle East and Africa),
leather coverings are offered in 4 grades, 12 finishes and 73 colours and microfiber coverings are
offered in 3 grades, 3 finishes and 33 colours.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The strong customer-oriented approach stems from the aspiration to offer more than just a
product. Beyond the offer of upholstered furniture, the Group is committed to expanding into other
areas by introducing new tables, lamps, carpets and wall units. The sales of &#147;Furnishing and
Accessories&#148; are continuously increasing.
</DIV>
<DIV align="left">
<A name="115"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Markets</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 <I>Divani &#038; Divani by Natuzzi </I>and <I>Natuzzi </I>furniture stores. Since 2001, the Group
has also sold its furniture through directly owned <I>Divani &#038; Divani by Natuzzi </I>and <I>Natuzzi Stores</I>.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">In 2006, the Group derived 37.2% of its leather- and fabric-upholstered furniture net sales
from the United States and the Americas, 55.5% from Europe and 7.3% from the rest of the world
(mainly Australia and Japan). See &#147;&#151; Strategy.&#148;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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>

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

<P align="center" style="font-size: 10pt">19
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Leather- and Fabric -Upholstered Furniture Net Sales (millions of euro)</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="28%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt; font-weight: bold" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2006</TD>
    <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>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">U.S. and the
Americas<SUP>(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">245.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">37.2</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">241.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&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="left">&nbsp;</TD>
    <TD align="right">42.0</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">366.<I>6</I></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">55.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">313.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&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="left">&nbsp;</TD>
    <TD align="right">51.1</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">48.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">7.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&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="left">&nbsp;</TD>
    <TD align="right">6.9</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>
    <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">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">660.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">594.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&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="left">&nbsp;</TD>
    <TD align="right">100.0</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>
    <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 style="margin-top: 10pt">
<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><DIV style="text-align: justify">Outside the United States, the Group also sells its products to customers in
Canada and Central and South America (collectively, the &#147;Americas&#148;).</DIV></TD>
</TR>
</TABLE>
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Leather- and Fabric -Upholstered Furniture Net Sales (in seats) (2)</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="28%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt; font-weight: bold" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2006</TD>
    <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>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">U.S. and the Americas<SUP>(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,364,873</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">45.2</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,386,329</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&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="left">&nbsp;</TD>
    <TD align="right">51.0</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">1,449,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">48.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,262,887</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&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="left">&nbsp;</TD>
    <TD align="right">43.0</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">202,133</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">6.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">162,523</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&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="left">&nbsp;</TD>
    <TD align="right">6.0</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>
    <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">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,016,702</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,811,739</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&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="left">&nbsp;</TD>
    <TD align="right">100.0</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>
    <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 style="margin-top: 10pt">
<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><DIV style="text-align: justify"> Outside the United States, the Group also sells its products to customers in
Canada and Central and South America (collectively, the &#147;Americas&#148;).</DIV></TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">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.</DIV></TD>
</TR>
</TABLE>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>1 United States and the Americas. </B>In 2006, net sales of leather- and
fabric-upholstered furniture in the United States and the Americas increased 1.5% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>245.4
million, compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>241.7&nbsp;million in 2005, and the number of seats sold decreased 1.5% to
1,364,873, compared to 1,386,329 in 2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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, 2007, the High Point operation had 64 employees.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Natuzzi Americas has 49 independent sales representatives and sub-representatives in the
United States and the Americas. They are regionally supervised by sales and brand development
managers.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 Spring and Fall to promote its products.
</DIV>

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

<P align="center" style="font-size: 10pt">20
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>2 Europe</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>2.1 Europe (excluding Italy). </B>During 2006, the Company&#146;s investments in opening stores and
galleries throughout Europe started to pay off and net sales of leather and fabric-upholstered
furniture increased by 15.6% to
<FONT face="'Times New Roman',times,serif">&#128;</FONT>284.6&nbsp;million, compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>246.1&nbsp;million in 2005, and seats sold
also increased by 14.3 % to 1,161,302 from 1,015,683.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The Group also promotes its products in Europe through six subsidiaries in Belgium, Denmark,
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, 2006,
the Group had 9 sales agents and sub-agents in Europe/Middle East. These sales agents are paid on
a commission basis.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Outside Italy, the Company uses franchised or directly owned stores to penetrate markets and
implement brand strategies. As of April&nbsp;30, 2007, 72 franchised single-brand stores were operating
in Europe (outside Italy): 28 under the <I>Divani &#038; Divani by Natuzzi </I>name (13 in Greece, 15 in
Portugal) and the remainder under the <I>Natuzzi </I>name (20 in France, 1 in Germany, 2 in Malta, 2 in
Cyprus, 1 Iceland, 1 in Latvia, 1 in Finland, 2 in Slovenia, 2 in Croatia, 1 in Bosnia-Herzegovina,
2 in Hungary, 1 in Belgium, 3 in Russia, 1 in Serbia-Montenegro, 3 in Czech Republic and 1 in
Poland ). As of April&nbsp;30, 2007, there were 41 directly owned stores in Europe (outside Italy): 6
in Switzerland, 26 in Spain, 5 in United Kingdom, 3 in Denmark and 1 in Sweden under the <I>Natuzzi</I>
name. Included in the 5 <I>Natuzzi Stores </I>located in United Kingdom, the Group operated 3 concessions
(store-in-store): 1 inside Selfridges Department Store in London and 2 inside House Of Fraser
Department Store (1 in Birmingham and the other in Glasgow).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">During 2005, the Group worked toward the conclusion of three important projects: the opening
of its first stores in Moscow (Russia), in St. Petersburg (Russia) and in Warsaw (Poland). These
stores were opened in the first months of year 2006. In Eastern Europe there are total of 14 stores
operating under the Natuzzi name.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">In February of 2006, the Group started liquidating Natuzzi&#146;s subsidiaries in the United
Kingdom. The Group intends to retain three 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">As of April&nbsp;30, 2007, there were 314 <I>Natuzzi Galleries </I>in Europe (outside Italy), 22 of which
are located in Eastern Europe: 2 in Slovenia, 5 in Russia, 1 in Slovakia, 7 in Poland, 2 in Czech
Republic, 1 in Hungary, 1 in Macedonia, 1 in Moldova and 2 in Ukraine. Seven of these new
galleries were opened in emerging markets like Macedonia, Moldova, Ukraine, Hungary and the Czech
Republic, where two galleries operate alongside three stores.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>2.2 Italy</B>. In 2006, sales of leather- and fabric-upholstered furniture in Italy increased by
22.2% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>81.9&nbsp;million, compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>67.0&nbsp;million in 2005, and seats sold also increased by 16.7%
to 288,394, as compared to 247,203 in 2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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,
2007, 124 <I>Divani &#038; Divani by Natuzzi </I>stores and 1 <I>Natuzzi Store </I>were located in Italy, 24 of which
were directly owned.
</DIV>

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

<P align="center" style="font-size: 10pt">21
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">On April&nbsp;5, 2006 the Group opened a store in the center of Milan&#146;s main shopping and
commercial area.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>3 Rest of the World</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>3.1 Asia-Pacific. </B>In 2006, overall sales in the Asia-Pacific market increased slightly by
21.1% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>48.3&nbsp;million, compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>39.9&nbsp;million in 2005. In 2006, sales in Australia were <FONT face="'Times New Roman',times,serif">&#128;</FONT>18.3
million (up 10.9% from <FONT face="'Times New Roman',times,serif">&#128;</FONT>16.5&nbsp;million in 2005), and sales in Japan were <FONT face="'Times New Roman',times,serif">&#128;</FONT>5.0&nbsp;million (up 19.0%
compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>4.2&nbsp;million in 2005).
This increase was mainly thanks to our decision to directly manage our operations through the
establishment of a local operating subsidiary.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">As of April&nbsp;30, 2007, 35 franchised single-brand stores were operating in the Asia Pacific
market: 18 in Australia, 13 in China, 1 in Singapore and 3 in New Zealand. The 18 stores in
Australia operate along with 29 galleries in David Jones Department Stores.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>3.2 Middle East</B>. 2006 has been an important year for the development of the Natuzzi brand
strategy in this region. We opened one store in Herzelia (Israel), and the first store in Istanbul
(Etiler Area), while two galleries have been opened: one in Kuwait and one in Amman (Jordan). As
of April&nbsp;30, 2007, there were a total of 7 stores: 1 in Lebanon, 1 in Turkey, 2 in the United Arab
Emirates, 1 in Saudi Arabia and 2 in Israel. There are also a total of 7 galleries: 1 in Bahrain, 1
in Kuwait, 1 in the United Arab Emirates, 1 in Jordan and 3 in Saudi Arabia.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><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 83% of its sales and obtains credit insurance for almost 70% of this
amount; 13.8% 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, 3.2% of the Group&#146;s sales are supported by a
&#147;letter of credit&#148; or &#147;payment in advance&#148;.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<P align="center" style="font-size: 10pt">22
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>Advertising &#151; </B>The Group uses the Natuzzi brand for its medium- to higher-priced product line.
Natuzzi&#146;s 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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: 10pt"><B>Incentive Programs and Tax Benefits</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Historically, the Group derived benefits from the Italian Government&#146;s investment incentive
program for under-industrialized regions in Southern Italy, which includes the area that serves as
the center of the Group&#146;s operations. The investment incentive 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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>35.6&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 for <FONT face="'Times New Roman',times,serif">&#128;</FONT>24.2&nbsp;million. 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>11.4&nbsp;million.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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
</DIV>

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

<P align="center" style="font-size: 10pt">23
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">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
<I>University of Lecce </I>and the <I>Polytechnic University of Bari</I>. In February&nbsp;2007, the Company provided
the above mentioned Committee with the complete list of the expenses to be acknowledged under such
project that have been incurred between August&nbsp;19, 2002 through December&nbsp;31, 2003, amounting to
<FONT face="'Times New Roman',times,serif">&#128;</FONT>1.0&nbsp;million. Recently, the Company sent the list of all the costs incurred in 2004 and 2005,
amounting to <FONT face="'Times New Roman',times,serif">&#128;</FONT>1.1&nbsp;million and <FONT face="'Times New Roman',times,serif">&#128;</FONT>1.7&nbsp;million respectively, to be acknowledged under the same project.
Currently, the Company is working on detailing all the expenses incurred in 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">In 2006, Natuzzi entered into an agreement with the Italian Ministry for the incentive program
denominated &#147;Integrated Package of Benefits &#151; Innovation of the working national program
&#145;Developing Local Entrepreneurs&#146;&#148; for the creation of a centralized information system in Santeramo
in Colle that will be utilized by all
Natuzzi points-of-sale around the world. 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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. On December&nbsp;29, 2006, the Company provided the Italian Industrial Ministry with the
complete list of the expenses related to feasibility study, industrial research expenses and
prototype developments that have been incurred during the period from July&nbsp;1, 2005 through December
31, 2006, totaling <FONT face="'Times New Roman',times,serif">&#128;</FONT>4.1&nbsp;million.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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: 10pt"><B>Management of Exchange Rate Risk</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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: 10pt"><B>Trademarks and Patents</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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;<I>Divani &#038; Divani by Natuzzi</I>&#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 that the Group believes will enjoy commercial success and have a high
likelihood of being copied.
</DIV>

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

<P align="center" style="font-size: 10pt">24
</DIV>
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<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; margin-left: .25in; width: 7.5in">

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

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Regulation</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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, &#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: 10pt"><B>Environmental Regulatory Compliance</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 6%">The Group operates its own tannery in the province of Udine and another facility for foam
production in Naples. The activities of these two facilities are subject to both Italian and
European laws and regulations. The Company operates in 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: 10pt"><B>Insurance</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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>
<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<P align="center" style="font-size: 10pt">25
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">
<DIV align="left">
<A name="122"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Description of Properties</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The location, approximate size and function of the principal physical properties used by the
Group as at April&nbsp;30, 2007 are set forth below:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR>
    <TD width="34%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="56%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" 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: 10pt" 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: 10pt" 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: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Location</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">meters)</TD>
    <TD>&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" nowrap><DIV style="margin-left:0px; text-indent:-0px">Santeramo in Colle (BA) &#150; Italy
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">29,000</TD>
    <TD nowrap valign="top">&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="top" nowrap><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="top">&nbsp;</TD>
    <TD align="right" valign="top">27,500</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Sewing and product assembly (Owned)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top" nowrap><DIV style="margin-left:0px; text-indent:-0px">Matera la martella &#150; Italy
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">38,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Fabric cutting, general warehouse of sofas and
accessory furnishing (Owned)</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" nowrap><DIV style="margin-left:0px; text-indent:-0px">Matera Iesce &#150; Italy
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">12,500</TD>
    <TD nowrap valign="top">&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="top" nowrap><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="top">&nbsp;</TD>
    <TD align="right" valign="top">5,800</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Leather cutting, sewing (Owned)</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" nowrap><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="top">&nbsp;</TD>
    <TD align="right" valign="top">8,500</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Product assembly (Owned)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top" nowrap><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="top">&nbsp;</TD>
    <TD align="right" valign="top">7,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Warehouse (Owned)</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" nowrap><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="top">&nbsp;</TD>
    <TD align="right" valign="top">3,300</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Training school, warehouse (Owned)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top" nowrap><DIV style="margin-left:0px; text-indent:-0px">Altamura (BA)&nbsp;NDS &#150; Italy
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3,700</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Accessory Furnishings warehouse (Owned)</TD>

</TR>
<TR valign="bottom">
    <TD valign="top" nowrap><DIV style="margin-left:0px; text-indent:-0px">Ginosa (TA) &#150; Italy
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">14,500</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Sewing and product assembly (Owned)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top" nowrap><DIV style="margin-left:0px; text-indent:-0px">Laterza (TA) &#150; Italy
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Leather cutting (Owned)</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" nowrap><DIV style="margin-left:0px; text-indent:-0px">Laterza (TA) &#150; Italy
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">13,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Fabric and lining cutting, leather warehouse (Owned)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top" nowrap><DIV style="margin-left:0px; text-indent:-0px">Laterza (TA) &#150; Italy
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">20,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Accessory Furnishing Packaging and Warehouse (Owned)</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" nowrap><DIV style="margin-left:0px; text-indent:-0px">Qualiano (NA) &#150; Italy
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">12,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Polyurethane foam production (Owned)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top" nowrap><DIV style="margin-left:0px; text-indent:-0px">Pozzuolo del Friuli (UD) &#150; Italy
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">20,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Leather dyeing and finishing (Owned)</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" nowrap><DIV style="margin-left:0px; text-indent:-0px">Montebello (VI) &#150; Italy
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5,500</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Leather warehouse (Leased)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top" nowrap><DIV style="margin-left:0px; text-indent:-0px">High Point &#151; North Carolina -
U.S.A.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10,000</TD>
    <TD nowrap valign="top">&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" nowrap><DIV style="margin-left:0px; text-indent:-0px">Baia Mare &#150; Romania
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">70,200</TD>
    <TD nowrap valign="top">&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" nowrap><DIV style="margin-left:0px; text-indent:-0px">Shanghai &#150; China
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">43,500</TD>
    <TD nowrap valign="top">&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" nowrap><DIV style="margin-left:0px; text-indent:-0px">Shanghai (Fengpu) &#150; China
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">14,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Leather and fabric cutting, leather and fabric
warehouse (Leased)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top" nowrap><DIV style="margin-left:0px; text-indent:-0px">Salvador de Bahia (Bahia) &#150;<BR>
Brazil
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">28,000</TD>
    <TD nowrap valign="top">&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" nowrap><DIV style="margin-left:0px; text-indent:-0px">Pojuca (Bahia) &#150; Brazil
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">30,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Leather cutting, sewing and product assembly,
manufacturing of wooden frames, wooden feet,
polyurethane foam shaping, fiberfill production
(Owned)</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 2006, the Group continued
to utilize subcontractors to meet demand. However, in light of the challenging business conditions
affecting all major markets and the adverse currency trend that are depressing the order flow, the
Company will reduce temporarily the production working time at its Italian plants (from 8 to 5
hours per shift) for 13&nbsp;weeks, starting from June&nbsp;13, 2007.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The Group also directly manages 63 stores (24 of which are located in Italy) and 3 Natuzzi
concessions in the United Kingdom (within House Of Fraser and Selfridges department stores).
</DIV>
<DIV align="left">
<A name="123"></A>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<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; margin-left: .25in; width: 7.5in">

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Capital Expenditures</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The following table sets forth the Group&#146;s capital expenditures for each year in the
three-year period ended December&nbsp;31, 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="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10"><B>Year ending December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">(millions of Euro)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" 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">Land and plants</DIV></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">3.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.5</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">7.0</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.5</TD>
    <TD>&nbsp;</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>
</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">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.9</TD>
    <TD>&nbsp;</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>
</TR>
<!-- End Table Body --></TABLE>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 expansion of the
Company&#146;s retail network. In 2006, capital expenditures were primarily made to open new <I>Natuzzi
Stores </I>and <I>Natuzzi Galleries</I>, as well as to make improvements at the Group&#146;s existing facilities
(those located in Bahia Mare, Romania, 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 2007, to be financed with cash flow from operations, will be approximately
<FONT face="'Times New Roman',times,serif">&#128;</FONT>20&nbsp;million mainly directed to improvements of existing plants as well as to opening new <I>Natuzzi
Stores </I>and <I>Natuzzi Galleries</I>.
</DIV>
<DIV align="left">
<A name="124"></A>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Item&nbsp;4A. Unresolved Staff Comments</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">None
</DIV>
<DIV align="left">
<A name="125"></A>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Item&nbsp;5. Operating and Financial Review and Prospects</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 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)&nbsp;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: 10pt"><B>Critical Accounting Policies</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><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 which affect the reported
amounts of assets and liabilities as of any reporting date and the reported amounts of revenues and
expenses during any reporting period. The Group&#146;s financial presentation could be materially
different if different estimates, judgments or assumptions were used. The following discussion
addresses the estimates, judgments 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>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt">27
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>Recoverability of Long-lived Assets &#151; </B>The Group periodically reviews the carrying values of
the long-lived assets held for use and the carrying values 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><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 creditworthiness 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 differ significantly from the Group&#146;s estimates if factors
such as general economic conditions and the creditworthiness of its customers are different from
the Group&#146;s assumptions.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><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 sales terms such that ownership, and thus risk, is
transferred to the customer when the customer takes possession of the goods. These sales terms are
referred to as &#147;delivered duty paid&#148;, &#147;delivered duty unpaid&#148;, &#147;delivered ex
quay&#148; and &#147;delivered
at customer factory&#148;. 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(c) to the Consolidated
Financial Statements included in Item&nbsp;18 of this annual report.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt">28
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">

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

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Results of Operations</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>Summary &#151; </B>In 2006, the Natuzzi Group reported strong net sales and net earnings, as well as
strong cash flow from operations, in spite of a weak market
environment, very aggressive pricing competition and unfavourable exchange rates. In 2006,
the Natuzzi Group continued to invest in the repositioning of the Natuzzi brand and the
reorganization of sales activities, as well as to focus on the ongoing restructuring of its
operations, in order to regain competitiveness and ensure long-term profitability. Net sales
increased 9.8% from <FONT face="'Times New Roman',times,serif">&#128;</FONT> 669.9&nbsp;million in 2005 to <FONT face="'Times New Roman',times,serif">&#128;</FONT> 735.4&nbsp;million in 2006. Seats sold increased, by
7.3%, due to the strong performance both in Europe (&#043;14.8%) and in the geographic territory that we
refer to as the &#147;Rest of the World&#148; (&#043;24.4%), which was partially offset by the negative
performance suffered in the Americas (-1.5%). Italsofa, the Group&#146;s lower-priced brand, continued
to represent a growing percentage of the Group&#146;s total seats sold, increasing to 50.0% of total
seats sold in 2006, as compared to 48.4% in 2005<B>.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">For the year 2006 the Group reported net earnings of <FONT face="'Times New Roman',times,serif">&#128;</FONT>12.3&nbsp;million, whereas, for the prior
year, it reported a net loss of <FONT face="'Times New Roman',times,serif">&#128;</FONT> 14.6&nbsp;million. On a per Ordinary Share, or per-ADS basis, net
income for 2006 totaled <FONT face="'Times New Roman',times,serif">&#128;</FONT> 0.23, up from a loss per share of <FONT face="'Times New Roman',times,serif">&#128;</FONT> 0.27 reported for 2005. 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="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Year Ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" 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">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&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">66.7</TD>
    <TD>&nbsp;</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>
</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">33.3</TD>
    <TD>&nbsp;</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>
</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">25.3</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">25.0</TD>
    <TD>&nbsp;</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>&nbsp;</TD>
    <TD align="right">5.7</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&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>
</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>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.5</TD>
    <TD nowrap>)</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">1.0</TD>
    <TD>&nbsp;</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>
</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>&nbsp;</TD>
    <TD align="right">1.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&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>
</TR>
<!-- End Table Body --></TABLE>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 seats sales, which are broken down by
geographic market, for the years ended December&nbsp;31, 2004 through 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>2006 Compared to 2005 &#151; </B>Net sales for 2006, including sales of leather- and fabric-upholstered
furniture and other sales (principally sales of polyurethane foam and leather sold to third parties
as well as of accessories), increased 9.8% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>735.4&nbsp;million, as compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>669.9&nbsp;million in
2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Net sales for 2006 of leather- and fabric-upholstered furniture increased 11.0% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>660.2
million, as compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>594.8&nbsp;million in 2005. The 11.0% increase was due to a 7.3% increase in
seats sold, and to a 4.2% change in the mix of products and product prices, partially off-set by a
0.5% decrease stemming from the appreciation of the Euro against the U.S. dollar. Net sales of
Natuzzi-branded
furniture accounted for 63.0% of our total net sales in 2006, and net sales of Italsofa
products accounted for 37.0% of our total net sales for 2006. Net sales for 2006 of Natuzzi-branded
furniture increased 5.4% in 2006, while net sales of Italsofa-branded furniture increased 22.1%, in
each case as compared to 2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Net sales for 2006 of leather upholstered furniture increased 14.9% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>573.1&nbsp;million, as
compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>498.9&nbsp;million in 2005, and net sales for 2006 of fabric upholstered furniture
decreased 9.1% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>87.2&nbsp;million, as compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>95.9&nbsp;million in 2005.
</DIV>

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

<P align="center" style="font-size: 10pt">29
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">In the Americas, net sales for 2006 of upholstered furniture increased slightly by 1.5% to
<FONT face="'Times New Roman',times,serif">&#128;</FONT>245.4&nbsp;million, as compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>241.7&nbsp;million in 2005, and seats sold decreased slightly by 1.5% to
1,364,873, as compared to 1,386,329 in 2005. Net sales of the lower-priced Italsofa-branded
furniture increased 9.6% compared to 2005, while net sales of the higher-priced Natuzzi-branded
furniture decreased 3.3%. In Europe, net sales for 2006 of upholstered furniture increased 17.0%
to <FONT face="'Times New Roman',times,serif">&#128;</FONT>366.6&nbsp;million, as compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>313.2&nbsp;million in 2005, due to a 9.3% increase in net sales of
Natuzzi-branded furniture and 34.0% growth in net sales of Italsofa-branded furniture. In the Rest
of the World, net sales for 2006 of upholstered furniture increased 21.1% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>48.3&nbsp;million, as
compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>39.9&nbsp;million in 2005, due to an increase in net sales of Natuzzi-branded furniture by
21.6%, and an increase in net sales of Italsofa-branded furniture by 19.3%.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Net sales for 2006 of Natuzzi-branded furniture increased 5.4% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>416.2&nbsp;million, as compared
to <FONT face="'Times New Roman',times,serif">&#128;</FONT>394.9&nbsp;million in 2005. During the same period, net sales of the lower-priced Italsofa
furniture increased 22.1% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>244.1&nbsp;million, as compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>199.9&nbsp;million in 2005. 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 mix resulting 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 increased
penetration of the Natuzzi brand in the medium/high end of the upholstery market as a result of
recently 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 -
Forward Looking Information&#148;.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Total net sales of <I>Divani &#038; Divani by Natuzzi </I>and <I>Natuzzi Stores </I>increased 21.8% in 2006 to
<FONT face="'Times New Roman',times,serif">&#128;</FONT>138.7&nbsp;million, as compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>113.9&nbsp;million in 2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">In 2006, total seats sold increased 7.3% to 3,016,702 from 2,811,739 sold in 2005. Negative
performance was recorded only in the Americas (down 1.5% to 1,364,872 seats) while positive results
were achieved in the Rest of the World (up 24.4% to 202,133 seats) and in Europe (up 14.8% to
1,449,697 seats).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Having already noted that in 2006 seats sold of the medium/low -priced Italsofa brand
increased 11.0% while seats sold of the medium/high &#150;priced Natuzzi brand increased 3.8%, the
following provides a more detailed country by country examination of the changes in volumes by
brand in our principal markets.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">In terms of seats sold under the Natuzzi brand, the Group recorded negative results in the
United States (-4.7%), the United Kingdom (-31.6%), Holland (-7.5%), Portugal (-14.2%), and Japan
(-12.3%). Positive performances were reported in Italy (&#043;11.6%), Canada (&#043;11.8%), Spain (&#043;16.8%),
Belgium (&#043;15.0%), France (&#043;29.8%), Germany (&#043;29.7%), Australia (&#043;22.4%), Denmark (&#043;104.0%) and
Switzerland (&#043;9.1%).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">In terms of seats sold under the Italsofa brand, the Group recorded significant growth in many
countries, including Germany (&#043;16.5%), France (&#043;33.2%), the United Kingdom (&#043;4.7%), Belgium
(&#043;56.1%), Canada (&#043;20.6%), Spain (&#043;52.5%), Sweden (&#043;2.0%), Holland (&#043;55.8%) and Italy (&#043;81.3%).
Negative performances were reported in the United States (-3.6%), Norway (-18.9%) and Australia
(-19.8%).
</DIV>

<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<P align="center" style="font-size: 10pt">30
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Other net sales (principally sales of polyurethane foam and leather sold to third parties, as
well as of accessories) amounted to <FONT face="'Times New Roman',times,serif">&#128;</FONT>75.1&nbsp;million in 2006, the same as in 2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Cost of sales increased by 6.8% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>490.5&nbsp;million or 66.7% of net sales in 2006, from <FONT face="'Times New Roman',times,serif">&#128;</FONT>459.4
million, or 68.6% of net sales in 2005. The improvement in cost of sales, as a percentage of net
sales, was due to a decrease in the cost of leather as well as to the lower impact of fixed costs
resulting from the increase in net sales.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The Group&#146;s gross profit increased 16.4% in 2006 to <FONT face="'Times New Roman',times,serif">&#128;</FONT>244.9&nbsp;million, as compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>210.5
million in 2005, as a result of the factors described above.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Selling expenses for 2006 increased 2.2% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>186.2&nbsp;million, as compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT> 182.2&nbsp;million in
2005, and, as a percentage of net sales, decreased from 27.2% in 2005 to 25.3% in 2006. This
increase was due to higher amortization costs of goodwill and higher payroll costs, deriving from
the acquisition of <I>Natuzzi stores </I>in Italy, and to higher warranty expenses for the repair or
replacement of products during the 2006. The increase in selling expenses was partially offset by a
marked decrease in exhibition costs realized as a result of a cost saving program.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">General and administrative expenses for 2006 decreased 1.8% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>42.2&nbsp;million, as compared to
<FONT face="'Times New Roman',times,serif">&#128;</FONT>43.0&nbsp;million in 2005, and, as a percentage of net sales, decreased from 6.4% in 2005 to 5.7% in
2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The Group had an operating income for 2006 of <FONT face="'Times New Roman',times,serif">&#128;</FONT>16.5&nbsp;million, as compared to an operating loss
of <FONT face="'Times New Roman',times,serif">&#128;</FONT>14.7&nbsp;million in 2005, as a result of the factors described above.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Other income (expense), net decreased slightly to <FONT face="'Times New Roman',times,serif">&#128;</FONT>2.8&nbsp;million in 2006 from other expense, net
of <FONT face="'Times New Roman',times,serif">&#128;</FONT>3.0&nbsp;million in 2005. Net interest income (expense), included in other income (expense), net,
in 2006 was <FONT face="'Times New Roman',times,serif">&#128;</FONT>1.5&nbsp;million, as compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>0.1&nbsp;million in 2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Foreign exchange
gains (losses), net, included in other income (expense), net,
were <FONT face="'Times New Roman',times,serif">&#128;</FONT> 0.8 million in 2006, as compared to
a net loss of <FONT face="'Times New Roman',times,serif">&#128;</FONT>1.6&nbsp;million in
2005. The foreign exchange gains in 2006 were mainly due to the following:
</DIV>

<DIV style="margin-top: 10pt">
<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="5%" nowrap align="left">-</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">A net realized gain of <FONT face="'Times New Roman',times,serif">&#128;</FONT>0.7&nbsp;million in 2006 (compared to a loss of <FONT face="'Times New Roman',times,serif">&#128;</FONT>4.3&nbsp;million in
2005) on domestic currency swaps due to the difference between the forward rates of the
domestic currency swaps and the spot rates at which the domestic currency swaps were closed
(the Group uses the forward rate to hedge its price risks against unfavourable exchange
rate variations);</DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV style="margin-top: 10pt"><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="5%" nowrap align="left">-</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">A net realized loss of <FONT face="'Times New Roman',times,serif">&#128;</FONT>8.2&nbsp;million in 2006 (compared to a gain of <FONT face="'Times New Roman',times,serif">&#128;</FONT>5.4&nbsp;million in
2005), from the difference between invoice exchange rates and collection/payment exchange
rates;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="5%" nowrap align="left">-</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">A net unrealized gain of <FONT face="'Times New Roman',times,serif">&#128;</FONT>2.8&nbsp;million in 2006 (compared to an unrealized gain of
<FONT face="'Times New Roman',times,serif">&#128;</FONT>2.1&nbsp;million in 2005) on accounts receivable and payable;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="5%" nowrap align="left">-</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">An unrealized gain of <FONT face="'Times New Roman',times,serif">&#128;</FONT>5.5&nbsp;million in 2006 (compared to an unrealized loss of <FONT face="'Times New Roman',times,serif">&#128;</FONT>4.8
million in 2005), from the mark-to-market of domestic currency swaps.</DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The Group also recorded other income, included in other income (expense), net, in 2006 of <FONT face="'Times New Roman',times,serif">&#128;</FONT>0.5
million compared to other income of <FONT face="'Times New Roman',times,serif">&#128;</FONT>4.5&nbsp;million reported in 2005. The aforesaid results were
mainly due to the following:
</DIV>

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<P align="center" style="font-size: 10pt">31
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">

<DIV style="margin-top: 10pt">
<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="5%" nowrap align="left">-</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Revenue from capital grants, which amounted to <FONT face="'Times New Roman',times,serif">&#128;</FONT>4.4&nbsp;million in 2005 and nil in 2006.
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
million, was related to depreciation of property, plant and equipment recorded in the
consolidated statements of earnings in years prior to 2005. Therefore, for this reason, the
amount of <FONT face="'Times New Roman',times,serif">&#128;</FONT>4.4&nbsp;million was classified under the caption &#147;other income (expense), net&#148;.</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="5%" nowrap align="left">-</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">In 2006 the Company has charged to other income (expense), net the amount of <FONT face="'Times New Roman',times,serif">&#128;</FONT> 5.8
million for the estimated probable liabilities related to some claims (including tax
claims) and legal actions. In 2005 the provisions for contingent liabilities were <FONT face="'Times New Roman',times,serif">&#128;</FONT> 0.6
million.</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="5%" nowrap align="left">-</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Other expenses deriving from the write-off of fixed assets, which decreased from
<FONT face="'Times New Roman',times,serif">&#128;</FONT>2.8&nbsp;million in 2005 to nil in 2006.</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="5%" nowrap align="left">-</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Revenue for export incentive benefits, which increased to <FONT face="'Times New Roman',times,serif">&#128;</FONT> 3.4&nbsp;million from <FONT face="'Times New Roman',times,serif">&#128;</FONT>2.1
million reported in 2005. This incentive is measured on the basis of the export sales
realized by the subsidiaries Italsofa Bahia Ltd and Minuano Nordeste S.A.</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="5%" nowrap align="left">-</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">A payment of <FONT face="'Times New Roman',times,serif">&#128;</FONT> 1.1&nbsp;million received in 2006 from the landlord of a store for the
termination of the related lease contract before the term specified in the lease agreement.
In 2005 the Group recorded an expense of <FONT face="'Times New Roman',times,serif">&#128;</FONT>0.6&nbsp;million as a provision established for the
penalties that the Group expected to pay to landlords of several stores located in England
for the early termination of the related operating leases.</DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Since 2003, the Company has not followed hedge accounting, and records all fair value changes
of its domestic currency swaps in the income statement.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The Group&#146;s effective income tax rate for 2006 was 36.7% of earnings before taxes and
minority interest, compared to a negative rate of 26.5% of the loss before taxes and minority
interest in 2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The Group&#146;s domestic companies recorded a negative effective tax rate of 35.4% (versus a 34.9%
negative rate in 2005), and the Group&#146;s foreign companies together recorded an effective tax rate
of 17.2% (versus 9.4% in 2005). For domestic companies, the Group&#146;s tax rate was negatively
affected by the regional tax denominated &#147;Irap&#148; (see Note 14 to the
Consolidated Financial
Statements in Item&nbsp;18 of this annual report). This regional tax is applicable to 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 pre-tax loss, it is subject to this regional tax.
In 2006, most domestic companies within the Natuzzi Group reported losses but had to pay Irap.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 in statutory 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>

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<P align="center" style="font-size: 10pt">32
</DIV>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The Group reported net earnings of <FONT face="'Times New Roman',times,serif">&#128;</FONT>12.3&nbsp;million in 2006, as compared to a net loss of <FONT face="'Times New Roman',times,serif">&#128;</FONT>14.6
million in 2005. On a per-Ordinary Share, or per-ADS basis, the Group had net earnings of <FONT face="'Times New Roman',times,serif">&#128;</FONT>0.23 in
2006, as compared to a net loss of <FONT face="'Times New Roman',times,serif">&#128;</FONT>0.27 in 2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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, 2006, 2005 and 2004, the Group would have had net earnings of <FONT face="'Times New Roman',times,serif">&#128;</FONT>14.5&nbsp;million, net losses
of <FONT face="'Times New Roman',times,serif">&#128;</FONT>6.9&nbsp;million and net earnings <FONT face="'Times New Roman',times,serif">&#128;</FONT>18.8&nbsp;million, respectively, compared to net earnings of <FONT face="'Times New Roman',times,serif">&#128;</FONT> 12.3
million, net losses of <FONT face="'Times New Roman',times,serif">&#128;</FONT>14.6&nbsp;million and net earnings of <FONT face="'Times New Roman',times,serif">&#128;</FONT>18.4&nbsp;million, respectively, under Italian
GAAP for the same periods.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 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>
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<P align="center" style="font-size: 10pt">33
</DIV>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Total net sales of <I>Divani &#038; Divani by Natuzzi</I>, <I>Natuzzi Stores </I>and <I>Kingdom of Leather </I>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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 changes in our volume sales by brand in our principal markets.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 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;<I>Natuzzi Galleries</I>&#148; and &#147;<I>Natuzzi Stores</I>&#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>

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<P align="center" style="font-size: 10pt">34
</DIV>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 described above.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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: 10pt">
<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="5%" nowrap align="left">-</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">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);</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="5%" nowrap align="left">-</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">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;
</DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV style="margin-top: 10pt"><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="5%" nowrap align="left">-</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">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(d) 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 operations 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.</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="5%" nowrap align="left">-</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">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;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="5%" nowrap align="left">-</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">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.</DIV></TD>
</TR>
</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt">35
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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: 10pt">
<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="5%" nowrap align="left">-</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">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
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.</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="5%" nowrap align="left">-</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">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.</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="5%" nowrap align="left">-</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Revenue for incentive benefits 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.</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="5%" nowrap align="left">-</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">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.</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="5%" nowrap align="left">-</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Other income, net of <FONT face="'Times New Roman',times,serif">&#128;</FONT>1.4&nbsp;million.</DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The Group&#146;s domestic companies recorded a negative effective tax rate of 34.9%, and the
Group&#146;s foreign companies recorded a positive effective tax rate 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 pre-tax net
loss, it is 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">&nbsp;

<P align="center" style="font-size: 10pt">36
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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">
<A name="128"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Liquidity and Capital Resources</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Cash and cash equivalents were <FONT face="'Times New Roman',times,serif">&#128;</FONT>128.1&nbsp;million at December&nbsp;31, 2006, as compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>89.7
million at December&nbsp;31, 2005. The most significant changes in the Group&#146;s cash flows between 2006
and 2005 are described below.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Cash flows from operations were <FONT face="'Times New Roman',times,serif">&#128;</FONT>62.2&nbsp;million in 2006, as compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>24.5&nbsp;million in 2005.
This increase of <FONT face="'Times New Roman',times,serif">&#128;</FONT>37.7&nbsp;million from 2005 to 2006 resulted principally from the Group&#146;s net earnings
of <FONT face="'Times New Roman',times,serif">&#128;</FONT>12.3&nbsp;million in 2006, as compared to a net loss of <FONT face="'Times New Roman',times,serif">&#128;</FONT>14.6&nbsp;million in 2005. In 2006 cash flow
generated by working capital was higher than in 2005 because of a significant decrease in
inventories and a positive impact generated by accounts payable. In 2006 the Group continued to
achieve positive results in credit collection, but the positive impact was lower than in 2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Cash flows used in investment activities in 2006 decreased <FONT face="'Times New Roman',times,serif">&#128;</FONT>4.6&nbsp;million to <FONT face="'Times New Roman',times,serif">&#128;</FONT>17.7&nbsp;million. The
decrease in cash used in investment activities was due to lower capital expenditures and less cash
used in the purchase of businesses. Capital expenditures were <FONT face="'Times New Roman',times,serif">&#128;</FONT>19.1&nbsp;million and <FONT face="'Times New Roman',times,serif">&#128;</FONT>22.3&nbsp;million in
2006 and 2005, respectively. In both 2006 and 2005, capital expenditures related primarily to the
opening of new Natuzzi stores and galleries as well as improvements at existing facilities in order
to increase productivity and production capacity, which included the purchase of equipment.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Cash used for financing activities in 2006 totalled <FONT face="'Times New Roman',times,serif">&#128;</FONT>5.2&nbsp;million, as compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>3.8&nbsp;million
in the previous year. The increase in cash used for financing activities was due to the higher
repayment of short-term borrowings, which was partially offset by lower dividends paid to
shareholders, of which there were none in 2006, as compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT> 3.8&nbsp;million in 2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">As at December&nbsp;31, 2006, the Group had available lines of credit for cash disbursement
totaling <FONT face="'Times New Roman',times,serif">&#128;</FONT>59.5&nbsp;million, 6.4% of which were used. The unused portion of these lines of credit
amounted to approximately <FONT face="'Times New Roman',times,serif">&#128;</FONT>55.7&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, 2006 and 2005 (see Note 16 to the Consolidated Financial
Statements included in Item&nbsp;18 of this annual report).
</DIV>

<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<P align="center" style="font-size: 10pt">37
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 uses of funds are 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: 10pt"><B>Contractual Obligations and Commitments</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The following tables set forth the contractual obligations and commercial commitments of the
Group as at December&nbsp;31, 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="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="18" style="border-bottom: 1px solid #000000"><B>Payments Due by Period </B>(in thousands of euros)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" 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="2"><B>Less than 1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>1-3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>After 5</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Contractual Obligations</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Total</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>year</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>years</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>4-5 years</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>years</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">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">2,751</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">318</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">657</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">1,164</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest due on Long Term Debt
<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80</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">(3) </SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66,978</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,524</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,391</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,168</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,895</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>
    <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 Contractual Cash
Obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,079</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,911</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,163</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,866</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,139</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>

<DIV style="margin-top: 10pt">
<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><DIV style="text-align: justify"> 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.</DIV></TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify"> Interest due on long-term debt has been calculated using fixed rates contractually
agreed with lenders</DIV></TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify"> The leases relate to the leasing of manufacturing facilities and stores by several
of the Group&#146;s companies.</DIV></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="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="18"><B>Amount of Commitment Expiration Per</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="18" style="border-bottom: 1px solid #000000"><B>Period </B>(in thousands of euros)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Total</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&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="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Amounts</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Less than 1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&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="2"><B>After 5</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Other Commitments</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Committed</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>year</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>1-3 years</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>4-5 years</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>years</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">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>

<DIV style="margin-top: 10pt">
<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><DIV style="text-align: justify">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 Industrial Activities provides the Company with the final disbursement
of the capital grants already given.</DIV></TD>
</TR>
</TABLE>
</DIV>
<DIV align="left">
<A name="130"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Related Party Transactions</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Please refer to Item&nbsp;7, &#147;Major Shareholders and Related Party Transactions&#148; of this annual
report.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt">38
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">

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

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Product &#038; Retail Development</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The previous denomination (&#147;Research &#038; Development&#148;) has been replaced with &#148;Product &#038; Retail
Development&#148;, in order to signal the efforts of the Company both to develop products that meet the
tastes and requirements of its customers and to develop a network of stores that adequately
represents the positioning of the Natuzzi brand. In order to achieve these goals, we have created a
Center of Retail Competence.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The overall system of in-store-communication (hardware and contents) has been revised with
more directed and incisive language focused on the consumer. The plan has been developed
considering different levels of communication &#151; institutional, cross-sectional and
product-specific, promotional and thematic &#151; that in succession rebuild the ideal way of the
consumer inside the store.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Innovation is a strategic activity of the Group. Product &#038; Retail Development efforts in 2006
have continued to focus on the design of new products and improvements in manufacturing processes.
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;. Throughout 2006, the Group&#146;s investments in research and development
activities were <FONT face="'Times New Roman',times,serif">&#128;</FONT>9.4&nbsp;million. More than 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 its low
environmental impact. The ISO 14001 certification applies also to Natuzzi&#146;s tannery subsidiary,
Natco S.p.A.
</DIV>

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

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Trend Information and Guidance</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">During the first three months of 2007, the Group&#146;s total net sales decreased by 18.3%
to <FONT face="'Times New Roman',times,serif">&#128;</FONT>153.8&nbsp;million and upholstery net sales decreased by 18.8% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>136.0&nbsp;million over first
quarter 2006. In the same period seats sold decreased by 17.0% with respect to the same
quarter in 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The Group&#146;s first quarter of 2007 turnover performance was affected by the challenging
business environment in all the major markets. In the United States, the level of business was even
more depressed, as has also be the case for our major competitors, mainly due to low consumer
confidence and to the sharp decline in the new housing construction. In addition, Natuzzi brand net
sales were negatively affected by the minimal 2006-year-end order backlog and by unfavorable euro
exchange rates against major currencies. This challenging scenario still continues to have a
negative effect on our performance: as of the end of May&nbsp;2007, total order flow is down high-single
digit as compared to the same period of last year and could affect the sales performance in the
coming months.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">For the first quarter of 2007, the Group reported a gross profit of <FONT face="'Times New Roman',times,serif">&#128;</FONT>46.9&nbsp;million, a decrease
of 27.3% over first quarter of 2006. In terms of percentage of sales, gross margin, during the same
period, was 30.5%, down from 34.3% in first quarter of 2006, mainly because of a lower production
volume as well as an increase in the price of leather, which the Group has been experiencing since
the second half of 2006.
</DIV>

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

<P align="center" style="font-size: 10pt">39
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">After a year in which the Group reported net earnings of <FONT face="'Times New Roman',times,serif">&#128;</FONT>12.3&nbsp;million, for the first three
months of 2007 the Group reported net losses of <FONT face="'Times New Roman',times,serif">&#128;</FONT>4.7&nbsp;million, versus net earnings of <FONT face="'Times New Roman',times,serif">&#128;</FONT>6.8&nbsp;million
in the first quarter of 2006, mainly as a consequence of the factors cited above.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">In spite of the persistence of the above mentioned difficult business conditions, Natuzzi&#146;s
top management remains committed to investing in the repositioning of the Natuzzi brand,
encouraged by the favorable acceptance of our new models presented during the recent international
Milan fair, held in April&nbsp;2007. The Group is continuing the reorganization process of its retail
activities as well as the ongoing restructuring process of its production to
better match the Group&#146;s cost structure with the pace of incoming orders.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">In light of the difficult furniture market conditions and the challenging comparison of the
first half of 2007 versus the same period of 2006, the Group expects, in 2007, to report
approximately the same revenues year-over-year and almost breakeven at a net results level. In
addition, the Group intends to invest almost <FONT face="'Times New Roman',times,serif">&#128;</FONT>20&nbsp;million in capital expenditures during 2007.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">As a consequence of challenging business conditions affecting all major markets and the
adverse currency trend that are depressing the order flow, the
Company decided to temporarily reduce the production working time at the Italian plants (from
8 to 5 hours per shift) starting from June&nbsp;13, 2007 for a thirteen-week period.
</DIV>
<DIV align="left">
<A name="133"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>New Accounting Standards under Italian and U.S. GAAP</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><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 have been required to, since 2005, adopt International Financial Reporting Standards (&#147;IFRS&#148;),
formerly known as IAS, in the preparation of their 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>Italian GAAP &#150; </B>The new accounting standard under Italian GAAP relevant for the Company is
outlined below.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">During September&nbsp;2005, effective as of December&nbsp;31, 2005, the Italian Accounting Profession
has changed the Italian accounting standard No.&nbsp;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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">(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 were 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>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt">40
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">(b)&nbsp;if the foreign subsidiary was not considered an integral part of a parent company, its
financial statements expressed in the foreign currency were 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Therefore, under Italian GAAP as of 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>U.S. GAAP &#151; </B>The new accounting standards under U.S. GAAP relevant for the Company are outlined
below:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>-&nbsp;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 application of this standard did not have an impact on the Company&#146;s
consolidated financial statements.
</DIV>

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

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>-&nbsp;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. The
application of this standard did not have an impact on the Company&#146;s consolidated financial
statements.
</DIV>

<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<P align="center" style="font-size: 10pt">41
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>-&nbsp;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 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 adoption of EITF 05-6 did not have an impact on the consolidated financial statements.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>-&nbsp;EITF
04-13:</B> In September&nbsp;2005, the Emerging Issues Task Force (EITF)&nbsp;issued EITF Issues
No.&nbsp;04-13 &#147;<I>Accounting for Purchases and Sales of Inventory with the Same Counterparty</I>&#148; (EITF
04-13). EITF 04-13 provides guidance as to when purchases and sales of inventory with the same
counterparty should be accounted for as a single exchange transaction. EITF 04-13 also provides
guidance as to when a nonmonetary exchange of inventory should be accounted for at fair value. EITF
04-13 will be applied to new arrangements entered into, and modifications or renewals of existing
arrangements occurring after January&nbsp;1, 2007. The application of EITF 04-13 is not expected to have
a significant impact on the Company&#146;s consolidated financial statements.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>-&nbsp;SFAS
No.&nbsp;157:</B> In September&nbsp;2006, the FASB issued FASB Statement No.&nbsp;157, &#147;<I>Fair Value
Measurement</I>&#148; (Statement 157). SFAS 157 defines fair value, establishes a framework for the
measurement of fair value, and enhances disclosures about fair value measurements. The Statement
does not require any new fair value measures. The Statement is effective for fair value measures
already required or permitted by other standards for fiscal years beginning after November&nbsp;15,
2007. The Company is required to adopt Statement 157 beginning on January&nbsp;1, 2008. Statement 157 is
required to be applied prospectively, except for certain financial instruments. Any transition
adjustment will be recognized as an adjustment to opening retained earnings in the year of
adoption. The Company is currently evaluating the impact of adopting Statement 157 on its results
of operations and financial position.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>-&nbsp;FASB
Interpretation No.&nbsp;48:</B> In July&nbsp;2006, the FASB issued FASB Interpretation No.&nbsp;48,
&#147;<I>Accounting for Uncertainty in Income Taxes</I>&#148;, an interpretation of FASB Statement 109 (FIN 48). FIN
48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise&#146;s financial
statements and prescribes a threshold of more-likely-than-not for recognition of tax benefits of
uncertain tax position taken or expected to be taken in a tax return. FIN 48 also provides related
guidance on measurement, derecognition, classification, interest and penalties, and disclosure. The
provisions of FIN 48 will be effective for the Company on January&nbsp;1, 2007, with any cumulative
effect of the change in accounting principle recorded as an adjustment to opening retained
earnings. The Company is in the process of assessing the impact of adopting FIN 48 on its results
of operations and financial position.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>-&nbsp;FASB
Statement No.&nbsp;123 (R):</B> Effective January&nbsp;1, 2006, the Company adopted FASB
Statement No.&nbsp;123 (R) &#147;<I>Share-Based Payment (Statement 123 (R))</I>&#147;. This statement replaces FASB
Statement No.&nbsp;123, Accounting for Stock-Based Compensation (Statement 123) and supersedes APB No.
25. Statement 123 (R)&nbsp;requires that all stock-based compensation be recognized as an expense in the
financial statements and that such cost be measured at the fair value of the award. This statement
was adopted using the modified prospective method of application, which requires the Company to
recognize compensation cost on a prospective basis. Therefore, prior years&#146; financial statements
have not been restated. Under this method, the Company recorded stock-based compensation expense
for awards
granted prior to, but not yet vested as of January&nbsp;1, 2006, using the fair value amounts determined
for pro forma disclosures under Statement 123.
</DIV>

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

<P align="center" style="font-size: 10pt">42
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>-&nbsp;SAB
108:</B> On September&nbsp;13, 2006, the SEC staff issued SAB 108, &#147;<I>Considering the effects
of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements
(SAB 108) </I>&#148;. SAB 108 provides guidance for SEC registrants on how the effects of uncorrected errors
originating in previous years should be considered when quantifying errors in the current year. SAB
108 does not amend the SEC&#146;s existing guidance for evaluating the materiality of errors included in
SAB 99. In order to eliminate diversity in practice for quantifying misstatements, and to address
the perceived shortfalls of the rollover and iron curtain methods, SAB 108 requires that
registrants quantify uncorrected misstatements using both methods (herein referred to as the &#147;dual
method&#148;), with adjustment required if either method results in an error that is material. The
adoption of SAB 108 did not have an impact on the Company&#146;s consolidated financial statements.
</DIV>

<DIV align="left">
<A name="134"></A>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Item&nbsp;6. Directors, Senior Management and Employees</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The directors, executive officers and officers of the Company at May&nbsp;3, 2007
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="35%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="50%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" 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="center" 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">67</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chairman of the Board of Directors and Chief
Sales Officer</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">56</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Executive Officer, Member of the Board of
Directors and Human Resources &#038; Organization
Director a.i.</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">44</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vice Chairman of the Board of Directors</TD>
</TR>
<TR valign="bottom">
    <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">57</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Member of the Board of Directors and Managing
Director for Accounting and Finance</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <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">62</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">Stelio Campanale *
</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" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Maurizia Iachino Leto di Priolo *
</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">Outside Director</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Filippo Simonetti
</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">Chief Financial Officer</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <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">43</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Product &#038; Retail Development General Manager</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Giovanni Ferrari
</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">Operations General Manager</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">45</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Purchasing Corporate Director, Chairman of Natco
S.p.A.</TD>
</TR>
<TR valign="bottom">
    <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">43</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" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Lorenzo Boffano
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">56</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Retail Competence Center Director</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Vito Tiziano Damiani
</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">Internal Audit Director</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <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">43</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Vice President of Finance and
Operations of Natuzzi Americas, Inc.</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

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

<P align="center" style="font-size: 10pt">43
</DIV>
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<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; margin-left: .25in; width: 7.5in">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="35%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="50%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" 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="center" style="border-bottom: 1px solid #000000"><B>Position with the Company</B></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<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 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">Finance Director</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Jos&#233; Manuel Gulias Roo
</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">Spain and Portugal Country Manager</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thomas Hagerup
</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">Nordic Region Country Manager</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Oliver Heil
</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">Commercial Director of the Asia &#038; Pacific Region</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">74</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">Giorgio Martellino
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">38</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Legal Director</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Nicola Masotina
</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">Italy Country Manager</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <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">40</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Benelux Country Manager</TD>
</TR>
<TR valign="bottom">
    <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">50</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Accounting Director</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <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">41</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Control Director</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Marcelo Miraglia
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">53</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chairman and Managing Director of Minuano
Nordeste S.A and Italsofa Bahia Ltd</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">45</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">49</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">Stefano Rezzin
</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">Switzerland Country Manager</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">48</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Germany and Austria Country Manager</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Stefano Sette
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">38</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vice President Sales Worldwide</TD>
</TR>
<TR valign="bottom">
    <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">75</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>
<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">41</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">47</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chairman and Managing Director of Italsofa
 (Shanghai) Ltd and Softaly (Shanghai) Ltd</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<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">*</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Nominated following the Natuzzi Annual Ordinary Shareholders&#146; Meeting held on May&nbsp;3, 2007.</DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Pasquale Natuzzi, who serves as Chairman of the Board of Directors and Chief Sales
Officer, 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Ernesto Greco is the Chief Executive Officer of the Group, Human Resources and Organization
Director a.i. and a member of the Board of Directors since June&nbsp;6, 2006<B>. </B>Mr.&nbsp;Greco holds a degree
in Mechanical Engineering and a Master in Business Administration from CUOA, Italy. He developed
his career by working in various areas within multinational companies, such as Montedison,
Hewlett-Packard and Wang Laboratories. Before his appointment at Natuzzi, he was CFO of Bulgari,
world leader in the luxury goods business.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Giuseppe Desantis is 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, and from 1991 to 2006 he was
General manager of the Company. In 1987, he managed the Company&#146;s Pricing and Costs department.
From 1984, when he joined the Company, to 1986 he worked in the Company&#146;s accounting department.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt">44
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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, which serves the Company and other major domestic and
multinational companies. He has also served as a consultant to non-profit organizations. He serves
as a member of the Board of Auditors of a number of other Italian companies. The Board has
delegated him the task of supervising all activities related to domestic and international tax
issues.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Armando Branchini has been an Outside Director of the Company since 2001. He 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Maurizia Iachino Leto di Priolo, an Outside Director, is a Senior Partner at Governance
Consulting &#151; a consultancy firm specializing in corporate governance. Prior to holding that post,
she was a Partner at Spencer Stuart, one of the world&#146;s leading executive search consulting firms,
from 1995 to 2001.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Filippo Simonetti has been the Chief Financial Officer of the Group since October&nbsp;19, 2006.
After a short stay in the Siemens Group, he developed his career in various countries with
increasing responsibilities within the Indesit Company Group. before joining the Company, he was
Finance Director in Indesit&#146;s United Kingdom subsidiary.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Giovanni Costantino is Product &#038; Retail Development General Manager. He 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Giovanni Ferrari has been the Operations General Manager since January&nbsp;2007. He developed his
career by working in various areas within multinational Companies, such as Valeo and 3MCM. Before
his appointment at Natuzzi, he was Industrial Corporate Director of Brembo, a multinational leader
in the planning, development, production and commercialization of brake systems.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Giambattista Massaro is the Purchasing Corporate Director. 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., Natuzzi Trade Service S.r.l. and Lagene as
well as Director of Italsofa Romania S.r.l.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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>
<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<P align="center" style="font-size: 10pt">45
</DIV>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Lorenzo Boffano is the Retail Competence Center Director of the Group since May&nbsp;2, 2006. He
holds a degree in Electronic Engineering from Politecnico of Turin, Italy. He developed his career
by working in various areas within multinational companies, such as IBM, Miroglio, Marzotto,
Cerruti and Gruppo Coin. Before his appointment at Natuzzi, he was General Manager of Coin, Italian
leader in non-food retail business.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Vito Tiziano Damiani became Internal Audit Director of the Group in 2006. Mr.&nbsp;Damiani holds a
degree in Economics and a Masters in Business Administration. He is a Chartered Accountant and CIA
(Certified Internal Auditor). Previously he was an external auditor for several years and acted in
the capacity of
Internal Audit Manager and other positions in Montedison Group, a large international
conglomerate.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Nicola Vittorio Maria Dell&#146;Edera is the Company&#146;s 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Jos&#233; Manuel Gulias Roo has been the Spain and Portugal Country Manager since June&nbsp;2004, when
he joined the Group. Previously, Mr.&nbsp;Gulias Roo worked for HL-Display,
a world-leading supplier in
the retail industry.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Thomas Hagerup is Nordic Region Country Manager a.i.. He joined Natuzzi in June&nbsp;2004 as
marketing manager, took on responsibility for sales in January&nbsp;2006, and has been Country Manager
since July&nbsp;2006. Prior to joining Natuzzi, he worked for seven years at Inter IKEA Systems,
franchisor of the IKEA Concept, as Business Support Manager, supporting franchisees in developing
their businesses and planning new IKEA stores around the world. Prior to holding that post, he
worked within IKEA&#146;s marketing department and at the marketing department of Magasin du Nord, the
leading Danish department store chain.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Oliver Heil joined the Group in October&nbsp;2006 as Commercial Director of the Asia-Pacific Region
in order to set up the regional headquarters in Shanghai, China. He has nearly nine years of
experience working in China. Before joining Natuzzi, Oliver worked approximately three years as
Vice President of Swatch Group China, responsible for RADO China, a subsidiary of the Swatch Group,
the biggest watch conglomerate in the world. He has also held the position of Managing Director of
Metro Cash&#038;Carry China. He began his career at L&#146;Oreal Germany in a variety of marketing and sales
positions.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Cesare Laberinti is Chairman and Managing Director of IMPE S.p.A., the subsidiary engaged in
polyurethane foam operations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Giorgio Martellino is the Legal Director of the Group. Mr.&nbsp;Martellino holds a degree in Law
and is admitted to the Italian Bar. He developed his career in law firms before joining Abbott
S.p.A. as Legal Manager for 10&nbsp;years. Abbott S.p.A. is the Italian affiliate of the U.S.
health-care multinational group Abbott Laboratories.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Nicola Masotina is Italy Country Manager. He joined the Company in 1994 as Sales Manager for
Divani &#038; Divani franchised stores in Italy. Previously, he was Area Manager for Southern Italy for
the franchised stores of GIG, an Italian group that distributes toys.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<P align="center" style="font-size: 10pt">46
</DIV>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Jan Mentens has been Benelux Country Manager since April&nbsp;2003. He is Managing Director of
Natuzzi Benelux NV.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 5%">Giovanni Mercadante is Accounting Director. He joined the Company in 1983.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 5%">Ottavio Milano is Control Director. He joined the Company in May&nbsp;1992.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Marcelo Miraglia, is the Chairman and Managing Director of Minuano Nordeste S.A. and Italsofa
Bahia Ltd. He joined Natuzzi in November of 2006. He graduated with a degree in Mechanical and
Production Engineering from the Faculdade de Engenharia Industrial in S&#226;o Paulo, Brazil. He also
has a specialization in Business and Financial Strategies and most recently received an MBA while
working at AMBEV. M.Miraglia developed his career by working in various multinational
organizations, such as Philips do Brasil, Philips Nederlands, and Brahma &#151; AMBEV. Before he joined
the Natuzzi Group, M.Miraglia was the Industrial Director of Metalfrio Solutions, a market leader
in commercial refrigeration in South America.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Achille Poretta is the Information Systems Director. He joined the company in March&nbsp;2006.
Until 2005 he worked at Accenture. Previously, he worked for Carrefour Italia as the Information
Technology Director.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Stefano Rezzin is the Switzerland Country Manager. He previously served as Commercial and
Brand Marketing Director of Casa Design at the Presotto Group.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Bodo Rupp is the Germany and Austria Country manager, and has been leading Natuzzi Germany
since December&nbsp;2004, after a long period at Nike USA. He manages the business development .
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Stefano Sette is Vice President Sales Worldwide. He joined Natuzzi in 1990, starting in the
Sales Administration and Accounting Department.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Richard Tan is Chairman and Managing Director of Italsofa (Shanghai) as well as Softaly
(Shanghai) Limited. He has worked in the upholstery business for 17&nbsp;years. In November&nbsp;2000, he began cooperation with Natuzzi Asia Ltd to start-up its
Chinese production operations. He was appointed as Chairman of Italsofa (Shanghai) Limited in
October&nbsp;2002.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<P align="center" style="font-size: 10pt">47
</DIV>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The above mentioned Members of the Board of Directors were elected, following the Natuzzi
Annual Ordinary Shareholders&#146; Meeting held on May&nbsp;3, 2007, for one-year terms. 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: 10pt"><B>Compensation of Directors and Officers</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Aggregate compensation paid by the Group to the directors and officers was approximately <FONT face="'Times New Roman',times,serif">&#128;</FONT>6.6
million in 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 were
assigned in January&nbsp;2007. These same Directors and Officers were also awarded, in connection with
the 2004 MBO Awards, 216,920 stock options whose exercise price was fixed at $10.37 and that can be
exercised until January&nbsp;15, 2009. Because of an exercise price greater than the stock market price,
no stock option has been exercised thus far.
</DIV>

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

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Share Ownership</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Mr.&nbsp;Pasquale Natuzzi owns 47.5% of the issued and outstanding Ordinary Shares. Since December
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 (with 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: 10pt"><B>Statutory Auditors</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 May&nbsp;3, 2007.
</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="70%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" 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><DIV style="margin-left:15px; text-indent:-15px">Francesco Venturelli </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Chairman</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cataldo Sferra </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Member</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Costante Leone </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Member</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Giuseppe Pio Macario </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Alternate</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Vittorio Boscia </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Alternate</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<P align="center" style="font-size: 10pt">48
</DIV>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">During 2006, our statutory auditors received in the aggregate approximately <FONT face="'Times New Roman',times,serif">&#128;</FONT>210,000 in
compensation for their services to the Company and its Italian subsidiaries.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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, as long as it is not out-sourced to the external auditor.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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: 10pt"><B>External Auditors</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">On May&nbsp;3, 2007, 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: 10pt"><B>Employees</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">As at December&nbsp;31, 2006, the Group had 8,133 employees (3,590 in Italy and 4,543 abroad), as
compared to 7,846 on December&nbsp;31, 2005. As at April&nbsp;30, 2007, the total number of employees was
7,998 (3,573 in Italy and 4,425 abroad), and their average age was approximately 32&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 an important participant
in community life.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Italian law provides that, upon termination of employment for whatever reason, employees
located in Italy are entitled to receive certain severance
payments based on length of employment. As at December&nbsp;31, 2006, the Company had <FONT face="'Times New Roman',times,serif">&#128;</FONT> 35.3
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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The Group has continued to expand its presence overseas thanks to new production plants in
Brazil, Romania and China and the establishment of some new distribution subsidiaries. The
corporate structure has been reinforced by the hiring of new skilled and experienced managers and
employees.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The Group&#146;s training activities have not changed substantially during 2006, as it continued to
focus its efforts in the production and marketing department. The Group is planning, in cooperation
with an external consultant, to launch a training program, whose aim will be to improve
management&#146;s skills and its ability to foster a collegial culture throughout the production
process.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<P align="center" style="font-size: 10pt">49
</DIV>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">During 2006, in accordance with the Group&#146;s compensation philosophy
and policy that aims to reward certain skilled employees and members of management, including certain Directors and Officers, the Group continued
to effect the Natuzzi Stock Incentive Plan 2004-2009 by assigning to the beneficiary employees and members of management
57,631 restricted stock units for the 2005 MBO plan. On January 23, 2007, the Natuzzi Board of Directors, in accordance with the
Plan, approved the issuance without consideration of 85,689 Ordinary Shares in favor of the beneficiary employees and members of
management. See Note 20 to the Consolidated Financial Statements included in Item 18 of this annual report.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">In 2006, the Company designed a new program called &#147;turnover proactive government&#148; whose goal
is to identify &#147;critical&#148; roles and resources and to build a specific retention policy around them. Such program currently
identifies 120 business managers according to their know-how and the difficulty in recruiting other managers with similar skills.
</DIV>

<DIV align="left">
<A name="140"></A>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><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: 10pt"><B>Major Shareholders</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 47.5% of the issued and
outstanding Ordinary Shares of the Company (52.6% 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 (with its registered
office at Via Gobetti 8, Taranto, Italy), wholly-owned by Pasquale Natuzzi.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The following table sets forth information, as reflected in the records of the Company as at
March&nbsp;31, 2007, 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="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&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: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Percent</B></TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Shares Owned</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" 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="left">&nbsp;</TD>
    <TD align="right">47.5</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">5,501,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">10.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Brandes Investment Partners, LP <SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,725,030</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">8.6</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">3,796,937</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">6.9</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>

<DIV style="margin-top: 10pt">
<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><DIV style="text-align: justify">If Mr.&nbsp;Natuzzi&#146;s Ordinary Shares are aggregated with those held by members of
the Natuzzi Family, the amount owned would be 28,864,906 and the percentage ownership of Ordinary
Shares would be 52.6%.</DIV></TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">During the course of 2005, Brandes Investment Partners, LP increased its position in
Natuzzi&#146;s shareholders&#146; base by 2,519,750 Natuzzi ADSs, thus holding 8.4% of shareholders&#146; equity
with a total of 4,587,197 Natuzzi ADSs as of December&nbsp;31, 2005. During 2006, the position was
increased by only 151,837 ADSs.</DIV></TD>
</TR>
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<P align="center" style="font-size: 10pt">50
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">As of May&nbsp;31, 2007, 54,824,227 Ordinary Shares were outstanding. As of the same date, there
were 25,900,660 ADSs (equivalent to 25,900,660 Ordinary Shares) outstanding. The ADSs represented
47.2% of the total number of outstanding Natuzzi Ordinary Shares.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Since certain shares and ADSs are 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: 10pt"><B>Related Party Transactions</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 significant influence has had any interest in any transaction that was
unusual in its nature or conditions or was material to the Company, and that was either effected
since January&nbsp;1, 2004 or that was effected during an earlier period and remains 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, 2004 nor do any loans remain outstanding or unperformed.
</DIV>
<DIV align="left">
<A name="143"></A>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><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: 10pt"><B>Consolidated Financial Statements</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 5%">Please refer to Item&nbsp;18, &#147;Financial Statements&#148; of this annual report.
</DIV>
<DIV align="left">
<A name="145"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Export Sales</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Export sales from Italy totaled approximately <FONT face="'Times New Roman',times,serif">&#128;</FONT>340.0&nbsp;million in 2006, up 5.0% from 2005. That
figure represents 51.5% of the Group&#146;s 2006 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: 10pt"><B>Legal and Governmental Proceedings</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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
</DIV>

<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<P align="center" style="font-size: 10pt">51
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">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 relied on 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 in
accordance with Italian Law 335/1995. As such, the Company has set aside only <FONT face="'Times New Roman',times,serif">&#128;</FONT>475,000&nbsp;to
cover the social security contributions in connection with employees hired after March&nbsp;2000. See
Note 21 to the Consolidated Financial Statements included in Item&nbsp;18 of this annual report.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">In 2001, the Company brought suit against a competitor alleging copyright infringement. In
2006, the Court of Justice in which the suit was filed rejected the Company&#146;s claims and condemned
the Company to reimburse the legal costs sustained by the defendant. As of December&nbsp;31, 2006 the
Company and its legal counsel estimated the probable amount of these legal costs to be <FONT face="'Times New Roman',times,serif">&#128;</FONT>1.5
million. This amount has been charged to other income (expense), net in 2006. The Company and its
legal counsel are currently evaluating how to proceed by analyzing a variety of options.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">During 2006 the tax authorities of a foreign country conducted a tax audit on a subsidiary
regarding income taxes for the years from 2001 to 2005. As a result of this audit, the tax
authorities issued several tax assessments totaling
approximately <FONT face="'Times New Roman',times,serif">&#128;</FONT>8&nbsp;million. The Company considers many of the issues by the tax
authorities baseless, irrational, and inadequately documented, and has initiated an action in order
to obtain the cancellation of the requested amounts. The Company intends to vigorously defend its
position. However, the Company and its tax consultants believe that the probable liability related
to the aforementioned tax assessments is approximately <FONT face="'Times New Roman',times,serif">&#128;</FONT>1.3&nbsp;million. Therefore, the Company has
charged this amount of <FONT face="'Times New Roman',times,serif">&#128;</FONT>1.3&nbsp;million to other income (expense)&nbsp;net in 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">During 2006 the Company charged to other income (expense)&nbsp;the amount of <FONT face="'Times New Roman',times,serif">&#128;</FONT>1.2&nbsp;million because
of a probable charge related to a misinterpretation of customs duties regulation in a foreign
country.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">In addition, the Group is involved in several minor claims and legal actions arising in the
ordinary course of business.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Apart from the proceedings 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 the Group&#146;s operations.
</DIV>
<DIV align="left">
<A name="147"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Dividends</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Historically, the Group&#146;s policy has been to maintain a dividend payout ratio of approximately
20% of profits earned during the fiscal year. Although the Group reported a positive net result in
2006, it decided not to distribute dividends for the year ended on December&nbsp;31, 2006 because of the
capital requirements necessary to implement the process of restructuring its operations and its
planned retail and marketing activities.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<P align="center" style="font-size: 10pt">52
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The table below sets forth the cash dividends paid per Ordinary Share for each of the years
indicated, and also translates them 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="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Dividends per</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Translated into</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Year ended December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Ordinary Share</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>dollars per ADS</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">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Not distributed</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Not distributed</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Not distributed</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Not distributed</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">0.0673</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.09</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">0.1366</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">0.3300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.35</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 given timely. 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="justify" style="font-size: 10pt; margin-top: 10pt"><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: 10pt"><B>Trading Markets and Share Prices</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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>

<DIV style="margin-top: 10pt">
<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><DIV style="text-align: justify">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.</DIV></TD>
</TR>
</TABLE>
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<P align="center" style="font-size: 10pt">53
</DIV>
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<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; margin-left: .25in; width: 7.5in">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>New York Stock Exchange</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Price per ADS</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>High</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Low</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>(in U.S. dollars)</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"><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">
    <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" 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">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">
    <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" 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">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">
    <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" 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">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">
    <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" 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">10.390</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.820</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">11.000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.460</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <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">
    <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" 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">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">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" 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">11.170</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.010</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <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" 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">11.650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.290</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">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" 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">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">
    <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" style="background: #cceeff">
    <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">
    <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" 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">7.600</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">Third Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.320</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">8.650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.840</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-06</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.260</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">January-07</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">8.430</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">February-07</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.600</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">March-07</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.070</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.150</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">April-07</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.510</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">May-07</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.533</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.800</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">June&nbsp;2007 (through June&nbsp;20)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.210</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.180</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt">54
</DIV>
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<DIV align="left">
<A name="150"></A>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><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: 10pt"><B>By-laws</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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
on 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>General &#151; </B>The issued share capital of the Company consists of 54,824,227 Ordinary Shares, with
a par value of <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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The Company is registered with the Companies&#146; Registry of Bari at n. 19551, with its
registered office in Bari, Italy.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>Authorization of shares &#150; At </B>the extraordinary meeting of the Company&#146;s shareholders on July
23, 2004, shareholders 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 Natuzzi ordinary shares increased on the same
date from 54,681,628 to 54,738,538. On January&nbsp;23, 2007 the Natuzzi Board of Directors, in
accordance with the Regulations of the &#147;Natuzzi Stock Incentive Plan 2004-2009&#148;, decided to issue
without consideration 85,689 new Natuzzi ordinary shares in favor of the beneficiary employees.
Consequently, the number of Natuzzi ordinary shares increased on the same date from 54,738,538 to
54,824,227.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><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 of the Company.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<P align="center" style="font-size: 10pt">55
</DIV>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><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 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% 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 that 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><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 of seven 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 reappointed 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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-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 fulfilment 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>
<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<P align="center" style="font-size: 10pt">56
</DIV>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 damages 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; meeting. If at any time more than half of the
members of the board of directors appointed at a shareholders&#146; meeting resign, such resignation 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>
<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<P align="center" style="font-size: 10pt">57
</DIV>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Shareholders determine the remuneration of directors at ordinary shareholders&#146; meetings at
which they are appointed. 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><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, and
shareholders must be informed as to the offices the proposed candidates hold in other companies
prior to or at the time of their election. In particular, at least one member must be a certified
auditor.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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.
Additionally, the statutory auditors have the power to initiate a liability action against one or
more directors after adopting a resolution with an affirmative vote by two thirds of the auditors
in office. 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 a competent court serious breaches of directors&#146; duties.
</DIV>

<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<P align="center" style="font-size: 10pt">58
</DIV>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><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 during the fiscal year, that (i)&nbsp;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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">On May&nbsp;3, 2007, 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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;<I>La Repubblica</I>&#148; at least 15&nbsp;days before the date fixed for the meeting.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 directors. Liquidation of the
Company must be resolved by an extraordinary shareholders&#146; meeting.
</DIV>

<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<P align="center" style="font-size: 10pt">59
</DIV>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Shareholders may appoint proxies by delivering in writing an appropriate power of attorney 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>Preemptive Rights &#151; </B>Pursuant to Italian law, holders of Ordinary Shares or of debentures
convertible into shares, if any exist, 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><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 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>

<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<P align="center" style="font-size: 10pt">60
</DIV>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The Company has no present intention to enter into any such transaction and none is currently
in effect.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><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-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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 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>

<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<P align="center" style="font-size: 10pt">61
</DIV>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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
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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Shareholders representing more than 10% of the Company&#146;s share capital have the right to
report to a competent court serious breaches of the duties of the directors, which 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 a competent court against
its directors, statutory auditors and general managers.
</DIV>

<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<P align="center" style="font-size: 10pt">62
</DIV>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Any dispute arising out of or in connection with the By-Laws that may arise between the
Company and its shareholders, directors, or liquidators shall fall under the exclusive jurisdiction
of the Tribunal of Bari.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><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="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 5%">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: 10pt"><B>Certain Contracts</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">As of December&nbsp;31, 2006, the Group entrusted approximately 15% 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: 10pt"><B>Exchange Controls</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 other government offices, to police money laundering, tax evasion and any other crime
or violation.
</DIV>

<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<P align="center" style="font-size: 10pt">63
</DIV>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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: 10pt"><B>Taxation</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The Italian Legislative Decree no. 49, approved on June&nbsp;2, 2007, has changed the discipline of
dividends. According to such Decree, that has adopted the
European regulations No.&nbsp;2003/123/CE by modifying the art. 27 bis of the Italian Decree No.
600/73, the threshold to benefit from the witholding tax relief on dividends distributed by an
Italian subsidiary in favour of its European controlling company is reduced from 25% to 20%
starting from 2007.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Furthermore, in case an Italian company is undercapitalized, it can not apply any witholding
tax when it pays to a European company within the same group interests that are taxable but
exceeding the threshold as set forth by the Italian Decree No.&nbsp;917/1986.
</DIV>

<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<P align="center" style="font-size: 10pt">64
</DIV>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>Taxation of Dividends</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 of obtaining
certificates as soon as possible after receiving instructions from the Depositary on how to claim a
treaty refund.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<P align="center" style="font-size: 10pt">65
</DIV>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><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>
<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<P align="center" style="font-size: 10pt">66
</DIV>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 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 2005 or 2006 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
2007 taxable year.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>Taxation of Capital Gains</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><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>
<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<P align="center" style="font-size: 10pt">67
</DIV>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 shareholding that does not meet the
above mentioned interest rights to be qualified as a &#145;qualified shareholding&#148;.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The relevant percentage is calculated taking into account the shareholdings sold during the
prior 12-month period.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 favorable. The majority of double tax treaties
entered into by Italy, including the Income Tax Convention, 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>Taxation of Distributions from Capital Reserves</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><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>
<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<P align="center" style="font-size: 10pt">68
</DIV>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>Other Italian Taxes</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Estate and Inheritance Tax &#151;  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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><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: 10pt"><B>Documents on Display</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 been
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
http://www.sec.gov. 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="justify" style="font-size: 10pt; margin-top: 10pt"><B>Item&nbsp;11. Quantitative and Qualitative Disclosures About Market Risk</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 40% of its
costs, are denominated in currencies other than the euro, in particular the U.S. dollar.
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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>

<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<P align="center" style="font-size: 10pt">69

</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>Exchange Rate Risks</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The Group&#146;s foreign exchange rate risks in 2006 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">As at December&nbsp;31, 2006 and 2005, the Group had outstanding trade receivables denominated in
foreign currencies totaling <FONT face="'Times New Roman',times,serif">&#128;</FONT>55.4&nbsp;million and <FONT face="'Times New Roman',times,serif">&#128;</FONT>66.7&nbsp;million, respectively, of which 66.6% and
62.2%, respectively, were denominated in U.S. dollars. On those same dates, the Group had <FONT face="'Times New Roman',times,serif">&#128;</FONT>21.9
million and <FONT face="'Times New Roman',times,serif">&#128;</FONT>23.1&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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">As at December&nbsp;31, 2006, 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>164.9&nbsp;million (compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>140.1&nbsp;million at December&nbsp;31, 2005), consisting of forward exchange
contracts with notional amounts of U.S. dollar 116.2&nbsp;million, Canadian dollar 22.4&nbsp;million, Euro
18.0&nbsp;million, Swiss franc 4.0&nbsp;million, Australian dollar 17.0&nbsp;million, Japanese yen 120.0&nbsp;million,
British pound 10.5&nbsp;million, Swedish kroner 36.0&nbsp;million, Danish kroner 6.9&nbsp;million, and Norwegian
kroner 48.0&nbsp;million. Such contracts had various maturities extending through December&nbsp;2006. See
Note 25 to the Consolidated Financial Statements included in Item&nbsp;18 of this annual report.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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, 2006 and 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="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left"><B>Euro equivalent of contractual amounts of</B></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: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 0px solid #000000"><B>forward exchange contracts as of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</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>&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">90,744</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Euro </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,154</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">Canadian dollars </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,703</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,698</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">15,121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,783</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">9,934</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,744</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Norwegian kroner </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,027</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,928</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Swedish kroner </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,887</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,441</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">2,584</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">656</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">924</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">845</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Japanese yen </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">864</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,504</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: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">164,942</TD>
    <TD>&nbsp;</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>
</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>
<!-- End Table Body --></TABLE>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">As at December&nbsp;31, 2006, these forward exchange contracts had a net unrealized gain of <FONT face="'Times New Roman',times,serif">&#128;</FONT>5.5
million, versus a net unrealized loss of <FONT face="'Times New Roman',times,serif">&#128;</FONT>4.8&nbsp;million at December&nbsp;31, 2005. 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>
<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<P align="center" style="font-size: 10pt">70
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>December 31, 2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>December 31, 2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Contract</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Fair</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Contract</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Fair</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Amount</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Value</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Amount</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Value</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">Assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">137,608</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">46,075</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">392</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">27,334</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(678</TD>
    <TD nowrap>)</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>
</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">164,942</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,463</TD>
    <TD>&nbsp;</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>
</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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The Group&#146;s forward exchange contracts as at December&nbsp;31, 2006 had maturities of maximum 12
months. The potential loss in fair value of the Group&#146;s forward exchange contracts at December&nbsp;31,
2006 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>11.5&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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>Interest Rate Risks </B>- To a significantly lesser extent, the Group is also exposed to interest
rate risk. At December&nbsp;31, 2006, the Group had <FONT face="'Times New Roman',times,serif">&#128;</FONT>6.6&nbsp;million (representing less than 1.0% 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt"><B>Item&nbsp;12. Description of Securities Other than Equity Securities</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 5%">Not applicable.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt">71
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">
<DIV align="left">
<A name="158"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>PART II</B>
</DIV>
<DIV align="left">
<A name="159"></A>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Item&nbsp;13. Defaults, Dividend Arrearages and Delinquencies</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 5%">None.
</DIV>
<DIV align="left">
<A name="160"></A>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Item&nbsp;14. Material Modifications to the Rights of Security Holders and Use of Proceeds</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">None.
</DIV>

<DIV align="left">
<A name="161"></A>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Item&nbsp;15T. Controls and Procedures</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>Disclosure Controls and Procedures </B>- The Company carried out an evaluation which involved the
participation of the Company&#146;s management, including the Chief Executive Officer, Chief Financial
Officer and Internal Audit Director, of the effectiveness of the design and operation of the
Company&#146;s disclosure controls and procedures as of December&nbsp;31, 2006. 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Based on the Company&#146;s evaluation of its disclosure controls and procedures and the material
weaknesses in the Company&#146;s internal control over financial reporting described below, the Chief
Executive Officer and Chief Financial Officer concluded that the Company&#146;s disclosure controls and
procedures were not effective as of December&nbsp;31, 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>Management&#146;s annual report on internal control over financial reporting </B>- The Company&#146;s
management is responsible for establishing and maintaining adequate internal control over financial
reporting as defined in Rules&nbsp;13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as
amended. Internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies and procedures may deteriorate.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">To evaluate the effectiveness of the Company&#146;s internal control over financial reporting,
management, including the Chief Executive Officer and the Chief Financial Officer, used the
criteria described in Internal Control&#151;Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (&#147;COSO&#148;).
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt">72
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">A material weakness in internal control over financial reporting is a control deficiency, or
combination of control deficiencies, that results in more than a remote likelihood that a material
misstatement of the annual or interim financial statements will not be prevented or detected. In
connection with its assessment of the Company&#146;s internal control over financial reporting,
management identified the
following material weaknesses in the Company&#146;s internal control over financial reporting as of
December&nbsp;31, 2006:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">1.&nbsp;The Company did not always maintain documented and effective policies, procedures and
controls for the application of group accounting principles and its financial close and reporting
process.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">2.&nbsp;The Company did not maintain a sufficient complement of personnel, particularly at its
foreign subsidiaries, with an appropriate level of knowledge, experience and training in the
application of group accounting principles and internal control over financial reporting
commensurate with its financial reporting obligations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">3.&nbsp;The Company did not maintain effective control over the access to, and the
development, implementation and management of, software applications and database.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The control deficiencies described above could result in misstatements of account balances or
disclosures that would not be detected or prevented and could be material to the annual or interim
consolidated financial statements. Accordingly, management has concluded that each of the control
deficiencies noted above constitutes a material weakness and that the Company&#146;s internal control
over financial reporting was not effective as of December&nbsp;31, 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>Ongoing Remediation of Control Deficiencies in Internal Control Over Financial Reporting </B>- The
Group has a SOX Unit located in its headquarters in Santeramo in Colle, Italy, which is focused on
identifying and assessing issues related to the control deficiencies in the Group&#146;s internal
control over financial reporting, proposing solutions and supporting specific implementation plans
to improve financial controls and remediate the identified control deficiencies. Specialized
personnel at each subsidiary support the activities of the SOX Unit. The Company intends to
remediate all of the identified material weaknesses by the time we file our Annual Report on form
20-F for the year ending December&nbsp;31, 2007. There can be no assurance, however, that the Company
will effectively remediate all material weaknesses by that time or that additional material
weaknesses will not arise in the future.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The most important actions the Group has taken during the first months of 2007 in order to
remedy control deficiencies are as follows:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">1.&nbsp;adopted a Group Accounting Handbook;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">2.&nbsp;formalized an accounting training program for employees, including specific training
relating to the group accounting principles and related disclosures;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">3.&nbsp;created a new process for period-end financial reporting, including a new software
application that, in addition to the new Group Accounting Handbook, will allow for the timely and
accurate presentation and review of financial statement accounts and disclosures;
</DIV>

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

<P align="center" style="font-size: 10pt">73
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">4.&nbsp;established new Information Systems Procedures aimed at (i)&nbsp;reducing the risk of
unauthorized access to the systems, and (ii)&nbsp;separating the development,
test and implementation stages of new applications, updated control procedures and test plans
for assessing new policies, processes and procedures
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">This annual report does not include an attestation report of the company&#146;s registered public
accounting firm regarding internal control over financial reporting. Management&#146;s report was not
subject to attestation by the Company&#146;s registered public accounting firm pursuant to temporary
rules of the Securities and Exchange Commission that permit the Company to provide only
management&#146;s report in this annual report.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>Changes in Internal Control Over Financial Reportin</B>g &#151; There has been no change in the
Company&#146;s internal control over financial reporting during 2006 that has materially affected, or is
reasonably likely to materially affect the Company&#146;s internal control over financial reporting. The
ongoing remediation during 2007 is described above.
</DIV>

<DIV align="left">
<A name="162"></A>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Item&nbsp;16. &#091;Reserved&#093;</B>
</DIV>
<DIV align="left">
<A name="163"></A>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Item&nbsp;16.A Audit committee financial expert</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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>
<DIV align="left">
<A name="164"></A>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Item&nbsp;16.B Code of Ethics</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 downloadable from its website at
www.natuzzi.com/codeofethics/ or can be requested in hard copy at no charge by e-mail at
investor_relations@natuzzi.com. 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="justify" style="font-size: 10pt; margin-top: 10pt"><B>Item&nbsp;16.C Principal Accountant Fees and Services</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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, 2006 and 2005, for
audit fees, audit-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="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">(in euros)</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">Audit fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">595,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">558,412</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 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"><B>Total fees</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">595,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">558,412</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">&nbsp;

<P align="center" style="font-size: 10pt">74
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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">&nbsp;

<P align="center" style="font-size: 10pt">75
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">
<DIV align="left">
<A name="166"></A>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Item&nbsp;16.D Exemptions from the Listing Standards for Audit Committees.</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 Rule&nbsp;10A-3(c)(3):
</DIV>
<DIV style="margin-top: 10pt">
<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">&#151;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the board of statutory auditors is established and selected
pursuant to Italian law expressly permitting such a board;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&#151;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the board of statutory auditors is required under Italian law
to be separate from the Company&#146;s board of directors;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&#151;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">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;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&#151;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Italian Law provides for standards for the independence of the
board of statutory auditors from the Company and its management;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&#151;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">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</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&#151;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">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.</DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt"><B>Item&nbsp;16.E Purchases of Equity Securities by the Issuer and Affiliated Purchasers</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">From January&nbsp;1, 2006, to December&nbsp;31, 2006, 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">&nbsp;

<P align="center" style="font-size: 10pt">76
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">
<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="tocpage"></A>
</DIV>
<DIV align="left">
<A name="168"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>PART III</B>
</DIV>
<DIV align="left">
<A name="169"></A>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Item&nbsp;17. Financial Statements</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Not applicable.
</DIV>
<DIV align="left">
<A name="170"></A>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><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="87%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" 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"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Report of Independent Registered Public Accounting Firm</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">F-1</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Consolidated Balance Sheets as of December&nbsp;31, 2006 and 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">F-2</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Consolidated Statements of Operations for the Years Ended December
31, 2006, 2005 and 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">F-3</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap><DIV style="margin-left:0px; text-indent:-0px">Consolidated Statements of Changes in Shareholders&#146; Equity for the
Years Ended December&nbsp;31, 2006, 2005 and 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">F-4</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Consolidated Statements of Cash Flows for the Years Ended December
31, 2006, 2005 and 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">F-5</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Notes to the Consolidated Financial Statements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">F-7</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>
<DIV align="left">
<A name="171"></A>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Item&nbsp;19. Exhibits</B>
</DIV>
<DIV style="margin-top: 10pt">
<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><DIV style="text-align: justify">English translation of the by-laws (<I>Statuto</I>) of the Company, as amended and restated as of
January&nbsp;23, 2007.</DIV></TD>
</TR>
</TABLE>
</DIV>
<DIV style="margin-top: 10pt">
<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">2.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">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></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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><DIV style="text-align: justify">List of Significant Subsidiaries.</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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><DIV style="text-align: justify">Chief Executive Officer Certification pursuant to Section&nbsp;302 of the Sarbanes-Oxley Act of
2002.</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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><DIV style="text-align: justify">Chief Financial Officer Certification pursuant to Section&nbsp;302 of the Sarbanes-Oxley Act of
2002.</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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><DIV style="text-align: justify">Certifications pursuant to 18 U.S.C. 1350, as adopted pursuant to Section&nbsp;906 of the
Sarbanes-Oxley Act of 2002.</DIV></TD>
</TR>
</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt">77
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">
<DIV align="left">
<A name="300"></A>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Report of Independent Registered Public Accounting Firm
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt">To the Shareholders of<BR>
Natuzzi S.p.A.
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">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, 2006 and 2005 and the related consolidated statements of
operations, changes in shareholders&#146; equity and cash flows for each of the years in the three-year
period ended December&nbsp;31, 2006. 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="justify" style="font-size: 10pt; margin-top: 10pt">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="justify" style="font-size: 10pt; margin-top: 10pt">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, 2006 and 2005 and
the results of its operations and its cash flows for each of the years in the three-year period
ended December&nbsp;31, 2006, in conformity with established accounting principles in the Republic of
Italy.
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">As discussed in Note 3 (d), 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="justify" style="font-size: 10pt; margin-top: 10pt">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="justify" style="font-size: 10pt; margin-top: 10pt"><B>KPMG S.p.A.</B>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Bari, Italy<BR>
June&nbsp;22, 2007
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt">F - 1
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><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, 2006 and 2005</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="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">December 31,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</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>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">128,109</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89,723</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">119,274</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">123,608</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">44,681</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,256</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">100,358</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">115,690</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">5,463</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">Prepaid expenses and accrued income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,955</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,551</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">7,463</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,632</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; 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:60px; text-indent:-15px">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">407,308</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">384,465</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; 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">
    <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">405,870</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">407,847</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="left">&nbsp;</TD>
    <TD align="right">(159,547</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(145,054</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; 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:45px; text-indent:-15px">Net property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">246,323</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">262,793</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">18,752</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,616</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">2,291</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,064</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; 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:60px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">674,674</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">664,938</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; 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" 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">3,801</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,727</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">318</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">426</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">79,519</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73,533</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">23,067</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,768</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">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,767</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">4,611</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,907</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">21,674</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,083</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; 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:60px; text-indent:-15px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132,990</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">136,211</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; 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"><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 (o) )</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,269</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,274</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">2,433</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,582</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred income for capital grants (note 3 (n) )</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,075</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,779</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other liabilities (note 17)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,460</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,358</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>Minority interest (note 18)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">605</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">709</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"><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">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Share capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,739</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,682</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <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">
    <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" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Retained earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">373,529</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">367,769</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; 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:60px; text-indent:-15px">Total shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">478,842</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:30px; 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">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">
    <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">674,674</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">664,938</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; 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="justify" style="font-size: 10pt; margin-top: 10pt"><B>See accompanying notes to the consolidated financial statements</B>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<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; margin-left: .25in; width: 7.5in">

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><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 Operations</B></DIV>
<DIV align="center" style="font-size: 10pt"><B>Years ended December&nbsp;31, 2006, 2005 and 2004</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="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" 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 sales (note 22)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">735,439</TD>
    <TD>&nbsp;</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>
</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">(490,563</TD>
    <TD nowrap>)</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>
</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" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">244,876</TD>
    <TD>&nbsp;</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>
</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">Selling expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(186,238</TD>
    <TD nowrap>)</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>
</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">(42,164</TD>
    <TD nowrap>)</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>
</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:45px; text-indent:-15px">Operating income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,474</TD>
    <TD>&nbsp;</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>
</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">Other income (expense), net (note 24)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,847</TD>
    <TD>&nbsp;</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>
</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:45px; text-indent:-15px">Earnings (loss)&nbsp;before taxes
and minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,321</TD>
    <TD>&nbsp;</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>
</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">Income taxes (note 14)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,085</TD>
    <TD nowrap>)</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>
</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">Earnings (loss)&nbsp;before minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,236</TD>
    <TD>&nbsp;</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>
</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">Minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103</TD>
    <TD>&nbsp;</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>
</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:45px; text-indent:-15px">Net earnings (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,339</TD>
    <TD>&nbsp;</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>
</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:30px; text-indent:-15px">Basic earnings (loss)&nbsp;per share (note 3 <I>(x</I>))</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.23</TD>
    <TD>&nbsp;</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>
</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:30px; text-indent:-15px">Diluted earnings (loss)&nbsp;per share (note 3 <I>(x</I>))</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.23</TD>
    <TD>&nbsp;</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>
</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="justify" style="font-size: 10pt; margin-top: 10pt"><B>See accompanying notes to the consolidated financial statements</B>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<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; margin-left: .25in; width: 7.5in">

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><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, 2006, 2005 and 2004</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="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" 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>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Additional</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">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>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">paid-in</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Retained</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">ordinary shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Reserves</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">capital</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">earnings</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" 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"><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 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>
    <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>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <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="left">&nbsp;</TD>
    <TD align="right">(7,655</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,655</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <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="left">&nbsp;</TD>
    <TD align="right">(2,844</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&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="left">&nbsp;</TD>
    <TD align="right">(37,828</TD>
    <TD nowrap>)</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="left">&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" 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">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 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"><!-- 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"><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 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>
    <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>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <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="left">&nbsp;</TD>
    <TD align="right">(3,828</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,828</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <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" style="background: #cceeff">
    <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="left">&nbsp;</TD>
    <TD align="right">(14,624</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&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 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"><!-- 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"><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 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>
    <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>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <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 share capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,910</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57</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="left">&nbsp;</TD>
    <TD align="right">(57</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">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 nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,522</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,522</TD>
    <TD nowrap>)</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">12,339</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,339</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>
    <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>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <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>Balances at December&nbsp;31, 2006</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,738,538</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,739</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">373,529</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">478,842</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>
    <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="justify" style="font-size: 10pt; margin-top: 10pt"><B>See accompanying notes to the consolidated financial statements</B>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<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; margin-left: .25in; width: 7.5in">

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><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, 2006, 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="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" 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>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>&nbsp;</TD>
    <TD align="right">12,339</TD>
    <TD>&nbsp;</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>
</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">30,281</TD>
    <TD>&nbsp;</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>
</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">6,778</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,058</TD>
    <TD nowrap>)</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>
</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="left">&nbsp;</TD>
    <TD align="right">(104</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(216</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83</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>&nbsp;</TD>
    <TD align="right">768</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(149</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,468</TD>
    <TD nowrap>)</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 nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,230</TD>
    <TD nowrap>)</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>
</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="left">&nbsp;</TD>
    <TD align="right">(1,309</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,616</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(874</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">1,883</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,444</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,546</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(16,637</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>&nbsp;</TD>
    <TD align="right">596</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(141</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(240</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,285</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">386</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,737</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Salaries, wages and related liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(445</TD>
    <TD nowrap>)</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,001</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(357</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Employees&#146; leaving entitlement</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,854</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,526</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,795</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"><!-- 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">Total adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,841</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,133</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,800</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" style="background: #cceeff">
    <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">62,180</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,509</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,153</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"><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" style="background: #cceeff">
    <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">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Additions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(15,563</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(20,917</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(51,860</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Disposals</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,057</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,560</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,361</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(893</TD>
    <TD nowrap>)</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">605</TD>
    <TD>&nbsp;</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>
</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="left">&nbsp;</TD>
    <TD align="right">(250</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,985</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(100</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">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,475</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:75px; text-indent:-15px">Net cash used in investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(17,711</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(22,345</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(37,971</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>
<!-- End Table Body --></TABLE>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<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; margin-left: .25in; width: 7.5in">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" 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>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">363</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Repayments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,620</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,094</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,349</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 nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,926</TD>
    <TD nowrap>)</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Dividends paid to shareholders</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">(3,828</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,655</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>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(61</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"><!-- 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="left">&nbsp;</TD>
    <TD align="right">(5,183</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,761</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,961</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"><!-- 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 nowrap align="left">&nbsp;</TD>
    <TD align="right">(900</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,980</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,446</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"><!-- 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 in cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,386</TD>
    <TD>&nbsp;</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>
</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">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 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:45px; text-indent:-15px">Cash and cash equivalents, end of the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">128,109</TD>
    <TD>&nbsp;</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>
    <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"><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">1,400</TD>
    <TD>&nbsp;</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>
</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:30px; text-indent:-15px">Cash paid during the year for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,555</TD>
    <TD>&nbsp;</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>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; 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:30px; text-indent:-15px">Non cash investing activties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,093</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: 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="justify" style="font-size: 10pt; margin-top: 10pt"><B>See accompanying notes to consolidated financial statements</B>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<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; margin-left: .25in; width: 7.5in">
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi S.p.A. and Subsidiaries</B>
</DIV>
<DIV align="left">
<A name="305"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>N<FONT style="font-variant: SMALL-CAPS">otes to the consolidated financial statements</FONT></B><BR>
(Expressed in thousands of euros except as otherwise indicated)
</DIV>
<DIV style="margin-top: 10pt">
<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%" nowrap align="left"><B>1.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Description of business and Group composition</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The subsidiaries included in the consolidation at December&nbsp;31, 2006, 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="45%">&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="32%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Percent of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>ownership</B></TD>
    <TD>&nbsp;</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="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">97.99</TD>
    <TD valign="top">&nbsp;</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="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD valign="top">&nbsp;</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="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD valign="top">&nbsp;</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="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD valign="top">&nbsp;</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="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD valign="top">&nbsp;</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="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">99.99</TD>
    <TD valign="top">&nbsp;</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="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">90.83</TD>
    <TD valign="top">&nbsp;</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">Nacon S.p.A.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD valign="top">&nbsp;</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">Lagene S.r.l.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD valign="top">&nbsp;</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">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Americas Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD valign="top">&nbsp;</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" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Iberica S.A.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD valign="top">&nbsp;</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">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Switzerland AG</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">97.00</TD>
    <TD valign="top">&nbsp;</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" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Nordic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD valign="top">&nbsp;</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">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Benelux S.A.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD valign="top">&nbsp;</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" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Germany Gmbh</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD valign="top">&nbsp;</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">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Sweden AB</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD valign="top">&nbsp;</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" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Japan KK</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD valign="top">&nbsp;</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">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Services Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD valign="top">&nbsp;</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="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD valign="top">&nbsp;</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">Natuzzi Netherlands Holding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD valign="top">&nbsp;</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 Trade Service S.r.l.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD valign="top">&nbsp;</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">Natuzzi United Kingdom Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD valign="top">&nbsp;</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" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Kingdom of Leather Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD valign="top">&nbsp;</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">La Galleria Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">London, UK</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(7)</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>
<DIV style="margin-top: 10pt">
<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><DIV style="text-align: justify">Manufacture and distribution</DIV></TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Intragroup leather dyeing and finishing</DIV></TD>
</TR>

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

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

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

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Distribution</DIV></TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Investment holding</DIV></TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(6)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Transportation services</DIV></TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(7)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Dormant</DIV></TD>
</TR>
</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<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; margin-left: .25in; width: 7.5in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi
S.p.A. and Subsidiaries</b></div>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>N<FONT style="font-variant: SMALL-CAPS">otes to the consolidated financial statements</FONT></B><BR>
(Expressed in thousands of euros except as otherwise indicated)
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">In June&nbsp;2006 the Company acquired 100% of a business composed by four &#147;Divani &#038; Divani by
Natuzzi&#148; stores, located in Milan area, for a consideration of 3,093. This business was operating
as a Natuzzi franchisee. Prior to the date of the acquisition the franchisee agreement between
Natuzzi and the original business had expired under the original terms. The primary reason for this
acquisition was the opportunity to maintain the market presence in the Milan area. The main factor
that contributed to the determination of the purchase price was the presence of the stores in key
locations. The acquisition was accounted for using the purchase price method and it resulted in a
goodwill of 2,600, 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="77%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&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">2,600</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fixed assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132</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">468</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="left">&nbsp;</TD>
    <TD align="right">(107</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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase price</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,093</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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The purchase price of this acquired business was not paid in cash but through an offset with
trade receivables due from the selling shareholder and amounting to 3,093. The results of this
business acquisition have been included in the consolidated statement of operations from the date
of the acquisition.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">In September&nbsp;2006 the Company acquired 100% of a business composed by two &#147;Divani &#038; Divani by
Natuzzi&#148; stores, located in Reggio Emilia and Modena, for a cash consideration of 250. This
business was operating as a Natuzzi franchisee. At the date of the acquisition the franchisee
agreement between Natuzzi and the original business had not expired. The primary reason for this
acquisition was the opportunity to maintain the market presence in the Emilia Romagna region. The
main factor that contributed to the determination of the purchase price was the presence of the
stores in key locations. The acquisition was accounted for using the purchase price method and it
resulted in a goodwill of 100, 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="77%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&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">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fixed assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38</TD>
    <TD>&nbsp;</TD>
</TR>
<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">112</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">Purchase price</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">250</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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The results of this business acquisition have been included in the
consolidated statement of operations from the date of the acquisition.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<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; margin-left: .25in; width: 7.5in">
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi
S.p.A. and Subsidiaries</b></div>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>N<FONT style="font-variant: SMALL-CAPS">otes to the consolidated financial statements</FONT></B><BR>
(Expressed in thousands of euros except as otherwise indicated)
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">During 2005 the Company tried to sell to third party its twelve stores located in United
Kingdom. But in December&nbsp;2005, due to the impossibility to find an acquirer, the Company decided to
close down this business through the adoption of the following actions: (a)&nbsp;in January&nbsp;2006 the
Company incorporated a new subsidiary in United Kingdom (Natuzzi Service Limited) to which it
transferred three stores and part of the corporate net assets; (b)&nbsp;during March&nbsp;2006 the Company
closed down the remaining nine stores that had poor earning performances and did not produce
positive cash flow. The stores closed down continued to trade until the end of March in order to
sell out all the stock in house.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">In January&nbsp;2006 the Company incorporated a new subsidiary, Natuzzi Service Limited, which owns
some stores and provides sales support for the Group in the United Kingdom.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">During 2006 in an effort to maximize the efficiency of the Group&#146;s organizational structure
two Italian subsidiaries, Divani Due S.r.l. and Koine&#232; S.r.l., were merged into Nacon S.p.A..
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">During 2006 the subsidiaries Natuzzi Asia Ltd and Kingdom of Leather Trustees Limited were
wound up.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 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; had expired under the
original terms. The stores are located in the Abruzzo and Marche regions of Italy. The primary
reason for this acquisition was the opportunity to maintain the market presence in the
aforementioned regions. The main factor that contributed to the determination of the price was 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="77%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&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="left">&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="left">&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 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>
</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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The purchase price
was composed of the consideration paid 297, plus the offset of trade receivables from Koine&#232;
S.r.l., amounting to 1,722 at the date of acquisition. The pre-acquistion results for 2005 of this
business acquisition have been included in the consolidated statement of operations of the Company
for the entire year ended at December&nbsp;31, 2005.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt">F - 9
</DIV>
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<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; margin-left: .25in; width: 7.5in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi
S.p.A. and Subsidiaries</b></div>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>N<FONT style="font-variant: SMALL-CAPS">otes to the consolidated financial statements</FONT></B><BR>
(Expressed in thousands of euros except as otherwise indicated)
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 original business had expired under the original terms. The primary reason for this
acquisition was 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 was the presence of the
stores in key street locations in Rome. The acquisition was accounted for using the purchase method
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="77%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&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="left">&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 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>
</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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The purchase price
was composed by the consideration paid of 688, plus the offset of trade receivables due from the
vendor, and amounting to 4,122 at the date of acquisition. The results of this business acquisition
have been included in the consolidated statements of operations from the date of acquisition.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 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="77%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&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 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>
</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>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt">F - 10
</DIV>
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<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; margin-left: .25in; width: 7.5in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi
S.p.A. and Subsidiaries</b></div>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>N<FONT style="font-variant: SMALL-CAPS">otes to the consolidated financial statements</FONT></B><BR>
(Expressed in thousands of euros except as otherwise indicated)
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The main factors that have contributed to the determination of the consideration paid were:
(a)&nbsp;presence of store in a key geographic location; (b)&nbsp;space of the store that is very large for a
central location (approximately 1,000 square meters); (c)&nbsp;advertising of Natuzzi&#146;s &#147;trademark&#148; and
&#147;product&#148; in the heart of Milan shopping area.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">In 2005 the Company incorporated two new subsidiaries, Natuzzi Sweden AB and Natuzzi Japan KK,
which provides sales support for the Group in the respective countries.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 approximately 12,000 of 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">In 2004 Style and Comfort S.r.l. was merged into Natuzzi S.p.A..
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">During 2004 the Company incorporated two new subsidiaries Nacon S.r.l. and Italholding S.r.l.
</DIV>
<DIV style="margin-top: 10pt">
<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%" nowrap align="left"><B>2.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Basis of preparation</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The financial statements utilized for the consolidation are the financial statements of each
Group company at December&nbsp;31, 2006, 2005 and 2004. The 2006, 2005 and 2004 financial statements
have been approved by the respective shareholders of the relevant companies. The 2006 consolidated
financial statements have been approved by the Board of Directors of the Company.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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">&nbsp;

<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; margin-left: .25in; width: 7.5in">
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi
S.p.A. and Subsidiaries</b></div>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>N<FONT style="font-variant: SMALL-CAPS">otes to the consolidated financial statements</FONT></B><BR>
(Expressed in thousands of euros except as otherwise indicated)
</DIV>
<DIV style="margin-top: 10pt">
<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%" nowrap align="left"><B>3.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Summary of significant accounting policies</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The significant accounting policies followed in the preparation of the consolidated financial
statements are outlined below.
</DIV>
<DIV style="margin-top: 10pt">
<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="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>a)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Principles of consolidation</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 that the acquisition is completed within 6&nbsp;months of the beginning of the
acquiring entity&#146;s fiscal year.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 operations. All intercompany balances and
transactions are eliminated in consolidation.
</DIV>
<DIV style="margin-top: 10pt">
<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="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>b)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Foreign currency transactions</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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
operations.
</DIV>
<DIV style="margin-top: 10pt">
<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="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>c)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Forward exchange contracts</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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, 2006, 2005 and 2004 all unrealized gains or losses on such
contracts are recorded in other income (expense), net, in the consolidated statements of
operations.
</DIV>
<DIV style="margin-top: 10pt">
<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="4%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>d)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Financial statements of foreign operations</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 during the year for revenues and expenses. The resulting exchange differences on translation
is recorded as a direct adjustment to shareholders&#146; equity.
</DIV>

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

<P align="center" style="font-size: 10pt">F - 12
</DIV>
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<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; margin-left: .25in; width: 7.5in">
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi
S.p.A. and Subsidiaries</b></div>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>N<FONT style="font-variant: SMALL-CAPS">otes to the consolidated financial statements</FONT></B><BR>
(Expressed in thousands of euros except as otherwise indicated)
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">During September&nbsp;2005, effective as of December&nbsp;31, 2005, the Italian Accounting Profession
has changed the Italian accounting standard N. 17, &#147;Consolidated Financial Statements&#148; with regard
to the translation of the financial statements of a foreign subsidiary expressed in a foreign
currency.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">(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 were 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 operations;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">(b)&nbsp;if the foreign subsidiary was not considered an integral part of a parent company, its
financial statements expressed in the foreign currency were 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">As indicated above, effective as of December&nbsp;31, 2005, the Italian Accounting Profession has
eliminated option (a)&nbsp;indicated above.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 are 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>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt">F - 13
</DIV>
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<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; margin-left: .25in; width: 7.5in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi
S.p.A. and Subsidiaries</b></div>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>N<FONT style="font-variant: SMALL-CAPS">otes to the consolidated financial statements</FONT></B><BR>
(Expressed in thousands of euros except as otherwise indicated)
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 exchange
gain of 1,684 in the consolidated statement of operations. The comparative financial statements of
prior years have not been adjusted to apply the new Italian GAAP foreign currency translation
standard retrospectively.
</DIV>


<DIV style="margin-top: 10pt">
<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%" nowrap align="left"><B>e)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Cash and cash equivalents</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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>
<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<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; margin-left: .25in; width: 7.5in">
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi
S.p.A. and Subsidiaries</b></div>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>N<FONT style="font-variant: SMALL-CAPS">otes to the consolidated financial statements</FONT></B><BR>
(Expressed in thousands of euros except as otherwise indicated)
</DIV>
<DIV style="margin-top: 10pt">
<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%" nowrap align="left"><B>f)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Marketable debt securities</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Realized gains and losses are charged to other income (expense), net.
</DIV>
<DIV style="margin-top: 10pt">
<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%" nowrap align="left"><B>g)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Accounts receivable and payable</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Receivables are stated at nominal value net of an allowance for doubtful accounts. Payables
are stated at face value.
</DIV>
<DIV style="margin-top: 10pt">
<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%" nowrap align="left"><B>h)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Inventories</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Goods in process and finished goods are valued at the lower of production cost and net
realizable value. Production cost includes 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The provision for slow moving and obsolete raw materials and finished goods is based on the
estimated realizable value net of the costs of disposal.
</DIV>
<DIV style="margin-top: 10pt">
<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%" nowrap align="left"><B>i)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Property, plant and equipment</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 expense
is allocated to cost of goods sold, selling expenses and general and administrative expenses based
on the usage of the assets.
</DIV>
<DIV style="margin-top: 10pt">
<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%" nowrap align="left"><B>j)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Treasury shares</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Treasury shares are accounted for as 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>
<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<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; margin-left: .25in; width: 7.5in">
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi
S.p.A. and Subsidiaries</b></div>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>N<FONT style="font-variant: SMALL-CAPS">otes to the consolidated financial statements</FONT></B><BR>
(Expressed in thousands of euros except as otherwise indicated)
</DIV>
<DIV style="margin-top: 10pt">
<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%" nowrap align="left"><B>k)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Other assets</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Other assets 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Trademarks, patents and goodwill are amortized on a straight-line basis over a period of five
years.
</DIV>
<DIV style="margin-top: 10pt">
<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%" nowrap align="left"><B>l)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Impairment of long-lived assets and long-lived assets to be disposed of</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 style="margin-top: 10pt">
<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%" nowrap align="left"><B>m)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Income taxes</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 for losses available for carryforward in the various tax jurisdictions. 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>
<DIV style="margin-top: 10pt">
<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%" nowrap align="left"><B>n)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Government grants</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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>
<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<P align="center" style="font-size: 10pt">F - 16
</DIV>
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<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; margin-left: .25in; width: 7.5in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi
S.p.A. and Subsidiaries</b></div>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>N<FONT style="font-variant: SMALL-CAPS">otes to the consolidated financial statements</FONT></B><BR>
(Expressed in thousands of euros except as otherwise indicated)
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 operations as revenue on a systematic basis over the useful life of the
related asset.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">In addition when capital grants are received after the year in which the related assets are
acquired, the depreciation of the 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
operations 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 operations of the year, is recorded in net sales (see note 24).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">At December&nbsp;31, 2006 and 2005 the deferred income for capital grants shown in the consolidated
balance sheet amounts to 14,075 and 14,779, respectively.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The amortization of these grants recorded in net sales of the consolidated statement of
operations for the years ended December&nbsp;31, 2006, 2005 and 2004, amounts to 1,111, 1,239 and 864,
respectively.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Cost reimbursement grants relating to training and other personnel costs are credited to
income when received from government agencies.
</DIV>
<DIV style="margin-top: 10pt">
<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%" nowrap align="left"><B>o)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B> Employees&#146; leaving entitlement</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The expense recorded for the leaving entitlement for the years ended December&nbsp;31, 2006, 2005
and 2004 was 6,778, 6,877 and 7,435, respectively.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<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; margin-left: .25in; width: 7.5in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi
S.p.A. and Subsidiaries</b></div>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>N<FONT style="font-variant: SMALL-CAPS">otes to the consolidated financial statements</FONT></B><BR>
(Expressed in thousands of euros except as otherwise indicated)
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The number of workers employed by the Group totalled 8,133 and 7,846 at December&nbsp;31, 2006 and
2005, respectively.
</DIV>
<DIV style="margin-top: 10pt">
<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%" nowrap align="left"><B>p)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Net sales</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 style="margin-top: 10pt">
<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%" nowrap align="left"><B>q)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Shipping and handling costs</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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, 2006, 2005 and 2004 were 69,433, 69,730 and 70,329, respectively.
</DIV>
<DIV style="margin-top: 10pt">
<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%" nowrap align="left"><B>r)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Advertising costs</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Advertising costs are expensed in the periods incurred and are included in selling expenses.
Advertising expenses recorded for the years ended December&nbsp;31, 2006, 2005 and 2004 were 31,621,
31,273 and 33,855, respectively.
</DIV>
<DIV style="margin-top: 10pt">
<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%" nowrap align="left"><B>s)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Commission expense</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 style="margin-top: 10pt">
<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%" nowrap align="left"><B>t)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Warranties</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Warranties 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 trends.
</DIV>
<DIV style="margin-top: 10pt">
<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%" nowrap align="left"><B>u)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Research and development costs</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Research and development costs are expensed in the periods incurred.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<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; margin-left: .25in; width: 7.5in">
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi
S.p.A. and Subsidiaries</b></div>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>N<FONT style="font-variant: SMALL-CAPS">otes to the consolidated financial statements</FONT></B><BR>
(Expressed in thousands of euros except as otherwise indicated)
</DIV>
<DIV style="margin-top: 10pt">
<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%" nowrap align="left"><B>v)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Contingencies</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 style="margin-top: 10pt">
<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%" nowrap align="left"><B>w)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Use of estimates</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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
statements and reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
</DIV>
<DIV style="margin-top: 10pt">
<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%" nowrap align="left"><B>x)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Earnings per share</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 include the
effects of the 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
2006 and 2005 share grants and options of 332,959 and 139,520, respectively, were excluded as their
effect was anti dilutive. The following table provides the amounts used in the calculation of
earnings (loss)&nbsp;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="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" 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;attributable to
ordinary shareholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,339</TD>
    <TD>&nbsp;</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>
</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">54,733,796</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">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,576</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">54,733,796</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">54,709,204</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 style="margin-top: 10pt">
<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%" nowrap align="left"><B>4.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Cash and cash equivalents</B></DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Cash and cash equivalents are analyzed as follows:</DIV></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="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</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">510</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">16,746</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,491</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bank accounts in foreign currencies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">110,798</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,699</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">55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</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">128,109</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89,723</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">&nbsp;

<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; margin-left: .25in; width: 7.5in">
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi
S.p.A. and Subsidiaries</b></div>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>N<FONT style="font-variant: SMALL-CAPS">otes to the consolidated financial statements</FONT></B><BR>
(Expressed in thousands of euros except as otherwise indicated)
</DIV>

<DIV style="margin-top: 10pt">
<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%" nowrap align="left"><B>5.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Marketable debt securities</B></DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Details regarding marketable debt securities are as follows:</DIV></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="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</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 style="margin-top: 10pt">
<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%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Further information regarding the Group&#146;s investments in marketable debt securities is as
follows:</DIV></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="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" 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="center" colspan="2">Fair</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Cost</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Gains</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Losses</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" 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="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" 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="center" colspan="2">Fair</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Cost</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Gains</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Losses</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The contractual maturity of the Group&#146;s marketable debt securities at December&nbsp;31, 2006 is
between 1 &#151; 5&nbsp;years.
</DIV>
<DIV style="margin-top: 10pt">
<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%" nowrap align="left"><B>6.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Trade receivables, net</B></DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Trade receivables are analyzed as follows:</DIV></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="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</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">37,408</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,257</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">54,217</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,127</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">32,163</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,781</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">1,543</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,602</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 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">125,331</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">128,767</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">(6,057</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,159</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">119,274</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">123,608</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">&nbsp;

<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; margin-left: .25in; width: 7.5in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi
S.p.A. and Subsidiaries</b></div>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>N<FONT style="font-variant: SMALL-CAPS">otes to the consolidated financial statements</FONT></B><BR>
(Expressed in thousands of euros except as otherwise indicated)
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Trade receivables are due primarily from major retailers who sell directly to their customers.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">As of December&nbsp;31, 2006, 2005 and 2004 and for each of the years in the three-year period
ended December&nbsp;31, 2006, the Company had customers who exceeded 5% of trade receivables and/or net
sales 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="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Trade receivables</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">N&#176; of customers</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">%on
trade receivables</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">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">16</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">16</TD>
    <TD nowrap>%</TD>
</TR>
<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 align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">9</TD>
    <TD nowrap>%</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="68%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Net sales</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">N&#176; of customers</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">%net sales</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">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">18</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">13</TD>
    <TD nowrap>%</TD>
</TR>
<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 align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">6</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" 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">Balance, beginning 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 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">1,695</TD>
    <TD>&nbsp;</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>
</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">(797</TD>
    <TD nowrap>)</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>
</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">6,057</TD>
    <TD>&nbsp;</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>
</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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Trade receivables denominated in foreign currencies at December&nbsp;31, 2006 and 2005 totalled
55,418 and 66,744, 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="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</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">36,938</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,549</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">5,440</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,853</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">British pounds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,760</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,470</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">4,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,405</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">4,257</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,467</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">55,418</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66,744</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; text-indent: 5%">&nbsp;

<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; margin-left: .25in; width: 7.5in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi
S.p.A. and Subsidiaries</b></div>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>N<FONT style="font-variant: SMALL-CAPS">otes to the consolidated financial statements</FONT></B><BR>
(Expressed in thousands of euros except as otherwise indicated)
</DIV>

<DIV style="margin-top: 10pt">
<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%" nowrap align="left"><B>7.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Other receivables</B></DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Other receivables are analyzed as follows:</DIV></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="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</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">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">11,798</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Receivable from tax authorities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,642</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,343</TD>
    <TD>&nbsp;</TD>
</TR>
<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">10,133</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,867</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">3,301</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,264</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">7,807</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,984</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">44,681</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,256</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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The receivable for capital grants represents amounts due from government agencies related to
capital expenditures that have been incurred.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The receivable from the tax authorities represents principally advance taxes paid in excess of
the amounts due and interest thereon.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 style="margin-top: 10pt">
<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%" nowrap align="left"><B>8.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Inventories</B></DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Inventories are analyzed as follows:</DIV></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="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</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">61,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68,481</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">10,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,294</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">28,602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,915</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">100,358</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">115,690</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 style="margin-top: 10pt">
<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%" nowrap align="left"><B>9.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Property, plant and equipment and accumulated depreciation</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Cost or</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Accumulated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Annual rate of</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">valuation</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">depreciation</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" 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">17,194</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">184,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(39,475</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">2-10</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">113,910</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(72,290</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">10-25</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">(5,056</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">27,159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19,754</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">10-20</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Retail gallery and store furnishings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,237</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(15,515</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">25-35</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">5,755</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,632</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">20-25</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">5,252</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,825</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">10-20</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">619</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">889</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">405,870</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(159,547</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>
<P align="center" style="font-size: 10pt">&nbsp;

<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; margin-left: .25in; width: 7.5in">
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi
S.p.A. and Subsidiaries</b></div>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>N<FONT style="font-variant: SMALL-CAPS">otes to the consolidated financial statements</FONT></B><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="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Cost or</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Accumulated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Annual rate of</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">valuation</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">depreciation</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" 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">17,463</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">182,750</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">2-10</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">10-25</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">10-20</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Retail gallery and store 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 nowrap align="right">25-35</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">20-25</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">10-20</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 style="margin-top: 10pt">
<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%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Construction in progress relates principally to manufacturing facilities.</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><B>10.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Other assets</B></DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Other assets consist of the following:</DIV></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="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</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">13,977</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,277</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">3,867</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">16,786</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,274</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">34,630</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,418</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <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">(15,878</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,802</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">Total, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,752</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,616</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 style="margin-top: 10pt">
<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%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">At December&nbsp;31, 2006 and 2005 the net book value of goodwill may be analyzed as follows:</DIV></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="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</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">13,977</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,277</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <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">(4,676</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,155</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 book value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,301</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,122</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">&nbsp;

<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; margin-left: .25in; width: 7.5in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi
S.p.A. and Subsidiaries</b></div>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>N<FONT style="font-variant: SMALL-CAPS">otes to the consolidated financial statements</FONT></B><BR>
(Expressed in thousands of euros except as otherwise indicated)
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">At December&nbsp;31, 2006 and 2005 the net book value of goodwill arising from business
acquisitions amounts to 9,301 and 9,122, respectively.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">At December&nbsp;31, 2006 and 2005 investments in affiliated enterprises are accounted under the
equity method.
</DIV>
<DIV style="margin-top: 10pt">
<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%" nowrap align="left"><B>11.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Short-term borrowings</B></DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Short-term borrowings consist of the following:</DIV></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="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</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">3,351</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,174</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">450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,553</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">3,801</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,727</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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">While bank overdrafts are payable on demand, bank borrowings consist of unsecured credit of
line agreements with banks and have various short maturities.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">At December&nbsp;31, 2006 and 2005 the short-term borrowings included 3,351 and 4,174 denominated
in foreign currencies, respectively.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The weighted average interest rates on the above-listed short-term borrowings at December&nbsp;31,
2006 and 2005 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="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</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 nowrap align="left">&nbsp;</TD>
    <TD align="right">4.87</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">4.92</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">3.58</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5.10</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 5%">&nbsp;

<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; margin-left: .25in; width: 7.5in">
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi
S.p.A. and Subsidiaries</b></div>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>N<FONT style="font-variant: SMALL-CAPS">otes to the consolidated financial statements</FONT></B><BR>
(Expressed in thousands of euros except as otherwise indicated)
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Credit facilities available to the Group, including amounts guaranteed under surety bonds,
amounted to 59,491 and 92,974 at December&nbsp;31, 2006 and 2005, respectively. The unused portion of
these facilities amounted to 55,690 and 85,247 at December&nbsp;31, 2006 and 2005, respectively.
</DIV>
<DIV style="margin-top: 10pt">
<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%" nowrap align="left"><B>12.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Accounts payable-trade</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Accounts payable-trade totaling 79,519 and 73,533 at December&nbsp;31, 2006 and 2005, respectively,
represent principally amounts payable for purchases of goods and services in Italy and abroad, and
includes 21,936 and 23,072 at December&nbsp;31, 2006 and 2005, respectively, denominated in foreign
currencies.
</DIV>
<DIV style="margin-top: 10pt">
<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%" nowrap align="left"><B>13.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Accounts payable-other</B></DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Accounts payable-other are analyzed as follows:</DIV></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="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</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 warranties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,561</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,896</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">5,441</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,785</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">3,835</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,018</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">3,059</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,375</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <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">593</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <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 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">3,578</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,241</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 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">23,067</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,768</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 style="margin-top: 10pt">
<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%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The following table provides the movements in the provision for warranties:</DIV></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="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" 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">Balance, beginning of year</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>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,363</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Charges to profit and loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,386</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,700</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Reductions for utilization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,721</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,345</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,586</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">6,561</TD>
    <TD>&nbsp;</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 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 style="margin-top: 10pt">
<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%" nowrap align="left"><B>14.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Taxes on income</B></DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Italian companies are subject to two income taxes at the following rates:</DIV></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="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" 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">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">33.00</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>
<P align="center" style="font-size: 10pt">&nbsp;

<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; margin-left: .25in; width: 7.5in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi
S.p.A. and Subsidiaries</b></div>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>N<FONT style="font-variant: SMALL-CAPS">otes to the consolidated financial statements</FONT></B><BR>
(Expressed in thousands of euros except as otherwise indicated)
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 2006, 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 2006, 2005 and 2004 income tax
charge.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Approximately 57.0%, 69.4% and 55.1% respectively, of the Group&#146;s consolidated earnings (loss)
before taxes were generated by domestic Italian operations during 2006, 2005 and 2004. 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="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" 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">Domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,012</TD>
    <TD nowrap>)</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,333</TD>
    <TD>&nbsp;</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>
</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">19,321</TD>
    <TD>&nbsp;</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>
</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">&nbsp;

<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; margin-left: .25in; width: 7.5in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi
S.p.A. and Subsidiaries</b></div>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>N<FONT style="font-variant: SMALL-CAPS">otes to the consolidated financial statements</FONT></B><BR>
(Expressed in thousands of euros except as otherwise indicated)
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The effective income tax rates for the years ended December&nbsp;31, 2006, 2005 and 2004 were
36.7%, 26.5% and 48.9%, respectively. The actual income tax expense differs from the &#145;expected&#146;
income tax expense (computed by applying the state tax, which is 33% 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="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" 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">Expected income (loss)&nbsp;tax charge
at full tax rates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,376</TD>
    <TD>&nbsp;</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>
</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:15px; text-indent:-15px">- Tax exempt income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,779</TD>
    <TD nowrap>)</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; 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">(4,434</TD>
    <TD nowrap>)</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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">- Italian regional tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,646</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">- Non-deductible expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,694</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,537</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,970</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">- Provisions for contingent liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">914</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">155</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">217</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">- Depreciation and impairment of goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">274</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; 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">1,989</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; 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">405</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,011</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">7,085</TD>
    <TD>&nbsp;</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>
</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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Total income taxes for the years ended December&nbsp;31, 2006, 2005 and 2004 relate to earnings
from operations.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<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; margin-left: .25in; width: 7.5in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi
S.p.A. and Subsidiaries</b></div>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>N<FONT style="font-variant: SMALL-CAPS">otes to the consolidated financial statements</FONT></B><BR>
(Expressed in thousands of euros except as otherwise indicated)
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Total income taxes for the years ended December&nbsp;31, 2006, 2005 and 2004 are 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="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" 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="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" 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">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>
    <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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,738</TD>
    <TD>&nbsp;</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>
</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,405</TD>
    <TD>&nbsp;</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>
</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: 0px 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:15px; text-indent:-15px">Total (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,143</TD>
    <TD>&nbsp;</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>
</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: 0px 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>
<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>
</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>
    <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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,592</TD>
    <TD nowrap>)</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>
</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">534</TD>
    <TD>&nbsp;</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>
</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: 0px 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:15px; text-indent:-15px">Total (b)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,058</TD>
    <TD nowrap>)</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>
</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: 0px 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>
<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>
</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,085</TD>
    <TD>&nbsp;</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>
</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: 0px 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The tax years from January&nbsp;1, 2001 for the majority of the Italian and Foreign companies are
open to assessment for additional taxes.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The tax effects of temporary differences that give rise to deferred tax assets and deferred
tax liabilities at December&nbsp;31, 2006 and 2005 are 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="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</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:15px; text-indent:-15px">- Tax loss carryforwards</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,562</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,937</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">- Provision for returns and discounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,047</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,873</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>&nbsp;</TD>
    <TD align="right">1,746</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,594</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">- Inventory obsolescence</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,849</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,490</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">- Provision for contingent liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,403</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">368</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">- Intercompany profit on inventory</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,051</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">475</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">- Provision for sales representatives</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">555</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">- Unrealized net losses on foreign exchange</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">590</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">374</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">- Other temporary differences</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,698</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,218</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 deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,978</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,527</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">- Less valuation allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(15,146</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net deferred tax assets (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,832</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,374</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">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">
    <TD><DIV style="margin-left:15px; text-indent:-15px">- Unremitted earnings of subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,940</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,535</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">- Revenue recognition</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(768</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(303</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">- Government grants</DIV></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">(658</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">- Other temporary differences</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(715</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(182</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">Total deferred tax liabilities (b)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,078</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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net deferred tax assets (a &#043; b)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,754</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>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

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

<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; margin-left: .25in; width: 7.5in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi
S.p.A. and Subsidiaries</b></div>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>N<FONT style="font-variant: SMALL-CAPS">otes to the consolidated financial statements</FONT></B><BR>
(Expressed in thousands of euros except as otherwise indicated)
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 5%">A valuation allowance has been established for most of the tax loss carryforwards.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The valuation allowance for deferred tax assets as of December&nbsp;31, 2006 and 2005 was 15,146
and 13,153, respectively. The net change in the total valuation allowance for the years ended
December&nbsp;31, 2006 and 2005 was an increase of 1,993 and 4,163, 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, 2006 and 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="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 5%">Net deferred income tax assets are included in the consolidated balance sheets 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="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Current</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Non current</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" 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">10,886</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,092</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,978</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">(15,146</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(15,146</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">10,886</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,946</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,832</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">(3,423</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">(4,078</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">7,463</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,291</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,754</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="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Current</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Non current</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The tax loss carryforwards of the Group total 57,791 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="77%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&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">527</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">5,713</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">3,664</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,453</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">42,434</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">57,791</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>


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

<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; margin-left: .25in; width: 7.5in">
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi S.p.A. and Subsidiaries</B>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">As of December&nbsp;31, 2006, taxes that are due on the distribution of the portion of
shareholders&#146; equity equal to unremitted earnings of most of the subsidiaries is 1,940 (1,535 at
December&nbsp;31, 2005). The Group has provided for such taxes as the likelihood of distribution is
probable.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The Group has not provided for such taxes, amounting to 217 (155 at December&nbsp;31, 2005), for
some subsidiaries for which the likelihood of distribution is remote and earnings are deemed to be
permanently reinvested.
</DIV>
<DIV style="margin-top: 10pt">
<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>15.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Salaries, wages and related liabilities</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">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="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</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">11,320</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,954</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">7,577</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,298</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">2,777</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,831</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">21,674</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,083</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 style="margin-top: 10pt">
<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>16.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Long-term debt</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">Long-term debt at December&nbsp;31, 2006 and 2005 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="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap colspan="2"><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 align="right">2,460</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,699</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>    <TD>&nbsp;</TD></TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">0.96% long-term debt payable in annual instalments with
final payment due September&nbsp;2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">291</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</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">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">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,309</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>    <TD>&nbsp;</TD></TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,751</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,008</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <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">(318</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(426</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">Long-term debt, excluding current instalments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,433</TD>
    <TD>&nbsp;</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>
    <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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The 3% long-term debt with final instalment due in October&nbsp;2007 was fully repaid in 2006.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<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; margin-left: .25in; width: 7.5in">
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi S.p.A. and Subsidiaries</B>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><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="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">Loan maturities after 2007 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="77%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&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">325</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">332</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">339</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">273</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">1,164</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">2,433</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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">At December&nbsp;31, 2006 and 2005 long-term debt denominated in foreign currencies amounts to nil
and 1,309, respectively.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Interest expense related to long-term debt for the years ended December&nbsp;31, 2006, 2005 and
2004 was 96, 139 and 110 respectively. Interest expense is paid with the related instalment
(quarterly, semi-annual or annual).
</DIV>
<DIV style="margin-top: 10pt">
<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>17.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Other liabilities</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">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="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</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">8,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,868</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">1,764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,490</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">10,460</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,358</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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The Group is 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 of these
matters, after the provision accrued (at December&nbsp;31, 2006 and 2005 amounts to 8,696 and 2,868,
respectively), will not have a material adverse effect on the Group&#146;s consolidated financial
position or results of operations.
</DIV>
<DIV style="margin-top: 10pt">
<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>18.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Minority interest</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Minority interest shown in the accompanying consolidated balance sheet at December&nbsp;31, 2006 is
605 (709 at December&nbsp;31, 2005).
</DIV>
<DIV style="margin-top: 10pt">
<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>19.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Shareholders&#146; equity</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">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="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</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">47.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">47.6</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">47.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">47.3</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>
<P align="center" style="font-size: 10pt">&nbsp;

<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; margin-left: .25in; width: 7.5in">
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi S.p.A. and Subsidiaries</B>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><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="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">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="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The number of ordinary shares issued at December&nbsp;31, 2006 and 2005 is 54,738,538 and
54,681,628, respectively. The par value of one ordinary share is euro 1.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 at December&nbsp;31, 2006 and 2005, respectively.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">No taxes would be payable on the distribution of the monetary revaluation reserve and
government capital grants reserve.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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, 2006 was a debit of 2,978 (credit of
3,544 at December&nbsp;31, 2005).
</DIV>

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

<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; margin-left: .25in; width: 7.5in">
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi S.p.A. and Subsidiaries</B>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><FONT style="font-variant: SMALL-CAPS">Notes to the consolidated financial statements</FONT></B><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)
</DIV>

<DIV style="margin-top: 10pt">
<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>20.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Share grants and options</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 covers the period 2005-2009. During this period the Company assigns 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 is 3,000,000, each with a nominal value
of <FONT face="'Times New Roman',times,serif">&#128;</FONT> 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The share grants issued for the achievement of 2004 MBOs have been 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>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The share options have an exercise price of euro 8.51 (U.S. dollars 11.21 at December&nbsp;31, 2006
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>
<P align="center" style="font-size: 10pt">&nbsp;

<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; margin-left: .25in; width: 7.5in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The status of the share grants and options under the plan, as of December&nbsp;31, 2006 and 2005,
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="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&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="2">Additional</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">MBO 2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Options</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">options</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" 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">Balance at December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">113,786</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">369,752</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">483,538</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Granted</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 nowrap align="left">&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(56,910</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 nowrap align="left">&nbsp;</TD>
    <TD align="right">(56,910</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forfeited</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">(88,746</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">(88,746</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expired</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">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,876</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">281,006</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">337,882</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>
<TR>    <TD>&nbsp;</TD></TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average remaining
contractual life</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">0.04 years</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">2.04 years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</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 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="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&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="2">Additional</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">MBO 2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Options</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">options</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" 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">Balance at December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,626</TD>
    <TD>&nbsp;</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">82,973</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">306,545</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Granted</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 valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercised</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 valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forfeited</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">(24,020</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12,010</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(36,030</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expired</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>    <TD>&nbsp;</TD></TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,626</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">141,926</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">270,515</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>
<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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average remaining
contractual life</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">0.54 years</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">2.04 years</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">2.04
years</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 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>
<P align="center" style="font-size: 10pt">&nbsp;

<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; margin-left: .25in; width: 7.5in">
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi S.p.A. and Subsidiaries</B>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><FONT style="font-variant: SMALL-CAPS">Notes to the consolidated financial statements</FONT></B><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">During 2006 and 2005 the Company did not grant any shares, options and additional options. The
total intrinsic value of shares exercised during the years ended December&nbsp;31, 2006 and 2005 was 368
and nil. During 2006 and 2005 there were no options and additional options exercised as the
intrinsic value was negative (the market value as of December&nbsp;31, 2005 and 2006 exceeded the
exercise price). The total fair value of shares vested during the years ended December&nbsp;31, 2006
and 2005 was 447 and nil.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 11.21 at December&nbsp;31, 2006 exchange
rates). At December&nbsp;31, 2006, 2005 and 2004 the market price of Natuzzi&#146;s shares is euro 6.46 (U.S.
dollars 8.51 at December&nbsp;31, 2006 exchange rate), euro 5.93
(U.S. dollars 7.00 at December 31, 2005
exchange rate) and euro 7.96 (U.S. dollars 10.85 at December&nbsp;31, 2004 exchange rates),
respectively.
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Under Italian GAAP the Company does not record in the consolidated statements of operations
the compensation expense related to share based compensation plans.
</DIV>
<DIV style="margin-top: 10pt">
<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>21.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Commitments and contingent liabilities</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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, 2006, 2005 and 2004 was 14,125, 13,970 and 11,976, respectively. As of December&nbsp;31,
2006, 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="77%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&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">12,524</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">11,667</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">10,724</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">9,560</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,608</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">13,895</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">66,978</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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Certain banks have provided guarantees at December&nbsp;31, 2006 to secure payments to third
parties amounting to 4,468 (8,245 at December&nbsp;31, 2005). These guarantees are unsecured and have
various maturities extending through December&nbsp;31, 2008.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<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; margin-left: .25in; width: 7.5in">
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi S.p.A. and Subsidiaries</B>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><FONT style="font-variant: SMALL-CAPS">Notes to the consolidated financial statements</FONT></B><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">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 the Italian Ministry of the Industrial Activities to revise
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
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 of 27,072 and of 7,910, respectively.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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;Istituto
Nazionale per la Previdenza Sociale&#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 did not pay the amounts claimed back and, at the same time, has taken
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 contingent liability recorded a provision of 475 in the Consolidated Financial Statements as
of December&nbsp;31, 2006, 2005 and 2004, as this amount is considered the probable final liability.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 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 (see note 17).
</DIV>
<DIV style="margin-top: 10pt">
<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>22.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Segmental and geographical information</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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>

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

<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; margin-left: .25in; width: 7.5in">
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi S.p.A. and Subsidiaries</B>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><FONT style="font-variant: SMALL-CAPS">Notes to the consolidated financial statements</FONT></B><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 5%">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="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" 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 upholstered furniture</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">573,086</TD>
    <TD>&nbsp;</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>
</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">87,165</TD>
    <TD>&nbsp;</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>
</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">660,251</TD>
    <TD>&nbsp;</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>
</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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" 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"><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">204,303</TD>
    <TD>&nbsp;</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>
</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">81,911</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Spain</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,955</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">England</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,874</TD>
    <TD>&nbsp;</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>
</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">36,244</TD>
    <TD>&nbsp;</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>
</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">33,551</TD>
    <TD>&nbsp;</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>
</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">30,927</TD>
    <TD>&nbsp;</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>
</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">28,013</TD>
    <TD>&nbsp;</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>
</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">18,269</TD>
    <TD>&nbsp;</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>
</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">16,624</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sweden</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,227</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,809</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,735</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Norway</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,520</TD>
    <TD>&nbsp;</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>
</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">101,833</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80,532</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,474</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">660,251</TD>
    <TD>&nbsp;</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>
</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="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</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">135,956</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">144,398</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">36,088</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,046</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">23,791</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,677</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">21,983</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,490</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">18,381</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,789</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">10,124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,393</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">246,323</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">262,793</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">&nbsp;

<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; margin-left: .25in; width: 7.5in">
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi S.p.A. and Subsidiaries</B>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><FONT style="font-variant: SMALL-CAPS">Notes to the consolidated financial statements</FONT></B><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">In addition, the Group also sells minor volumes of excess polyurethane foam, leather
by-products and certain pieces of furniture (coffee tables, lamps and rugs) which, for 2006, 2005
and 2004 totalled 75,188, 75,089 and 87,913, respectively.
</DIV>
<DIV style="margin-top: 10pt">
<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>23.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Cost of sales</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 5%">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="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" 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">Opening inventories</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>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97,518</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">313,207</TD>
    <TD>&nbsp;</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>
</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">109,360</TD>
    <TD>&nbsp;</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>
</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">19,609</TD>
    <TD>&nbsp;</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>
</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">33,055</TD>
    <TD>&nbsp;</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>
</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">(100,358</TD>
    <TD nowrap>)</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>
</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">490,563</TD>
    <TD>&nbsp;</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>
</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 style="margin-top: 10pt">
<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>24.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Other income (expense), net</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">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="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" 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">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,609</TD>
    <TD>&nbsp;</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>
</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">(2,077</TD>
    <TD nowrap>)</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>
</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">1,532</TD>
    <TD>&nbsp;</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>
</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 nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,651</TD>
    <TD nowrap>)</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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrealized exchange
gains (losses)&nbsp;on domestic currency swaps</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,463</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">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: 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>&nbsp;</TD>
    <TD align="right">812</TD>
    <TD>&nbsp;</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>
</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" 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>&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>
</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">503</TD>
    <TD>&nbsp;</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>
</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">2,847</TD>
    <TD>&nbsp;</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>
</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">&nbsp;

<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; margin-left: .25in; width: 7.5in">
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi S.p.A. and Subsidiaries</B>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><FONT style="font-variant: SMALL-CAPS">Notes to the consolidated financial statements</FONT></B><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">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="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" 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 realized gains (losses)&nbsp;on
domestic currency swaps</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">664</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net realized gains (losses)&nbsp;on accounts
receivable and payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,166</TD>
    <TD nowrap>)</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>
</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">2,851</TD>
    <TD>&nbsp;</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>
</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 nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,651</TD>
    <TD nowrap>)</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>
</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="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">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="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" 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">Provisions for contingent liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,828</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(560</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,133</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Incentive from landlord</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,100</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">Revenue for capital grants</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">4,380</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 benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,371</TD>
    <TD>&nbsp;</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>
</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>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</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>&nbsp;</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>&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">Write off of fixed assets</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">(2,770</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,311</TD>
    <TD nowrap>)</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">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,419</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pre-acquisition 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">495</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, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,860</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,475</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(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>
    <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">503</TD>
    <TD>&nbsp;</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>
</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">&nbsp;

<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; margin-left: .25in; width: 7.5in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi S.p.A. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><FONT style="font-variant: SMALL-CAPS">Notes to the consolidated financial statements</FONT></B><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>Provisions for contingent liabilities</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The Company has charged to other income (expense), net in 2006, 2005 and 2004 the amount of
5,828, 560 and 1,133, respectively, for the estimated probable liabilities related to some claims
(including tax claims) and legal actions in which it is involved.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 5%">Below are reported the comments on the 2006 legal and tax claims.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The Company since 2001 was a plaintiff in a suit that alleged the infringement of Natuzzi&#146;s
model copyright by a competitor. In 2006 the Court of Justice in which the suit was filed has
rejected the Company&#146;s requests. The Court of Justice has also condemned the Company to reimburse
the legal costs sustained by the defendant. As of December&nbsp;31,
2006 the Company estimated the probable amount of the legal costs to reimburse to the defendant in 1,500.
This amount has been charged to other income (expense), net in 2006. The Company is currently
evaluating how to proceed through analysis of various different options.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">During 2006 the tax authorities of a foreign country conducted a tax audit on a subsidiary
regarding, in particular, income taxes for the years from 2001 to 2005. As a result of this audit,
the tax authorities issued several tax assessments totaling approximately to 8,000. The Company has
taken action against the tax authorities in order to obtain the cancellation of the requested
amounts. The Company considers many of the issues contested by the tax authorities baseless,
without rational and not adequately documented. The Company intends to vigorously defend its
position. However, the Company believes that the probable liability related to the aforementioned
tax assessments is approximately 1,260. Therefore, the Company has charged this amount of 1,260 to
other income (expense)&nbsp;net in 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">During 2006 the Company has charged to other income (expense)&nbsp;the amount of 1,200 because of a
probable charge related to a misinterpretation of custom duties regulation in a foreign country.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The remaining amount of 1,868 of the provisions for contingent liabilities is related to
several minor claims and legal actions arising in the ordinary course of business.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><B>Incentive from landlord</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">In 2006, the Company has charged to other income (expense), net the one time incentive,
amounting to 1,100, received from the landlord of a store, for the termination of the related lease
contract before the term specified in the lease agreement.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<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; margin-left: .25in; width: 7.5in">
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi S.p.A. and Subsidiaries</B>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><FONT style="font-variant: SMALL-CAPS">Notes to the consolidated financial statements</FONT></B><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><B>Revenue for capital grants</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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, was related to depreciation of property, plant and equipment recorded in the
consolidated statements of operations in the years prior to 2005. Therefore, for this reason the
amount of 4,380 has been classified under the caption &#145;other income (expense), net&#146;.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 operations as revenue
on a systematic basis over the useful life of the related asset.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>Export incentive benefits</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The Company received export incentive benefits in 2006 and 2005 of 3,371 and 2,100,
respectively. These incentives are measured on the basis of the export sales realized during a
certain period.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>Penalties to landlords</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 expected to negotiate with the landlords of several
stores located in England, for the termination of the related operating lease contracts before the
term specified in the lease agreements.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>Impairment loss of goodwill</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The impairment loss for goodwill of 6,119 is related to Natuzzi UK Group. 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>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>Gain on disposal of subsidiary</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 operations in other income (expense), net is 3,419 (see also note
1 and note 27 (o)).
</DIV>

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

<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; margin-left: .25in; width: 7.5in">
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi S.p.A. and Subsidiaries</B>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><FONT style="font-variant: SMALL-CAPS">Notes to the consolidated financial statements</FONT></B><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%"><B>Pre-acquistion loss</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The pre-acquistion loss related to the Koine&#232; S.r.l. business acquisition, amounting to 495,
has been eliminated in the consolidated statements of earnings for the year ended December&nbsp;31, 2005
(see also note 27 (d)).
</DIV>
<DIV style="margin-top: 10pt">
<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>25.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Financial instruments and risk management</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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, 2006 and
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="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</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">90,744</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72,496</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Euro</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,154</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">Canadian dollars</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,703</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,698</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">15,121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,783</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">9,934</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,744</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Norwegian kroner</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,027</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,928</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Swedish kroner</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,887</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,441</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">2,584</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">656</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">924</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">845</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Japanese yen</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">864</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,504</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">164,942</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">140,095</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">&nbsp;

<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; margin-left: .25in; width: 7.5in">
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi S.p.A. and Subsidiaries</B>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><FONT style="font-variant: SMALL-CAPS">Notes to the consolidated financial statements</FONT></B><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Contract</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Unrealized</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Contract</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Unrealized</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">amount</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">gains (losses)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">amount</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" 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">137,608</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">46,075</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">392</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">27,334</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(678</TD>
    <TD nowrap>)</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>
</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">164,942</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,463</TD>
    <TD>&nbsp;</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>
</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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">At December&nbsp;31, 2006 and 2005, the forward exchange contracts had a net unrealized gain of
5,463 and a net unrealized loss of 4,767, respectively. These amounts are recorded in other income
(expense), net in the consolidated statements of operations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 the residual maturity rate.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 5%">Refer to notes 3 (c)&nbsp;for the Group&#146;s accounting policy on forward exchange contracts.
</DIV>
<DIV style="margin-top: 10pt">
<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>26.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Fair value of financial instruments</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The following table summarizes the carrying value and the estimated fair value of the Group&#146;s
financial instruments:
</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="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Carrying</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Fair</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Carrying</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Fair</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" 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">-&nbsp;&nbsp;&nbsp;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">-&nbsp;&nbsp;&nbsp;Long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,751</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,472</TD>
    <TD>&nbsp;</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>
</TR>
<!-- End Table Body --></TABLE>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<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; margin-left: .25in; width: 7.5in">
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi S.p.A. and Subsidiaries</B>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><FONT style="font-variant: SMALL-CAPS">Notes to the consolidated financial statements</FONT></B><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Cash and cash equivalents, receivables, payables and short-term borrowings approximate fair
value because of the short maturity of these instruments.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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: 10pt">
<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>27.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Application of generally accepted accounting principles in the United States of
America</B></DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The calculation of net earnings (loss)&nbsp;and shareholders&#146; equity in conformity with US GAAP is
as follows:
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><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="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" 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;under Italian GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,339</TD>
    <TD>&nbsp;</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>
</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">27</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(b)&nbsp;Government grants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,453</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(c)&nbsp;Revenue recognition</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(615</TD>
    <TD nowrap>)</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(i)&nbsp;Goodwill and intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,828</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(j)&nbsp;Share grants and options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(254</TD>
    <TD nowrap>)</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(k)&nbsp;Translation of foreign financial statements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">762</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(l)&nbsp;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">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 nowrap align="left">&nbsp;</TD>
    <TD align="right">(393</TD>
    <TD nowrap>)</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>
</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 earnings (loss)&nbsp;in conformity with US GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,489</TD>
    <TD>&nbsp;</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 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>    <TD>&nbsp;</TD></TR>
<TR valign="bottom">
    <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>&nbsp;</TD>
    <TD align="right">0.26</TD>
    <TD>&nbsp;</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>
</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">Diluted earnings (loss)&nbsp;per share in conformity
with US GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.26</TD>
    <TD>&nbsp;</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>
</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">&nbsp;

<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; margin-left: .25in; width: 7.5in">
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi S.p.A. and Subsidiaries</B>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><FONT style="font-variant: SMALL-CAPS">Notes to the consolidated financial statements</FONT></B><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="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">

<TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Reconciliation of shareholders&#146; equity:</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</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">Shareholders&#146; equity under Italian GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">478,842</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">473,025</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">(588</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(615</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(b)&nbsp;Government grants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14,036</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(15,489</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(c)&nbsp;Revenue recognition</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,260</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,645</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(i)&nbsp;Goodwill and intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,251</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,898</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(k)&nbsp;Translation of foreign financial statements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,424</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,860</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(l)&nbsp;Penalties to landlords</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">658</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 nowrap align="left">&nbsp;</TD>
    <TD align="right">(208</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">710</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">468,425</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">453,682</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="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The differences which have a material effect on net earnings (loss)&nbsp;and/or shareholders&#146;
equity are disclosed as follows:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(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>

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

<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; margin-left: .25in; width: 7.5in">
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi S.p.A. and Subsidiaries</B>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><FONT style="font-variant: SMALL-CAPS">Notes to the consolidated financial statements</FONT></B><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(b)&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
operations as revenue or other income, as appropriate under Italian GAAP (see note 3 n), on a
systematic basis over the useful life of the asset.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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 operations according to the nature of the asset to which the grant
relates.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The adjustments to net income (loss)&nbsp;represent mainly the annual amortization of the pre
December&nbsp;31, 2000 capital grants based on the estimated 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Amortization of deferred income related to grants recognized as revenues under Italian GAAP of
1,111, 1,239 and 864 for the years ended December&nbsp;31, 2006, 2005 and 2004 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(c)&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 &#147;delivered duty paid&#148;, &#147;delivered duty unpaid&#148;,
&#147;delivered ex quay&#148; and &#147;delivered at customer factory&#148;. Delivery to the customer generally occurs
within one to six weeks from the time of shipment.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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, 2006 and 2005 and related consolidated statements of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;operations&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;for each of
the years in the three-year period ended December&nbsp;31, 2006 are indicated below:
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<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; margin-left: .25in; width: 7.5in">
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi S.p.A. and Subsidiaries</B>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><FONT style="font-variant: SMALL-CAPS">Notes to the consolidated financial statements</FONT></B><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="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Effects</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Effects</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Increase</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Increase</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 0px solid #000000"><B>Consolidated balance sheet</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(Decrease)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(Decrease)</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">(29,721</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(33,106</TD>
    <TD nowrap>)</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">19,824</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,711</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 effect on current assets (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,897</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,395</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"><!-- 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">Accounts payable-trade</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,637</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,750</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">(1,741</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,468</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">Total effect on current liabilities (b)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,378</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,218</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>    <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">(4,519</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,177</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="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 0px solid #000000"><B>Consolidated statement of operations</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" 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">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,385</TD>
    <TD>&nbsp;</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>
</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">498</TD>
    <TD>&nbsp;</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>
</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 nowrap align="left">&nbsp;</TD>
    <TD align="right">(615</TD>
    <TD nowrap>)</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>
</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 nowrap align="left">&nbsp;</TD>
    <TD align="right">(342</TD>
    <TD nowrap>)</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>
</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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(d)&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 operations 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. (see note 1) were included in the Italian GAAP
consolidated statement of operations for the year 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="77%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&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>
</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>
</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">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">460</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">Selling expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(417</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>
</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">Operating loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(132</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>
</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>&nbsp;</TD>
    <TD align="right">132</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">Loss before taxes</DIV></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">Income taxes</DIV></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>
</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>
</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>
<P align="center" style="font-size: 10pt">&nbsp;

<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; margin-left: .25in; width: 7.5in">
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi S.p.A. and Subsidiaries</B>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><FONT style="font-variant: SMALL-CAPS">Notes to the consolidated financial statements</FONT></B><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">Under US GAAP the above pre-acquisition amounts would not be included in the consolidated
statements of operations for the year ended December&nbsp;31, 2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(e)&nbsp;During 2005 (see note 1) the Company acquired 100% of the equity interest of Koin&#232;&#232;
S.r.l., and the purchase price was 2,019. Koin&#232;&#232; S.r.l. 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 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>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">US GAAP</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">IT GAAP</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The acquired order backlog has been recognized in full in the statement of operations of 2005,
as it relates to one time orders that became revenue soon after the acquisition and before December
31, 2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(f)&nbsp;On December&nbsp;23, 2005 (see note 1 and 27 (i)) 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 construction in order to set up in the store the Natuzzi layout selling
system. The Company started trading in the store during June&nbsp;2006.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<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; margin-left: .25in; width: 7.5in">
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi S.p.A. and Subsidiaries</B>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><FONT style="font-variant: SMALL-CAPS">Notes to the consolidated financial statements</FONT></B><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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 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 the &#147;simultaneous equations method&#148;.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">US GAAP</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">IT GAAP</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(g)&nbsp;During June&nbsp;2006 (see note 1 and 27 (i)) the Company acquired a business composed by
four &#147;Divani &#038; Divani by Natuzzi&#148; stores, located in Milan area, and the purchase price was 3,093.
At the date of the acquisition the franchisee agreement between Natuzzi and the original business
had expired under the original terms. 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 in part
to goodwill and in part to intangibles &#147;operating lease agreements&#148; for favorable lease acquired.
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="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">US GAAP</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">IT GAAP</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" 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">1,778</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(822</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fixed assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132</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">Leasehold improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">468</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">468</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">Operating lease agreements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,310</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">1,310</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">(488</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">(488</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Payable to employes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(107</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(107</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" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase price</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,093</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,093</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>
<P align="center" style="font-size: 10pt">&nbsp;

<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; margin-left: .25in; width: 7.5in">
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi S.p.A. and Subsidiaries</B>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><FONT style="font-variant: SMALL-CAPS">Notes to the consolidated financial statements</FONT></B><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The intangible &#147;operating lease agreements&#148; is amortized on a straight-line basis over the
remaining lease term of approximately 8&nbsp;years.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(h)&nbsp;During September&nbsp;2006 (see note 1 and 27 (i)) the Company acquired a business composed
by two &#147;Divani &#038; Divani by Natuzzi&#148; stores, located in Reggio Emilia and Modena, respectively, and
the purchase price was 250. 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 in part to
goodwill and in part to the intangible &#147;franchisee agreements&#148;. 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="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">US GAAP</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">IT GAAP</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" 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">37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(63</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fixed assets and leas. impr.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38</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">Inventory</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">112</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">112</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">Franchisee agreements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">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">100</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">(37</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">(37</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">250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">250</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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The intangible &#147;franchisee agreements&#148; is amortized on a straight-line basis over the
remaining life of the agreement of 3.6&nbsp;years.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(i)&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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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>
<P align="center" style="font-size: 10pt">&nbsp;

<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; margin-left: .25in; width: 7.5in">
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi S.p.A. and Subsidiaries</B>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><FONT style="font-variant: SMALL-CAPS">Notes to the consolidated financial statements</FONT></B><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The changes in the carrying amount of goodwill, intangible 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="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000">Goodwill</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000">Intangibles</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000">Deferred taxes</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">US</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Italian</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">US</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Italian</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">US</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Italian</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 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="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>
</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">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" 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="left">&nbsp;</TD>
    <TD align="right">(2,647</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&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">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Impairment losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,179</TD>
    <TD nowrap>)</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>
    <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>
    <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">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="left">&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">
    <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 nowrap align="left">&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD nowrap></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(403</TD>
    <TD>)</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 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">
    <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="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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <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="left">&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">
    <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="left">&nbsp;</TD>
    <TD align="right">(1,344</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&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="left">&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 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" style="background: #cceeff">
    <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="left">&nbsp;</TD>
    <TD align="right">(2,097</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(23</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>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <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">Acquisition of Milan stores</DIV></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">2,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,310</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">(488</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">Acquisition of other stores</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</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">(37</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="left">&nbsp;</TD>
    <TD align="right">(2,521</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(693</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">241</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(494</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>
    <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">Balance at December&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,760</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,301</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,792</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">(2,381</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(517</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>
    <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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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, 2006, 2005 and 2004 goodwill is impaired to the extent of nil, nil and 9,179,
respectively.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">The impairment loss for goodwill of 9,179 was related to Natuzzi UK Group (see note 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 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 the 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(j)&nbsp;Under Italian GAAP the Company does not record in the consolidated statement of
operations the compensation expense related to share based compensation plans.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<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; margin-left: .25in; width: 7.5in">
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi S.p.A. and Subsidiaries</B>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><FONT style="font-variant: SMALL-CAPS">Notes to the consolidated financial statements</FONT></B><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Effective January&nbsp;1, 2006, the Company adopted FASB Statement No.&nbsp;123 (R)&nbsp;Share-Based Payment
(Statement 123 (R)). This statement replaces FASB Statement No.&nbsp;123, Accounting for Stock-Based
Compensation (Statement 123) and supersedes APB No.&nbsp;25. Statement 123 (R)&nbsp;requires that all
stock-based compensation be recognized as an expense in the financial statements and that such cost
be measured at the fair value of the award. This statement was adopted using the modified
prospective method of application, which requires the Company to recognize compensation cost on a
prospective basis. Therefore, prior years&#146; financial statements have not been restated. Under this
method, the Company recorded stock-based compensation expense for awards granted prior to, but not
yet vested as of January&nbsp;1, 2006, using the fair value amounts determined for pro forma disclosures
under Statement 123.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">During 2006 Natuzzi did not launch any new stock awards plan. Therefore, as of the effective
date of SFAS 123R January&nbsp;1, 2006 and as of December&nbsp;31, 2006 the only stock awards plan in place
is the one described in note 20 and launched by the Company during 2004.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">As of December&nbsp;31, 2006 for US GAAP purpose the Company for its compensation cost related to
its stock awards plan recorded a cost of 254. At December&nbsp;31, 2006, there was 59 of total
unrecognised compensation cost related to non vested share-based compensation arrangements granted
under the 2004 Plan. That cost is expected to be recognised over a weighted average period of two
years.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Prior to fiscal year 2006 under US GAAP, the provisions of Statement of Financial Accounting
Standards No.&nbsp;123 (SFAS No.&nbsp;123), Accounting for Stock Based Compensation, allowed 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 required 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 had 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 was 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">For US GAAP purposes, the Company employees share based awards are considered variable under
APB Opinion No.&nbsp;25. Accordingly, the Company was 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>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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>
<P align="center" style="font-size: 10pt">&nbsp;

<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; margin-left: .25in; width: 7.5in">
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi S.p.A. and Subsidiaries</B>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><FONT style="font-variant: SMALL-CAPS">Notes to the consolidated financial statements</FONT></B><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" 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 (loss)</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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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 was 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="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&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 colspan="3" align="center">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2 years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center">5.3 years</TD>
</TR>
<TR>    <TD>&nbsp;</TD></TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; 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>
    <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">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>
    <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">Risk-free interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">2.43% &#150; 3.79</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD nowrap>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left">2005</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">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">
    <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="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left">2004</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">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">
    <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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">(k)&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 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
(d)).
</DIV>

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

<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; margin-left: .25in; width: 7.5in">
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi S.p.A. and Subsidiaries</B>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><FONT style="font-variant: SMALL-CAPS">Notes to the consolidated financial statements</FONT></B><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Under US GAAP as of December&nbsp;31, 2006 and 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 operations. 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 operations.
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">At December&nbsp;31, 2006 and 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 be determined based on certain indicators which may, or may not result
in the local currency being determined to be the functional currency. Consequently, the Company
recorded in the US GAAP reconciliation for: (a)&nbsp;net earnings (loss)&nbsp;an income of 762 and 1,684 for
2006 and 2005, respectively; (b)&nbsp;shareholders equity a positive adjustment of 5,424 for 2006 and a
negative adjustment of 1,860 for 2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In 2004 the functional currency of foreign subsidiaries was, for Italian GAAP purposes, deemed
to be the parent Company&#146;s functional currency (the Euro) consistent with US GAAP.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(l)&nbsp;Under Italian GAAP in 2005 Natuzzi has charged to other income (expense), net one time
penalties, amounting to 658, that it expected 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 were reversed out of the consolidated statements of operations for the
year ended at December&nbsp;31, 2005, and were recognized at the &#147;cease-use date&#148;, that occurred during
2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(m)&nbsp;During 2006, 2005 and 2004 the Company under Italian GAAP has recognized impairment loss
and write-off of tangible and intangible assets of nil, 2,770 and of 8,063, respectively, as part
of non operating income. Under US GAAP such impairment charge would be included as part of
operating income.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(n)&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, 2006, 2005 and 2004 to 4,236, 2,311 and 3,376, respectively.
</DIV>

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

<P align="center" style="font-size: 10pt">F - 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; margin-left: .25in; width: 7.5in">
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi S.p.A. and Subsidiaries</B>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><FONT style="font-variant: SMALL-CAPS">Notes to the consolidated financial statements</FONT></B><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(o)&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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(p)&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, 2006, 2005 and 2004 warranty cost
amounting to 4,294, 3,168 and 2,995, respectively, would be reclassified from selling expenses to
cost of goods sold under US GAAP.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(q)&nbsp;In 2006 and 2005 the Company under Italian GAAP has recognized certain export incentives
of 2,100 and 3,371, respectively, 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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(r)&nbsp;In 2006 the Company under Italian GAAP has recognized in other income (expense)&nbsp;an
incentive of 1,100 received from the landlord of a store for the termination of the related lease
contract before the term specified in the lease agreement (see note 24). Under US GAAP such revenue
would be included as part of operating income.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">(s)&nbsp;Under Italian GAAP, the Company includes the deferred tax assets related to the
elimination of the intercompany profits on inventory under the line deferred income taxes of the
current part of the balance sheet. As of December&nbsp;31, 2006, 2005 and 2004 the above deferred taxes
amount to 1,051, 475 and 396, respectively. Under US GAAP these deferred taxes would be classified
in the line deferred charges of the current part of the balance sheet.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(t)&nbsp;Under Italian GAAP the Company includes the component income taxes included in the
provisions for contingent tax liabilities under the line other income (expense), net in the
consolidated statement of operations. For the years ended December&nbsp;31, 2006, 2005 and 2004 the
above income taxes amount approximately to 310, 55 and 100. Under US GAAP these amounts would be
classified in the line income taxes of the consolidated statements of operations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">(u)&nbsp;The consolidated statements of cash flows for the years ended December&nbsp;31, 2006, 2005 and
2004 prepared by the Company under Italian GAAP is in conformity with US GAAP (SFAS No 95).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><B>Comprehensive Income</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company has adopted SFAS No.&nbsp;130, Reporting Comprehensive Income, 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>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt">F - 55
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi S.p.A. and Subsidiaries</B>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><FONT style="font-variant: SMALL-CAPS">Notes to the consolidated financial statements</FONT></B><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">Recent U.S. Accounting pronouncements relevant for the Company are as follows:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><B>SFAS No.&nbsp;151:</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In November&nbsp;2004, the FASB issued SFAS No.&nbsp;151, &#147;Inventory Costs&#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)
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
application of this standard did not have an impact on the Company&#146;s consolidated financial
statements.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><B>SFAS No.&nbsp;153:</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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 for exchanges of nonmonetary assets that do not have
commercial substance. This Statement became effective for the Company for nonmonetary asset
exchanges occurring on or after January&nbsp;1, 2006. Application of this statement did not have an
impact on the consolidated financial statements of the Company.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><B>SFAS No.&nbsp;154:</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In May&nbsp;2005, the FASB issued SFAS 154, &#147;Accounting Changes and Error Corrections &#150; a
Replacement of APB Opinion No.&nbsp;20 and FASB Statement No.&nbsp;3&#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. The
application of this standard did not have an impact on the Company&#146;s consolidated financial
statements.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><B>EITF 05-06:</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In June&nbsp;2005 the EITF reached a consensus on EITF 05-6, <I>Determining the amortization period
for leasehold improvements</I>. The issue is how to determine the amortization period for leasehold
improvements acquired subsequent to inception of lease, including leasehold improvements 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 adoption of EITF 05-6 did not
have an impact on the Company&#146;s consolidated financial statements.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt">F - 56
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi S.p.A. and Subsidiaries</B>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><FONT style="font-variant: SMALL-CAPS">Notes to the consolidated financial statements</FONT></B><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><B>EITF 04-13:</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In September&nbsp;2005, the Emerging Issues Task Force (EITF)&nbsp;issued EITF Issues
No.&nbsp;04-13 <I>Accounting for Purchases and Sales of Inventory with the Same Counterparty </I>(EITF
04-13). EITF 04-13 provides guidance as to when purchases and sales of inventory with the same
counterparty should be accounted for as a single exchange transaction. EITF 04-13 also provides
guidance as to when a nonmonetary exchange of inventory should be accounted for at fair value. EITF
04-13 will be applied to new arrangements entered into, and modifications or renewals of existing
arrangements occurring after January&nbsp;1, 2007. The application of EITF 04-13 is not expected to have
a significant impact on the Company&#146;s consolidated financial statements.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><B>SFAS No.&nbsp;157:</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In September&nbsp;2006, the FASB issued FASB Statement No.&nbsp;157, <I>Fair Value Measurement </I>(Statement
157). SFAS 157 defines fair value, established a framework for the measurement of fair value, and
enhances disclosures about fair value measurements. The Statement does not require any new fair
value measures. The Statement is effective for fair value measures already required or permitted by
other standards for fiscal years beginning after November&nbsp;15, 2007. The Company is required to
adopt Statement 157 beginning on January&nbsp;1, 2008. Statement 157 is required to be applied
prospectively, except for certain financial instruments. Any transition adjustment will be
recognized as an adjustment to opening retained earnings in the year of adoption. The Company is
currently evaluating the impact of adopting Statement 157 on its results of operations and
financial position.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>FASB Interpretation No.&nbsp;48:</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In July&nbsp;2006, the FASB issued FASB Interpretation No.&nbsp;48, <I>Accounting for Uncertainty in Income
Taxes</I>, an interpretation of FASB Statement 109 (FIN 48). FIN 48 clarifies the accounting for
uncertainty in income taxes recognized in an enterprise&#146;s financial statements and prescribes a
threshold of more-likely-than-not for recognition of tax benefits of uncertain tax position taken
or expected to be taken in a tax return. FIN 48 also provides related guidance on measurement,
derecognition, classification, interest and penalties, and disclosure. The provisions of FIN 48
will be effective for the Company on January&nbsp;1, 2007, with any cumulative effect of the change in
accounting principle recorded as an adjustment to opening retained earnings. The Company is in the
process of assessing the impact of adopting FIN 48 on its results of operations and financial
position.
</DIV>

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

<P align="center" style="font-size: 10pt">F - 57
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Natuzzi S.p.A. and Subsidiaries</B>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><FONT style="font-variant: SMALL-CAPS">Notes to the consolidated financial statements</FONT></B><BR>
<FONT style="font-variant: SMALL-CAPS">(</FONT>Expressed in thousands of euros except as otherwise indicated)
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>SAB 108</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On September&nbsp;13, 2006, the SEC staff issued SAB 108, &#147;<I>Considering the effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial Statements (SAB 108) </I>&#147;. SAB
108 provides guidance for SEC registrants on how the effects of uncorrected errors originating in
previous years should be considered when quantifying errors in the current year. SAB 108 does not
amend the SEC&#146;s existing guidance for evaluating the materiality of errors
included in SAB 99. In
order to eliminate diversity in practice for quantifying misstatements, and to address the
perceived shortfalls of the rollover and iron curtain methods, SAB 108 requires that registrants
quantify uncorrected misstatements using both methods (herein referred to as the &#147;dual method&#147;),
with adjustment required if either method results in an error that is material. The adoption of SAB
108 did not have an impact on the Company&#146;s consolidated financial statements.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt">F - 58
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">
<DIV align="left">
<A name="172"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>SIGNATURES</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 5%">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="50%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="46%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="46%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="center">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="center">(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;/s/ Ernesto Greco
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Ernesto Greco<BR></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">Chief Executive Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Date: July&nbsp;2, 2007
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">
<DIV align="left">
<A name="173"></A>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Exhibit&nbsp;Index</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="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">1.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">English translation of the by-laws (<I>Statuto</I>) of the Company, as amended and restated as of
January&nbsp;23, 2007.</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>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">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&nbsp;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 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>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">8.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">List of Significant Subsidiaries.</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>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">12.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Executive Officer Certification pursuant to Section&nbsp;302 of the Sarbanes-Oxley Act of
2002.</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>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">12.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Financial Officer Certification pursuant to Section&nbsp;302 of the Sarbanes-Oxley Act of
2002.</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>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">13.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certifications pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of 2002.</TD>
</TR>
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</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>
</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-1.1
<SEQUENCE>2
<FILENAME>c70715exv1w1.htm
<DESCRIPTION>EXHIBIT 1.1
<TEXT>
<HTML>
<HEAD>
<TITLE>Filed by Bowne Pure Compliance</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; margin-left: .25in; width: 7.5in">

<DIV align="right" style="font-size: 10pt; margin-top: 10pt"><B>Exhibit&nbsp;1.1</B>
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>BY LAWS OF THE STOCK COMPANY &#147;NATUZZI S.p.A.</B>
</DIV>
<DIV align="Center" style="font-size: 10pt; margin-top: 10pt"><B>of &#147;NATUZZI S.P.A.&#148;</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Article&nbsp;1. Name</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt"><B>Article&nbsp;2. Head Office</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt"><B>Article&nbsp;3. Corporate purpose</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt">
<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">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the management of the group&#146;s information services, administration and commercial
systems;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the production of software and hardware;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">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;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">training services for managers, executives, employees and factory workers;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the development and creation of industrial prototypes, brand names and patents,
graphics and publicity;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the granting of financing in any form;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">foreign exchange transactions;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the collection, payment and transfer of funds;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">financial coordination; budgetary, strategic and administrative planning;
coordination of purchases, product engineering and development and marketing;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the construction, purchase, management, licensing and leasing of industrial,
commercial and production premises; and
</DIV></TD>
</TR>
</TABLE>
</DIV>
<DIV style="margin-top: 10pt"><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">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the purchase, management, licensing and leasing of machinery, equipment and other
tools.</DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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;

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt"><B>Article&nbsp;4. Duration</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt"><B>Article&nbsp;5. Domicile</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt"><B>Article&nbsp;6. Capital and shares</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>6. </B>The share capital is fifty-four million, eight hundred twenty four thousand and two hundred
and twenty-seven euro (<FONT face="'Times New Roman',times,serif">&#128;</FONT>54,824,227) and is divided into fifty-four million, eight hundred twenty
four thousand and two hundred and twenty-seven euro (<FONT face="'Times New Roman',times,serif">&#128;</FONT>54,824,227) shares, each with a nominal
value of one euro (<FONT face="'Times New Roman',times,serif">&#128;</FONT>1.00).
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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 (<FONT face="'Times New Roman',times,serif">&#128;</FONT>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 (<FONT face="'Times New Roman',times,serif">&#128;</FONT>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="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt"><B>Article&nbsp;7. Participation Certificates (&#147;</B><B><I>Strumenti finanziari</I></B><B>&#148;)</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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
activities are not transferable.
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt"><B>Article&nbsp;8. Bonds</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt"><B>Article&nbsp;9. Segregated Assets</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt"><B>Article&nbsp;10. Loans</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt"><B>Article&nbsp;11. Shares and domicile of shareholders</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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: 10pt"><B>Article&nbsp;12. Withdrawal</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt">
<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">a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">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;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">transformation of the company from a stock corporation into another legal entity;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">transfer of the legal headquarters abroad;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">revocation of the state of winding up;</DIV></TD>
</TR>
</TABLE>
</DIV>
<DIV style="margin-top: 10pt"><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">e)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">modification of the rules determining the value of the shares in case of
withdrawal;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">f)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">modifications of the by-laws related to the voting rights attached to shares or
the rights to attend the meetings;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">g)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">elimination of one or more triggering events for withdrawal pursuant to these
by-laws.</DIV></TD>
</TR>
</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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;

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt"><B>Article&nbsp;13. Sole Shareholder</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt"><B>Article&nbsp;14. Subjection to management and control powers</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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-<I>bis</I>, second paragraph,
of the civil code.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Article&nbsp;15. Powers of the ordinary meeting</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt">
<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><DIV style="text-align: justify">approval of the financial statements;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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><DIV style="text-align: justify">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;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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><DIV style="text-align: justify">determination of the compensation for directors and statutory auditors, without
prejudice to the prescriptions set forth in the following article 39;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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><DIV style="text-align: justify">determination of the responsibilities of directors and statutory auditors.</DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Article&nbsp;16. Powers of the extraordinary meeting</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt">
<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">a.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the amendments to the by-laws, with the exception of article 31.2 of these
by-laws;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the appointment, revocation and determination of the powers of liquidators;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">c.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the issuance of participation certificates pursuant to article 7 of these
by-laws;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">d.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the creation of segregated pools of assets pursuant to article 9 of these
by-laws;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">e.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">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;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">f.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">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;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">g.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">all the other subject matters provided for in the applicable laws and in these
by-laws.</DIV></TD>
</TR>
</TABLE>
</DIV>

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

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">
<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Article&nbsp;17. Call of the meeting</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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 particular needs or
circumstances occur in relation to the structure and the corporate purpose.
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt">
<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">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the place in which the meeting shall be carried out as well as the places in
which it may be connected through telecommunication devices;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the date and time of the meeting;</DIV></TD>
</TR>
</TABLE>
</DIV>
<DIV style="margin-top: 10pt">
<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">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the items on the agenda;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">any other item prescribed by law.</DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt"><B>Article&nbsp;18. Call of second and subsequent meeting</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt"><B>Article&nbsp;19. General meeting</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt"><B>Article&nbsp;20. Ordinary meeting: definition of the quorum</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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;

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt"><B>Article&nbsp;21. Extraordinary meeting: definition of the quorum</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt">
<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">a.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">amendment of the corporate purpose;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">transformation of the company into another legal entity, mergers, de-mergers, in
hypotheses other than the ones contemplated by article 31.3, letter a);</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">c.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">early winding up;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">d.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">extension of the duration;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">e.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">cancellation of the state of winding up;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">f.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">transfer of the registered office abroad;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">g.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">issuance of preference shares.</DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Article&nbsp;22. Rules for the calculation of the quorum</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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>

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

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">
<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Article&nbsp;23. Postponement of the meeting</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt"><B>Article&nbsp;24. Eligibility to attend the meeting and to vote</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>24.1 </B>Shareholders that are going to attend the meeting (in accordance, <I>inter alia</I>, 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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt"><B>Article&nbsp;25. Shareholder representation at a meeting</B>
</DIV>
<DIV align="Center" style="font-size: 10pt; margin-top: 10pt"><B>Proxies</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Alternatively, the company may delegate one of its employees or collaborators.
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt"><B>Article&nbsp;26. Chairman and secretary of the meeting.</B>
</DIV>
<DIV align="Center" style="font-size: 10pt; margin-top: 10pt"><B>Recording of the minutes</B>
</DIV>

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

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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 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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>26.6 </B>The minutes must indicate:
</DIV>
<DIV style="margin-top: 10pt">
<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">a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the date of the meeting;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the identity of the participants and the share capital that they represent (even
through an exhibit/addendum);</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the procedures adopted for the resolutions and results thereof;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">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;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">e)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">upon the specific request of the participants, a brief summary of their
declarations with regards to the items on the agenda.</DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Article&nbsp;27. Meeting procedures</B>
</DIV>
<DIV align="Center" style="font-size: 10pt; margin-top: 10pt"><B>Carrying out of items on the agenda</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt">
<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">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">all people attending the meeting may be identified and their right to take part
in may be verified;
</DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV style="margin-top: 10pt"><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">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">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;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">all the participants are allowed to follow the discussions, intervene in real
time in the discussions and take part simultaneously in the vote;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the person in charge of recording the minutes must be able to understand/hear the
events to be indicated in the report;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the notice of call indicates the places from which an external link has been
prepared in order to allow shareholders to participate.</DIV></TD>
</TR>
</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt"><B>Article&nbsp;28. Method of voting</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt"><B>Article&nbsp;29. Special meetings</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt"><B>Article&nbsp;30. Annulment of the resolutions of the meeting</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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, holding,
even collectively, at least five percent of the share capital having voting rights in the
challenged resolution.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Article&nbsp;31. Duties and powers of the managing body</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt">
<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">a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the resolution approving a merger in the cases indicated in articles 2505,
2505-bis, 2506-ter last paragraph of the civil code;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the setting-up and cancellation of secondary offices;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the indication of directors who are legal representative of the company;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">e)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the transfer of the registered office to another location within the national
territory.</DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt"><B>Article&nbsp;32. Non compete</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt"><B>Article&nbsp;33. Composition of the managing body</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt"><B>Article&nbsp;34. Appointment and replacement of the managing body</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.5in">
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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 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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt"><B>Article&nbsp;35. Chairman of the board of directors</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt"><B>Article&nbsp;36. Delegated members</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt"><B>Article&nbsp;37. Resolutions of the board of directors</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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 directors. In case
of tie, the vote of the Chairman shall prevail.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt"><B>Article&nbsp;38. Company representation</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt"><B>Article&nbsp;39. Directors compensation</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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>

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

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>
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<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Article&nbsp;40. Board of statutory auditors</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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 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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt"><B>Article&nbsp;41. The external auditor</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt">
<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">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">to audit the regular book-keeping and the correct entering of management events
during the financial year, at least once every three months;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">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;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">&#150;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">to deliver an opinion upon the truth and accuracy of the financial statements of
the company and, if any, of the group.</DIV></TD>
</TR>
</TABLE>
</DIV>

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

<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; margin-left: .25in; width: 7.5in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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 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="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt"><B>Article&nbsp;42. Financial statements and dividends</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt"><B>Article&nbsp;43. Termination and winding up</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt">
<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">a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">expiration of the duration provided for in these by-laws;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">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;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">impossibility to function or the continued inactivity of the shareholders&#146;
meeting;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">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;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">e)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the hypothesis contemplated by article 2437-quater of the civil code;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">f)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">any resolution of the extraordinary meeting; expressly providing for the
dissolving of the company; and</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">g)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">any other event provided for by law.</DIV></TD>
</TR>
</TABLE>
</DIV>

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

<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; margin-left: .25in; width: 7.5in">
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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: 10pt">
<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">a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the number of liquidators;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">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;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the parties with the responsibility of legally representing the company;</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the standards according to which the winding up should be carried out; and</DIV></TD>
</TR>
<TR>
    <TD style="font-size: 10pt">&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">e)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">any possible limitation on the powers of the liquidators.</DIV></TD>
</TR>
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Article&nbsp;44. Jurisdiction</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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;

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>
</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-8.1
<SEQUENCE>3
<FILENAME>c70715exv8w1.htm
<DESCRIPTION>EXHIBIT 8.1
<TEXT>
<HTML>
<HEAD>
<TITLE>Filed by Bowne Pure Compliance</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; margin-left: .25in; width: 7.5in">
<DIV align="right" style="font-size: 10pt; margin-top: 10pt"><B>Exhibit&nbsp;8.1</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><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="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="32%">&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: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><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: 10pt" 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><DIV style="margin-left:15px; text-indent:-15px">Italsofa Bahia Ltd</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97.99</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bahia, Brazil</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Minuano Nordeste S.A.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Pojuca, Brazil</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</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>&nbsp;</TD>
    <TD align="right">100.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Shanghai, China</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Softaly Shanghai Ltd</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Shanghai, China</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</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>&nbsp;</TD>
    <TD align="right">100.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Baia Mare, Romania</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natco S.p.A.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99.99</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bari, Italy</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</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>&nbsp;</TD>
    <TD align="right">90.83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Qualiano, Italy</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nacon S.p.A.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bari, Italy</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</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>&nbsp;</TD>
    <TD align="right">100.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bari, Italy</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Americas Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">High Point, NC, USA</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Iberica S.A.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Madrid, Spain</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Switzerland AG</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Kaltbrunn, Switzerland</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Nordic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Copenaghen, Denmark</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Benelux S.A.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Geel, Belgium</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Germany Gmbh</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Dusseldorf, Germany</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Sweden AB</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Stockholm, Sweden</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Japan KK</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Tokyo, Japan</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Services Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">London, UK</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">La Galleria Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">London, UK</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Netherlands Holding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amsterdam, Holland</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5</TD>
    <TD nowrap>)</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>&nbsp;</TD>
    <TD align="right">100.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">London, UK</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7</TD>
    <TD nowrap>)</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>&nbsp;</TD>
    <TD align="right">100.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bari, Italy</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&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">Kingdom of Leather Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">London, UK</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Italholding S.r.l.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bari, Italy</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>
<DIV align="left">
<DIV style="font-size: 10pt; margin-top: 1pt; width: 18%; border-bottom: 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><DIV style="text-align: justify">Manufacture and distribution</DIV></TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Intragroup leather dyeing and finishing</DIV></TD>
</TR>

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

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

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

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Distribution</DIV></TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Investment holding</DIV></TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(6)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Transportation services</DIV></TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(7)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Dormant</DIV></TD>
</TR>

</TABLE>

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

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>
</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.1
<SEQUENCE>4
<FILENAME>c70715exv12w1.htm
<DESCRIPTION>EXHIBIT 12.1
<TEXT>
<HTML>
<HEAD>
<TITLE>Filed by Bowne Pure Compliance</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; margin-left: .25in; width: 7.5in">
<DIV align="right" style="font-size: 10pt; margin-top: 10pt"><B>Exhibit&nbsp;12.1</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>I, Ernesto Greco</B><B><I>, </I></B><B>certify that:</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">1.&nbsp;I have reviewed this annual report on Form 20-F of Natuzzi S.p.A.;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">2.&nbsp;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="justify" style="font-size: 10pt; margin-top: 10pt">3.&nbsp;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="justify" style="font-size: 10pt; margin-top: 10pt">4.&nbsp;The company&#146;s other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules&nbsp;13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the company and have:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 2%">a) 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;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 2%">b) Designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 2%">c) 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
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 2%">d) 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
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">5.&nbsp;The company&#146;s other certifying officer 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 functions);
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 2%">a) 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
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 2%">b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the company&#146;s internal control over financial reporting.
</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="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="67%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Ernesto Greco
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
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">July&nbsp;2, 2007</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;

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>
</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.2
<SEQUENCE>5
<FILENAME>c70715exv12w2.htm
<DESCRIPTION>EXHIBIT 12.2
<TEXT>
<HTML>
<HEAD>
<TITLE>Filed by Bowne Pure Compliance</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; margin-left: .25in; width: 7.5in">

<DIV align="right" style="font-size: 10pt; margin-top: 10pt"><B>Exhibit&nbsp;12.2</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>I, Filippo Simonetti</B><B><I>, </I></B><B>certify that</B>:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">1.&nbsp;I have reviewed this annual report on Form 20-F of Natuzzi S.p.A.;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">2.&nbsp;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="justify" style="font-size: 10pt; margin-top: 10pt">3.&nbsp;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="justify" style="font-size: 10pt; margin-top: 10pt">4.&nbsp;The company&#146;s other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules&nbsp;13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules&nbsp;13a-15(f) and
15d-15(f)) for the company and have:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 2%">a) 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;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 2%">b) Designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 2%">c) 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
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 2%">d) 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
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">5.&nbsp;The company&#146;s other certifying officer 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 functions);
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 2%">a) 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
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 2%">b) 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.
</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="35%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="62%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Filippo Simonetti
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Filippo Simonetti
</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</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">July&nbsp;2, 2007</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;

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>
</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13.1
<SEQUENCE>6
<FILENAME>c70715exv13w1.htm
<DESCRIPTION>EXHIBIT 13.1
<TEXT>
<HTML>
<HEAD>
<TITLE>Filed by Bowne Pure Compliance</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; margin-left: .25in; width: 7.5in">

<DIV align="right" style="font-size: 10pt; margin-top: 10pt"><B>Exhibit&nbsp;13.1</B>
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Certification Pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of 2002</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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="justify" style="font-size: 10pt; margin-top: 10pt">&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, 2006 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="justify" style="font-size: 10pt; margin-top: 10pt">Dated: July&nbsp;2, 2007
</DIV>
<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">                         &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/s/ Ernesto Greco
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">Name:&nbsp;&nbsp;</TD>
    <TD colspan="2" align="left">Ernesto Greco&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">Title:&nbsp;&nbsp;</TD>
    <TD colspan="2" align="left">Chief Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Dated: July&nbsp;2, 2007
</DIV>
<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">                         &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/s/ Filippo Simonetti
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">Name:&nbsp;&nbsp;</TD>
    <TD colspan="2" align="left">Filippo Simonetti&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">Title:&nbsp;&nbsp;</TD>
    <TD colspan="2" align="left">Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">&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;

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>
</BODY>
</HTML>
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
