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<SEC-DOCUMENT>0001362310-08-003471.txt : 20080630
<SEC-HEADER>0001362310-08-003471.hdr.sgml : 20080630
<ACCEPTANCE-DATETIME>20080630120344
ACCESSION NUMBER:		0001362310-08-003471
CONFORMED SUBMISSION TYPE:	20-F
PUBLIC DOCUMENT COUNT:		6
CONFORMED PERIOD OF REPORT:	20071231
FILED AS OF DATE:		20080630
DATE AS OF CHANGE:		20080630

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:		08924628

	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>c73762e20vf.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: 7.20in">

<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<BR>
SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

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

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

<DIV align="center" style="font-size: 18pt; margin-top: 0pt"><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>
<tr style="font-size: 10pt">
<TD>&nbsp;</TD>
</tr>

<TR valign="top" style="font-size:10pt">

    <TD colspan="3" align="center"><B>or</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 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"><B>For the Fiscal Year Ended: December&nbsp;31, 2007</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"><B>For the Transition Period from <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> to <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"><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><BR>
<BR>
For the Transition Period from <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> to </B><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></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">(Translation of Registrant&#146;s name into English)</DIV>


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


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


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

<DIV align="center" style="font-size: 10pt; margin-top: 0pt"><B>Mr.&nbsp;Nicola Dell&#146;Edera, Tel. &#043;39 080 8820.111,<BR>
investor_relations@natuzzi.com, Fax &#043;39 080 8820.513,<BR>
Via Iazzitiello 47, 70029 Santeramo, Italy</B><BR>
(Name, telephone, e-mail and/or facsimile number and address of company contact person)</DIV>

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

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>

<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Name of each class</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" style="border-bottom: 1px solid #000000">Name of each exchange on which registered</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>American Depositary Shares</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>New York Stock Exchange</B></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><B>Ordinary Shares with a par value of <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*</B></TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>




<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><U><B>*</B></u></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B><u>Not for trading, but only in connection with the registration of the American
Depositary Shares</U></B></DIV></TD>
</TR>

</TABLE>


<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>&#149;</B></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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></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, 2007: <B>54,824,227 Ordinary
Shares</B></DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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>&nbsp;&nbsp;&nbsp; No <FONT face="Wingdings">&#254;</FONT></DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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>&nbsp;&nbsp;&nbsp; No <FONT face="Wingdings">&#254;</FONT></DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Note &#151; 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: 4%">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>&nbsp;&nbsp;&nbsp; No <FONT face="Wingdings">&#111;</FONT></DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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">
<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="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top">Large accelerated filer <FONT face="Wingdings">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Accelerated filer <FONT face="Wingdings">&#254;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Non-accelerated filer <FONT face="Wingdings">&#111;</FONT></TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Indicate by check mark which basis of accounting the registrant has used to prepare the
financial statements included in this filing:
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 10pt">U.S. GAAP <FONT face="Wingdings">&#111;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IFRS <FONT face="Wingdings">&#111;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other <FONT face="Wingdings">&#254;</FONT></DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">If &#147;Other&#148; has been checked in response to the previous question, 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>&nbsp;&nbsp;&nbsp;Item&nbsp;18 <FONT face="Wingdings">&#254;</FONT></DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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>&nbsp;&nbsp;&nbsp;No <FONT face="Wingdings">&#254;</FONT></DIV>



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




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

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</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: 7.20in">
<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 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="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>Page</B></TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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 align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <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" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <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" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <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" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <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" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <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" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <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">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <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" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <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" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <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" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <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">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#112">Strategy </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <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">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <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">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <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">21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <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">24</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <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">25</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <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">25</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <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" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <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">26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <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">26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <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" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <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">28</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <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">28</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <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">28</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#126">Critical Accounting Policies</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <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" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <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" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <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>
<!-- End Table Body --></TABLE>
</DIV>


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

<P align="center" style="font-size: 10pt"><!-- Folio -->i<!-- /Folio -->
</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: 7.20in">
<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>TABLE OF CONTENTS</B>
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 0pt"><B>(continued)</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="77%">&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>Page</B></TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 10pt">
<TD>&nbsp;</TD>
</tr>

<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#130">Related Party Transactions</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:30px; 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" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#132">Trend Information and Guidance </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#133">New Accounting Standards under Italian and U.S. GAAP</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <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" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#135">Compensation of Directors and Officers</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#136">Share Ownership</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#137">Statutory Auditors</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#138">External Auditors</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#139">Employees</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <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">51</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#141">Major Shareholders</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#142">Related Party Transactions</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <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">52</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#144">Consolidated Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#145">Export Sales</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#146">Legal and Governmental Proceedings</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#147">Dividends</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <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">54</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#148">Trading Markets and Share Prices</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#149">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" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#150">By-laws</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#151">Certain Contracts</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#152">Exchange Controls</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#153">Taxation</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#154">Documents on Display</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#155">Item&nbsp;11. Quantitative and Qualitative Disclosures About Market Risk</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#156">Item&nbsp;12. Description of Securities Other than Equity Securities</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72</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"><!-- Folio -->ii<!-- /Folio -->
</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: 7.20in">
<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>TABLE OF CONTENTS</B>
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 0pt"><B>(continued)</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="77%">&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>Page</B></TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 10pt">
<TD>&nbsp;</TD>
</tr>

<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#157"><B>PART II</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>73</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#158">Item&nbsp;13. Defaults, Dividend Arrearages and Delinquencies</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#159">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">73</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#160">Item&nbsp;15. Controls and Procedures</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#161">Item&nbsp;16. &#091;Reserved&#093;</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#162">Item&nbsp;16.A Audit committee financial expert</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#163">Item&nbsp;16.B Code of Ethics</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#164">Item&nbsp;16.C Principal Accountant Fees and Services</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#165">Item&nbsp;16.D Exemptions from the Listing Standards for Audit Committees </A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#166">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">77</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#167"><B>PART III</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>78</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#168">Item&nbsp;17. Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#169">Item&nbsp;18. Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#170">Item&nbsp;19. Exhibits</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="c73762exv1w1.htm">Exhibit 1.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="c73762exv8w1.htm">Exhibit 8.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="c73762exv12w1.htm">Exhibit 12.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="c73762exv12w2.htm">Exhibit 12.2</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="c73762exv13w1.htm">Exhibit 13.1</A></FONT></TD></TR>
<!-- End Table Body --></TABLE>
</DIV>

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

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



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

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</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: 7.20in">



<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: 8%">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: 8%">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: 8%">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 June&nbsp;24, 2008 of U.S.$ 1.5591 per euro.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%">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: 8%">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: 8%">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: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->1<!-- /Folio -->
</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: 7.20in">
<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; text-indent: 8%">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; text-indent: 8%">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: 8%">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: 8%">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: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->2<!-- /Folio -->
</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: 7.20in">
<DIV align="center">
<TABLE style="font-size: 7pt" 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: 7pt" 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: 7pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <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>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(millions of dollars,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="18">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">except per</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="18">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Ordinary Share)<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></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>


<!-- 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" style="padding-top: 1px">
    <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; padding-top: 1px">
    <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" style="padding-top: 1px">
    <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">878.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">563.5</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other(2) </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">110.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70.9</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>
</TR>
<TR style="font-size: 1px">
    <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">989.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">634.4</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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">(718.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(460.6</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gross profit </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">271.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">173.8</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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">(271.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(173.9</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">(76.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(49.0</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Operating income (loss) </DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(76.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(49.1</TD>
    <TD nowrap>)</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other income (expense), net(3) (4) (5)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2.6</TD>
    <TD nowrap>)</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Earnings (loss)&nbsp;before taxes and minority
Interests </DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(80.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(51.7</TD>
    <TD nowrap>)</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">(17.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11.4</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Earnings (loss)&nbsp;before minority interests </DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(98.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(63.1</TD>
    <TD nowrap>)</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">0.5</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net earnings (loss) </DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(97.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(62.6</TD>
    <TD nowrap>)</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net earnings (loss)&nbsp;per Ordinary Share </DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.78</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.14</TD>
    <TD nowrap>)</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Dividends declared per share</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 align="left"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">0.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">0.14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><I>Amounts in accordance with U.S. GAAP :</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net earnings (loss) </DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(93.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(60.0</TD>
    <TD nowrap>)</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net earnings (loss)&nbsp;per Ordinary Share (basic and
diluted)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1.70</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">(1.09</TD>
    <TD nowrap>)</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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">54,817,086</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,817,086</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance Sheet Data :</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current assets </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">567.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">364.1</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total assets </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">962.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">617.5</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current liabilities </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">227.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">146.0</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long-term debt </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.1</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Minority interest </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</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">0.6</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Shareholders&#146; equity (6)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">641.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">411.6</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><I>Amounts in accordance with U.S. GAAP :</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Shareholders&#146; equity </DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">636.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><FONT face="'Times New Roman',times,serif">&#128;</FONT></TD>
    <TD align="right">408.5</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>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

<DIV align="left"><DIV style="font-size: 10pt; margin-top: 10pt; width: 18%; border-bottom: 1px solid #000000">&nbsp;</DIV></DIV>




<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</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 June&nbsp;24, 2008 of U.S.$ 1.5591 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; 2007 Compared to 2006&#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>

<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">Share capital as of December&nbsp;31, 2007, 2006, 2005, 2004 and 2003 amounted to <FONT face="'Times New Roman',times,serif">&#128;</FONT>54.8&nbsp;million,
<FONT face="'Times New Roman',times,serif">&#128;</FONT>54.7&nbsp;million, <FONT face="'Times New Roman',times,serif">&#128;</FONT>54.7&nbsp;million, <FONT face="'Times New Roman',times,serif">&#128;</FONT>54.7&nbsp;million and <FONT face="'Times New Roman',times,serif">&#128;</FONT>57.5&nbsp;million, respectively.</DIV></TD>
</TR>

</TABLE>

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

<P align="center" style="font-size: 10pt"><!-- Folio -->3<!-- /Folio -->
</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: 7.20in">




<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: 8%">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: 8%">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; 2007 Compared to 2006&#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: 8%">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>&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>&nbsp;</TD>
    <TD>&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">2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.1411</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2597</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2478</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.3538</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.1842</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2661</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.3197</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.3797</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.4603</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>&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>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">31-Dec-07 </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.4759</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.4344</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">31-Jan-08 </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.4877</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.4574</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">29-Feb-08 </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.5187</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.4495</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">31-Mar-08 </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.5805</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.5195</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">30-Apr-08 </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.6010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.5568</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">31-May-08 </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.5784</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.5370</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

<DIV align="left"><DIV style="font-size: 10pt; margin-top: 10pt; width: 18%; border-bottom: 1px solid #000000">&nbsp;</DIV></DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</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.
Source: Federal Reserve Statistical Release on Foreign Exchange Rates &#151; Historical Rates
for Euro Area</DIV></TD>
</TR>

</TABLE>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The effective Noon Buying Rate on June&nbsp;24, 2008 was 1.5591 (Source: Federal Reserve
Statistical Release on Foreign Exchange Rates &#151; Historical Rates for Euro Area).
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<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: 8%">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: 8%"><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. In 2006 the Group reported net earnings
of
<font style="white-space: nowrap"><FONT face="'Times New Roman',times,serif">&#128;</FONT>12.3&nbsp;million,</font> but that was
achieved primarily by the reduction of the existing orders backlog. In the fiscal year ended
December&nbsp;31, 2007, the Group had net losses of <FONT face="'Times New Roman',times,serif">&#128;</FONT>62.6&nbsp;million. The Group attributes this downward
trend to an increasingly difficult macroeconomic environment affecting the furniture industry,
including:
</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="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">price competition from low-cost manufacturers,</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">recurring unfavorable currency conditions (in particular the devaluation of the U.S.
dollar),</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">higher raw material prices, and</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">more recently, sluggish economic conditions in the Group&#146;s key markets (particularly the
United States, but others as well).</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In 2007, the Group&#146;s negative results also resulted from the poor performance of its retail
network, which was affected by the factors listed above, and the poor performance of the Group&#146;s
South-American manufacturing plants, which struggled with low productivity and other challenges
which management is currently evaluating.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">This negative trend continued in the first quarter of 2008, during which the Group recorded
net losses of <FONT face="'Times New Roman',times,serif">&#128;</FONT>23.4&nbsp;million notwithstanding an increase of its total net sales by 12.4%, as
compared to the same period of previous year. 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: 8%">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. The Group&#146;s top management is currently working on the operational details of a
three-year business plan (which, among other things, is expected to include measures to achieve
the strategic goals of the 2005 restructuring plan), that covers the period 2008-2010 and that is
expected to be ready in the next few weeks. If the 2005 restructuring plan and the 2008-2010 business
plan are 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: 8%"><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 such as those being experienced in some of our
markets in Europe and the United States.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In 2007, the Group derived 35.2% of its leather- and fabric-upholstered furniture net sales
from the Americas, 56.7% from Europe and 8.1% from the rest of the world. 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>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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</DIV>

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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>The Group operates principally in a niche area of the furniture market &#151;</B> The Group is a leader
in the production of leather-upholstered furniture, with 89.3% of net sales of upholstered
furniture in 2007 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: 8%"><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: 8%">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>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%">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: 8%"><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 2007, a
significant portion 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: 8%"><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>
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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>The
price of the Group&#146;s principal raw material is difficult to predict &#151;</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, such as
has been the case in the recent months.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>Introduction of a new integrated management system &#151;</B> The Company has undertaken the adoption
for its operations worldwide of a new Enterprise Resource Planning (&#147;ERP&#148;) system denominated
&#147;SAP&#148;, with the aim of enabling Management to achieve better control over the Company through:
</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="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">improved quality, reliability and timeliness of information;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">improved integration and visibility of information stemming from different management
functions and countries;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">optimization and global management of corporate processes.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The overall estimated investment for the project is about <FONT face="'Times New Roman',times,serif">&#128;</FONT>10.6&nbsp;million. The adoption of a new
ERP system, which will replace the existing accounting and management systems, poses several
challenges relating to, among other things, training of personnel, communication of new rules and
procedures, changes in corporate culture, migration of data, and the potential instability of the
new system. In order to mitigate the impact of such critical issues, the Company decided to
implement the new ERP system on a step-by-step basis, both geographically and in terms of
processes. In relation to each step of the project, the Company has set up a contingency plan in
order to ensure business continuity. However, there can be no assurance that the new ERP system
will be successfully implemented and failure to do so could have a material adverse effect on the
Group&#146;s operations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>The Group&#146;s past results and operations have significantly benefited from government incentive
programs, which may not be available in the future &#151;</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 -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>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%"><B>The Group is dependent on qualified personnel &#151;</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>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>Investors
may face difficulties in protecting their rights as shareholders or holders of ADSs &#151;</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: 8%"><B>Control of the Company &#151; </B>Mr.&nbsp;Pasquale Natuzzi, who founded the Company and is currently Chief
Executive Officer and Chairman of the Board of Directors, beneficially owns 29,358,089 Ordinary
Shares, representing 53.5% of the Ordinary Shares outstanding (58.6% of the Ordinary Shares
outstanding if the Ordinary Shares owned by members of Mr.&nbsp;Natuzzi&#146;s immediate family (the &#147;Natuzzi
Family&#148;) are aggregated). As a result, Mr.&nbsp;Natuzzi controls the Company, including its management
and the selection of its Board of Directors. Since December&nbsp;16, 2003, Mr.&nbsp;Natuzzi has held his
entire beneficial ownership of Natuzzi S.p.A. shares (other than 196 ADSs) through INVEST 2003
S.r.l., an Italian holding company (having its registered office at Via Gobetti 8, Taranto, Italy),
wholly-owned by Mr.&nbsp;Natuzzi.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%">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: 8%">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>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Forward-looking statements involve inherent risks and uncertainties. The Company cautions
readers that a number of important factors could cause actual results to differ materially from
those contained in any forward-looking statement. Such factors include, but are not limited to:
effects on the Group from competition with other furniture producers, material changes in consumer
demand or preferences, significant economic developments in the Group&#146;s primary markets,
significant changes in labor, material and other costs affecting the construction of new plants,
significant changes in the costs of principal raw materials, significant exchange rate movements or
changes in the Group&#146;s legal and regulatory environment, including developments related to the
Italian Government&#146;s investment incentive or similar programs. Natuzzi cautions readers that the
foregoing list of important factors is not exhaustive. When relying on forward-looking statements
to make decisions with respect to the Company, investors and others should carefully consider the
foregoing factors and other uncertainties and events.
</DIV>
<DIV align="left">
<A name="109"></A>
</DIV>

<DIV align="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: 8%">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: 8%">The Group is a world&#146;s leader in the production of leather-upholstered furniture and believes
that it has a leading share of the market for leather-upholstered furniture in the United States
and Europe<I>. </I>The Group is currently focusing its attention on the development of foreign markets,
like East Europe, Middle East, China and India, where it has been achieving for the last months
significant results both in terms of sales and order flow. 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 37%
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 of April&nbsp;30, 2008, 123 <I>Divani &#038;
Divani by Natuzzi </I>stores, of which 3 are outlet stores, and
1 <I>Natuzzi </I>store were located in Italy. Outside of Italy, the Group sells its furniture principally
on a wholesale basis to major retailers and through 179 <I>Natuzz</I>i stores and <I>Divani &#038; Divani by
Natuzzi </I>stores, 3 outlet stores, 5 Italsofa stores (located in
China), 14 concessions in the United Kingdom and
1 concession in the Republic of Ireland. These concessions are store-in-store concept directly
managed by a subsidiary of the Company located in the United Kingdom. As of April&nbsp;30, 2008, there were 419
Natuzzi galleries worldwide (store-in-store concept managed by independent partners).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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 the Chairman of the Board of Directors, Chief Executive
Officer, 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: 8%">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>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Ernesto Greco resigned as CEO of Natuzzi S.p.A effective September&nbsp;30, 2007. He remains a
member of the Board of Directors of the Company. Mr.&nbsp;Pasquale Natuzzi has been Chief Executive
Officer of the Company since October&nbsp;1, 2007. On June&nbsp;4, 2008 the Natuzzi Group announced that Mr.
Aldo Uva, who has joined the Group as a General Manager, has been indicated by the Group&#146;s controlling shareholder as a candidate for Chief Executive Officer. His
appointment would become effective in July&nbsp;2008, after the resolution of the relevant Corporate
bodies.
</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; text-indent: 8%">As of April&nbsp;30, 2008, 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="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="5%">&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"><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"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Italsofa Bahia Ltd</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">97.99</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bahia, Brazil</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">(1)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Minuano Nordeste S.A.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Pojuca, Brazil</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">(1)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Italsofa Shanghai Ltd</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Shanghai, China</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">(1)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Softaly Shanghai Ltd</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Shanghai, China</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">(1)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi China Ltd</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Shanghai, China</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">(1)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Italsofa Romania</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Baia Mare, Romania</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">(1)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natco S.p.A.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">99.99</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bari, Italy</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">(2)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">I.M.P.E. S.p.A.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">90.83</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Qualiano, Italy</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">(3)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nacon S.p.A.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bari, Italy</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">(4)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Lagene S.r.l.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bari, Italy</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">(4)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Americas Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">High Point, NC, USA</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">(4)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Iberica S.A.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Madrid, Spain</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">(4)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Switzerland AG</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">97.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT style="white-space: nowrap">Kaltbrunn, Switzerland</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">(4)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Nordic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Copenaghen, Denmark</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">(4)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Benelux S.A.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Geel, Belgium</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">(4)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Germany Gmbh</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Dusseldorf, Germany</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">(4)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Sweden AB</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Stockholm, Sweden</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">(4)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Japan KK</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Tokyo, Japan</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">(4)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Services Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">London, UK</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">(4)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Italholding S.r.l.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bari, Italy</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">(5)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Netherlands Holding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amsterdam, Holland</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">(5)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi Trade Service S.r.l.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bari, Italy</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">(6)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">La Galleria Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">London, UK</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">(7)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi United Kingdom Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">London, UK</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">(7)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Kingdom of Leather Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">London, UK</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">(7)</TD>
</TR>
<!-- End Table Body --></TABLE>
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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</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"><!-- Folio -->10<!-- /Folio -->
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%">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: 8%"><B>Improving efficiency and reducing operating costs &#151;</B> Recurring unfavorable currency conditions
(in particular the devaluation of the U.S. dollar during the past few years), pricing competition
especially in the U.S. and a downturn in general economic conditions in the Group&#146;s principal
markets have negatively affected order flows for Natuzzi-branded products. As part of the Group&#146;s
ongoing efforts to become more efficient and competitive in light of these unfavorable conditions,
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>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">At the time of its inception, the restructuring plan provided for, among other measures, a
temporary work force reduction (through a legislative tool known in Italy as &#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 of 2005, 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 Group&#146;s Italian factories. In June&nbsp;2006 the
Group obtained from the Italian Government an extension of the temporary work force reduction to
cover the period June&nbsp;2006 &#151; June&nbsp;2008 in order to recover profitability and efficiency,
specifically in the Italian plants. The Group agreed with the Italian Unions that no more than 508
workers would be affected by the temporary work force reduction during the period.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Because of the complexity of the restructuring plan and in light of the persisting generalized
difficult business conditions and the unfavorable devaluation of the U.S. dollar against the
currencies of the countries where the Group manufactures products to be exported in the U.S., which
have negatively affected the order flows, the Group in May&nbsp;2008 announced a further extension of
the temporary work force reduction in Italy (through the <I>Cassa Integrazione Guadagni </I>- CIG,
pursuant to an agreement signed by the Italian Ministry of Labor and the Italian Unions on June&nbsp;17,
2008), involving 1,200 positions for twelve months. For the same reasons, the Group recently
announced a lay-off at its Brazilian plants involving about 570 workers that the Group hopes to
recall in the next few months, should the order flow of the Brazilian plants recover.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Top management of the Group is working on the operational details of a three years business
plan covering the period 2008-2010 which management expects to complete in the next few weeks.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Company has recently promoted the creation of a special task force among important
manufacturers in Southern Italy, within the so-called &#147;upholstery district&#148;, to request the local
and national governments to declare a state of deep crisis for the upholstery industry in Southern
Italy. The Group believes that the declaration of a state of deep crisis could allow the local and
national governments to adopt measures to address the difficult conditions faced by the upholstery
district in Southern Italy. However, there can be no assurance that any such relief measures will
be granted, or that a state of deep crisis will be declared by the Italian authorities.
</DIV>


<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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

</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>Brand Portfolio Strategy: </B>The Group is focusing 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: 8%"><B>i) The Natuzzi brand </B>offers high -end high -quality products, with detailed designs and
customized materials and finishes. The Group aims to position this brand as one that helps
consumers rediscover the home as a welcoming place, a place of happiness and well-being. The Group
also wants to establish an &#147;aspirational&#148; image for this brand through the style and quality of its
products, and the concepts and presentation in its stores. Finally, the Group seeks to broaden this
brand&#146;s market by bringing consumers in various countries around the world product collections
filled with beautiful, Italian-style living room design. Products under this brand are distributed
through the Group&#146;s stores, galleries, and qualified free market (multi brand) retailers that
carry high -end products.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">From the identification of consumer preferences and market trends, to the delivery of the
living room in the consumer&#146;s home, Natuzzi directly controls 90% of the production and
distribution value chain, with the aim of ensuring ultimate quality at competitive prices. All
models are designed in the Group&#146;s Style Center in Italy and are primarily manufactured at the
Group&#146;s Italian factories.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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 avoid the relative rise in production costs at its Italian plants due
to the weak U.S. dollar and thus increase profitability. This move 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: 8%">ii) <B>The Italsofa brand</B>, targets the medium segment of the market. The Group aims to position
this brand as one that offers quality products at competitive prices. 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. Products under this brand are
distributed through wholesale channels.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Competition has increased significantly in recent years within this segment 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: 8%">In response to this increase and the inherent fragmentation in some markets in which the Group
competes, the Group will continue to focus its efforts on improving product quality, design and
reliable customer service.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In 2007, the Group launched an initiative to redefine the image of its Italsofa brand, and
opened a total of 5 Italsofa stores in China, with the objective of positioning Italsofa within a
higher market segment as compared to very-low-cost Chinese competitors.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>Geographical expansion &#151;</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). The Group is a leader in the leather-upholstered furniture
segment in the United States and in Europe and is currently focusing its attention on the
development of foreign markets, like Eastern Europe, the Middle East, China and India, where it has been
achieving for the last months significant results both in terms of sales and order flow.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">As of
April&nbsp;30, 2008, 123 <I>Divani &#038; Divani by Natuzzi
</I>stores, of which 3 are outlet stores, and 1 <I>Natuzzi</I>
store were located in Italy. Outside of Italy, the Group sells its furniture principally on a
wholesale basis to major retailers and through 179 <I>Natuzzi </I>stores and <I>Divani &#038; Divani by Natuzzi</I>
stores, 3 outlet stores, 5 Italsofa stores (located in China) and 14 concessions (store-in-store)
in the UK and 1 in the Republic of Ireland. As of the same date, there were 419 Natuzzi galleries
worldwide.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>Retail program and brand development &#151;</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 s</I>tores and <I>Natuzzi </I>galleries
worldwide. See &#147;&#151;Markets&#148;. As of April&nbsp;30, 2008, there were 306 stores worldwide, including
<I>Natuzzi </I>stores and <I>Divani &#038; Divani by Natuzzi </I>stores, and 5 Italsofa stores in China. The <I>Natuzzi</I>
galleries program was launched in 2002 and the number of galleries worldwide reached 419 as of
April&nbsp;30, 2008. By using the same creative concepts and internal decorations in <I>Natuzzi </I>stores and
<I>Natuzzi </I>galleries, the Group has created a coherent identity for the Natuzzi brand. The Group
plans to open additional <I>Natuzzi </I>stores and <I>Natuzzi </I>galleries in strategic geographical locations
to strengthen its presence in Italy and abroad and plans to make the marketing investments
necessary to increase brand recognition in these markets.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In May&nbsp;2007, the Group organized a Retail Congress in Italy, inviting all its partners
worldwide to visit the Group&#146;s headquarters for product selection and collection renewal, and to
participate in strategy sessions to develop marketing and advertising plans for the upcoming year.
More than 230 stores and 500 persons participated in the Retail Congress. Due to the success of
this event, the Group organized a similar event in 2008.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>Product diversification &#151;</B> The Group believes that it is the Italian manufacturing company in
the designer furniture and home decoration industry most capable of offering consumers carefully
developed, coordinated living rooms at competitive prices 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: 8%">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. Beginning in 2006, the Group has further widened its collection of
accessories by introducing wall units, thus completing its 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>
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<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: 8%">As of March&nbsp;31, 2008, the Group operated 7 production facilities in Italy. Four of the
facilities are engaged in upholstery cutting and sewing and assembly of finished and semi-finished
products, and employed (net of those workers temporarily laid-off), as of the same date, 2,357
workers, 37.7% of whom are not directly involved in production. Four of 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: 8%">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
automatic transit through the different production phases up to the storehouse.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%">Operations at all of the Group&#146;s production facilities are normally conducted Monday through
Friday with two eight-hour shifts per day.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%">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 primarily 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: 8%">One of the Group&#146;s production facilities, which is located near Naples and employed 62 workers
as of April&nbsp;30, 2008, 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 from the Naples facility, which is produced through a patented process that results in a
high-quality material without using any auxiliary blowing agent, is sold under the &#147;Eco-FlexTM&#148;
trademark. A material specially designed for mattresses is also produced and sold under the
&#147;GreenflexTM&#148; trademark.
</DIV>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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. During 2007 the Group also introduced to
the market a new material called Slowflex, primarily for use in the mattress industry. This
material has unique properties, including visco-elasticity, which causes it to achieve a
stable deformation when a load is applied, not immediately, but rather with some delay.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Group currently manufactures the Italsofa Collection outside Italy at plants located in
China, Romania, and Brazil, although the strong appreciation of Brazilian currency against the U.S.
dollar and the low productivity of the Brazilian plants have negatively affected the
competitiveness of the Group&#146;s manufacturing operations in Brazil. 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: 8%">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. 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 length, under Italian law the leases for the Group&#146;s Italian
plants 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 leases 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: 8%">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 15% of Natuzzi&#146;s production during the year ended on December&nbsp;31, 2007).
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: 8%">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: 8%"><B>Raw Materials &#151;</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: 8%">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 13 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>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%">During 2007 the prices paid by the Group for hides continued, for the most part, to increase,
especially in the Brazilian market, although prices in the European market tended to decrease.
However, during the first quarter of 2008, the prices for hides tended to stabilize even though
there are signs of further increases in the market. Factors influencing the leather price increase
included a reduction in red meat consumption and the high demand for hides from the Far East
markets. The Group is always searching for 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: 8%">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 13 suppliers which provide the product at the finished stage.
Microfibers are purchased in Italy, South Korea, Taiwan, and a small quantity from Japan through
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: 8%">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
Group&#146;s 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 the best product at the best price.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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 2007 and the beginning of 2008, fabric
prices were stable due to long-term relationships with suppliers and the large volumes purchased by
the Group. During the same period microfiber prices 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. Despite the recent stability of fabric prices, and the
recent decline in the prices of microfibers, the Group expects a further increase in the overall
cost of raw materials and oil in the coming months.
</DIV>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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, which has significantly increased over the last
months. 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: 8%">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: 8%"><B>&#147;Supply-chain Management&#148;</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>Procurement Policies and Operations Integration. </B>In order to improve customer service and
reduce industrial costs, the Company in 2006 established a policy for handling suppliers and supply
logistics. All of the sub-departments working in the Logistics Department have been reorganized to
maximize efficiency throughout the supply-chain. Logistics Department 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 Department is
responsible for 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 Department, with the support of the Information Systems department, has created a new
portal that allows the Logistics 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: 8%"><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: 8%">1) the development of a logistic-production model to customize the level of service to
customers;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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 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 at Italian plants 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: 8%">3) the planning and partial completion of the industrial reorganization of the local
production center.
</DIV>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Group plans procurements of raw materials and components:
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">i) &#147;on demand&#148; for those materials and components (which the Group identifies by code
numbers) that require a shorter lead time for order completion than the standard
production planning cycle for customers&#146; orders.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">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; eliminates the risk that these materials and components would
become obsolete during the production process.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">ii) &#147;upon forecast&#148; for all those materials and components requiring a long lead time
for order completion.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">Since April&nbsp;2006, the Group has been utilizing a new forecast methodology, developed in
cooperation with a consulting firm. This methodology 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. This new
methodology is currently being developed together with the Group&#146;s IT department, in order
to create a new intranet portal, called Worldwide Demand Planning tool. This tool is being
tested since November&nbsp;2007 for sales coming from the North American market, under the
supervision of a forecast manager. Once completed, it will further support corporate
logistics and operations managers to better forecast the future demand for the Group&#146;s
products so as to improve the lead time from material supply to sales delivery.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Special production programs, those requiring lead times 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: 8%">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: 8%">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: 8%">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: 8%"><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: 8%">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 the Group&#146;s headquarters, has been almost completely transferred to
Natuzzi Americas in High Point, North Carolina.
</DIV>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">As far as the load composition by truck is concerned, the Group has commissioned planning a
software development project to minimize total transport costs by taking into account volume and
route optimization for customers&#146; orders in defined areas. A prototype of this software was
delivered to the Group in November&nbsp;2007. The Group expects conclusive testing of this prototype to
be completed in September&nbsp;2008. This software is being developed by the Group jointly with
Polytechnic of Bari and the University of Lecce.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><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 2007, the Group shipped 11,397 containers (40&#146;hc) to overseas countries
and approximately 8,380 full load mega-trailer trucks to European destinations. To improve service
levels, a method of Supplier Vendor Rating has been applied since November&nbsp;2007 to measure
performance of carriers and distributors providing direct service. This rating system has
first been extended to transport &#147;by land&#148;, but the Group expects it to also cover the transport
&#147;by sea&#148; no later than July&nbsp;2008.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In order to guarantee the best price and quality of transportation services, the Group deals
directly with shipping companies and logistics operators without working through intermediaries.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%">The Group is committed to the conception, prototyping, production and commercialization of a
wide range of upholstered furniture, both in leather and in fabric, and furnishings &#038; accessories.
Natuzzi is the largest Italian company in the sector and a world leader in the segment of
upholstered furniture.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The wide range of offerings enables the Company to reach specific market segments, constantly
monitor consumers needs and offer products in line with market trends and final customers&#146;
preferences.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">New models are the result of a constant information flow that stems from the market (whose
preferences are analyzed, filtered and translated by the product managers into a brief, including
specific styles, functions and price points), and is communicated to the group of designers who,
through constant work with the team from the prototypes department, sketches the creation of new
products in accordance with the guidelines received.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->19<!-- /Folio -->
</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: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The product development process is also based on specific needs of particular clients (mass
dealers) who are capable of generating a critical mass of sales that enable the product to achieve
the right market penetration.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The diversity of final customers&#146; tastes and preferences and the natural inclination of
Natuzzi to offer new solutions promote the development of products that are increasingly
personalized. For instance, the Company in 2007 developed 108 new models that have generated more
than 1700 different versions, a new collection of accent fabrics (12 new items), new solutions for
upholstery leather (&#147;<I>pelle spessorata</I>&#148;), and that led to the launch of the Fashion and Fleur
collection of special, design-oriented models for the high-end segment of the market.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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). As of December&nbsp;31, 2007, the Group
offered its products in 374 different models.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Regarding the supply of furnishing &#038; accessories, in 2007, 400 new products were introduced as
a result of a significant push on development, and for the first time, the introduction in
collections of tables and dining chairs.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Group&#146;s wide range of products includes a comprehensive collection of sofas and armchairs
with particular styles, coverings and functions, with more than two million combinations. The
Group&#146;s offering is divided into two separate collections: the Natuzzi Collection, which has two
separate lines of products, one targeting the Americas and one targeting the Group&#146;s markets in the
rest of the world, and the Italsofa Collection, which is also divided into two lines of products,
those targeting the Americas and the Asia Pacific region, and those targeting Europe, the Middle
East and Africa.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Natuzzi
Collection, positioned in the medium-high market, focuses on making Italian
quality and style accessible through coordinated and innovative living rooms. This collection
stands out for high quality in the choice of materials and finishes, as well as the creativity and
details of its designs. As of May&nbsp;31, 2008, this line of products offered 166 models, 23 articles
in fabrics in 68 colors, 14 leather articles in 105 colors, and 3 articles in dreamfibre in 38
colors. The best-selling models in 2007 were <I>Klaus</I>,
<I>Plaza</I>, <I>Tahira </I>and<I> Domino </I>models (generating
respectively <FONT face="'Times New Roman',times,serif">&#128;</FONT>15.6, <FONT face="'Times New Roman',times,serif">&#128;</FONT>12.4, <FONT face="'Times New Roman',times,serif">&#128;</FONT>9.1
and <FONT face="'Times New Roman',times,serif">&#128;</FONT>8.2&nbsp;million euros in sales). The collection also includes a
selection of additional furniture (wall units, tables, lamps, carpets), accessories (pots and
candles), furniture for the dining room (tables, chairs, lamps) to offer complete furniture with
the aim enabling the Group to become a real &#147;Lifestyle Company.&#148;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">As
of May 31, 2008, the Natuzzi Collection&#146;s line oriented to the
Americas was represented by 99 models, 10
articles in dreamfiber and fabrics in 49 colors. The <I>Aspen </I>model is the best
selling model with sales of
about <FONT face="'Times New Roman',times,serif">&#128;</FONT>7&nbsp;million.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Italsofa
Collection, which is characterized by a young and sparkling style, offers 109
models for the medium- to low-end market. The Italsofa Collection offers 13 models in the Americas
and the Asia Pacific region, and 14 models in Europe, the Middle East and Africa. The most
successful model is
the <I>Otranto</I>, with <FONT face="'Times New Roman',times,serif">&#128;</FONT>8.8&nbsp;million
in sales during 2007.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Group&#146;s
overall sales are also partly the result of unbranded production, developed on the
basis of specific provision agreements for important mass-dealer clients like IKEA and/or
Macy&#146;s.
</DIV>


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

<P align="center" style="font-size: 10pt"><!-- Folio -->20<!-- /Folio -->
</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: 7.20in">
<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: 8%">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>Natuzzi </I>stores and <I>Divani &#038; Divani by Natuzzi</I>
stores. Starting in the second half of 2007, the Group began to sell its promotional line also
through 5 Italsofa stores in China.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In 2007, the Group derived 35.2% of its leather- and fabric-upholstered furniture net sales
from the United States and the Americas, 56.7% from Europe and 8.1% 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: 8%">The following tables show the leather- and fabric-upholstered furniture net sales and number
of seats sold of the Group broken down by geographic market for each of the years indicated<B>:</B>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="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 nowrap align="center" colspan="24" style="border-bottom: 1px solid #000000"><B>Leather- and Fabric-Upholstered Furniture Net Sales (millions of euro)</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>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">U.S. and the Americas<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">198.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">35.2</TD>
    <TD nowrap>%</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Europe</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">319.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">56.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">366.6</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Rest of the World</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">8.1</TD>
    <TD nowrap>%</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>
</TR>
<TR style="font-size: 1px">
    <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" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">563.5</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">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>
</TR>
<TR style="font-size: 1px">
    <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>




<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</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 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 nowrap align="center" colspan="24" style="border-bottom: 1px solid #000000"><B>Leather- and Fabric-Upholstered Furniture Net Sales (in seats) (2)</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>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">U.S. and the Americas<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,176,585</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">45.4</TD>
    <TD nowrap>%</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Europe</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,225,882</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">47.3</TD>
    <TD nowrap>%</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Rest of the World</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">189,926</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">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>
</TR>
<TR style="font-size: 1px">
    <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" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,592,393</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">3,016,702</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>
</TR>
<TR style="font-size: 1px">
    <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>




<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</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 align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>1 United States and the Americas. </B>In 2007, net sales of leather- and fabric-upholstered
furniture in the United States and the Americas decreased 19.1% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>198.6&nbsp;million, compared to
<FONT face="'Times New Roman',times,serif">&#128;</FONT>245.4&nbsp;million in 2006, and the number of seats sold decreased 13.8% to 1,176,585 compared to
1,364,873 in 2006.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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

<!-- PAGEBREAK -->
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<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: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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 South 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, 2008, the High Point operation had 70 employees.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Natuzzi Americas has 44 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: 8%">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>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>2 Europe</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>2.1 Europe (excluding Italy). </B>During 2007, the Group continued to consolidate its position in
Europe (excluding Italy) by investing in stores and galleries. Nevertheless, net sales of leather
and fabric-upholstered furniture in Europe decreased by 11.9% from <FONT face="'Times New Roman',times,serif">&#128;</FONT>284.6&nbsp;million in 2006 to <FONT face="'Times New Roman',times,serif">&#128;</FONT>250.7
million in 2007, with the number of seats sold decreasing to 1,000,431, 13.9% below the number of
seats sold in 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Group also promotes its products in Europe through six subsidiaries in Belgium, Denmark,
Germany, the 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,
2007, the Group had 8 sales agents and sub-agents in Europe. These sales agents are paid on a
commission basis.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Outside Italy, the Company uses franchised or directly owned stores to penetrate markets and
implement brand strategies. As of April&nbsp;30, 2008, 84 franchised single-brand stores were operating
in Europe (outside Italy): 23 under the <I>Divani &#038; Divani by Natuzzi </I>name (8 in Greece, 15 in
Portugal) and the remainder under the <I>Natuzzi </I>name (25 in France, 2 in Germany, 2 in Malta, 2 in
Cyprus, 1 in Iceland, 2 in Latvia, 1 in Lithuania, 1 in Finland, 2 in Slovenia, 2 in Croatia, 1 in
Bosnia-Herzegovina, 1 in Hungary, 1 in Belgium, 5 in Russia, 1 in Serbia-Montenegro, 3 in the Czech
Republic, 2 in Poland, 5 in Holland, 1 in Turkey and 1 in Romania). As of April&nbsp;30, 2008, there
were 42 directly owned stores in Europe (outside Italy): 6 in Switzerland, 28 in Spain (of which 1
is an outlet), 4 in the United Kingdom, 3 in Denmark and 1 in Sweden, all under the <I>Natuzzi </I>name.
Apart from the 4 <I>Natuzzi </I>stores located in the United Kingdom, the Group operates 14 concessions in
the United Kingdom and 1 in the Republic of Ireland.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">As of April&nbsp;30, 2008, there were 260 <I>Natuzzi </I>galleries in Europe (outside Italy), 22 of which
are located in Eastern Europe: 3 in Slovenia, 4 in Russia, 1 in Slovakia, 7 in Poland, 2 in the
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: 8%"><B>2.2 Italy</B>. In 2007, net sales of leather- and fabric-upholstered furniture in Italy decreased
by 16.1% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>68.7&nbsp;million, compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>81.9&nbsp;million in 2006, and seats sold also decreased by
21.8% to 225,452, as compared to 288,394 in 2006.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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

<!-- PAGEBREAK -->
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<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: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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,
2008, 123 <I>Divani &#038; Divani by Natuzzi </I>stores and 1 <I>Natuzzi </I>store were located in Italy, 25 of which
were directly owned.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>3 Rest of the World</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>3.1 Asia-Pacific &#038; Africa</B>. In 2007, overall net sales in the Asia-Pacific market decreased
by 5.8% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>45.5&nbsp;million, compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>48.3&nbsp;million in 2006. In 2007, net sales in Australia were
<FONT face="'Times New Roman',times,serif">&#128;</FONT>15.4&nbsp;million (down 16.0% from <FONT face="'Times New Roman',times,serif">&#128;</FONT>18.3&nbsp;million in 2006), and net sales in Japan were <FONT face="'Times New Roman',times,serif">&#128;</FONT>4.9&nbsp;million
(down 2.6% compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>5.0&nbsp;million in 2006).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Group manages its Asia-Pacific sales through its operating subsidiary in Japan, 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: 8%">As of April&nbsp;30, 2008, 43 franchised single-brand Natuzzi stores were operating in the Asia
Pacific market: 19 in Australia, 16 in China, 1 in Singapore, 3 in New Zealand, 1 in the
Philippines and 3 in Taiwan. The 19 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: 8%">In 2007, the Group launched an initiative to redefine the image of its Italsofa brand, and
opened a total of 5 single brand <I>Italsofa </I>stores in China with the objective of positioning
Italsofa within a higher market segment as compared to very-low-cost Chinese competitors.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>3.2 Middle East</B>. The Group&#146;s recent investment in store openings in the Middle East began
yielding results in 2007. The Group has seen a significant increase in demand, especially in
Kuwait where net sales increased from <FONT face="'Times New Roman',times,serif">&#128;</FONT>215 thousand in 2006 to <FONT face="'Times New Roman',times,serif">&#128;</FONT>645 thousand in 2007. As of April
30, 2008, the Group had a total of 8 stores in the Middle East: 1 in Lebanon, 3 in Israel, 2 in the
United Arab Emirates, 1 in Saudi Arabia and 1 in Kuwait. It also had a total of 8 galleries: 1 in
Bahrain, 2 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: 8%"><B>Customer Credit Management &#151;</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 85% of its sales and obtains credit insurance for almost 77% of this
amount; 11% of the Group&#146;s sales are commonly made to customers on a &#147;cash against documents&#148; and
&#147;cash on delivery&#148; basis; and lastly, 4% of the Group&#146;s sales are supported by a &#147;letter of credit&#148;
or &#147;payment in advance&#148;.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><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: 8%">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>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->23<!-- /Folio -->
</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: 7.20in">
<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: 8%">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 interests from 1994 to 2003 was derived from Group companies 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: 8%">In December&nbsp;1996, the Company and the &#147;Contract Planning Service&#148; of the Italian Ministry of
Industrial Activities signed a &#147;Program Agreement&#148; with respect to the &#147;<I>Natuzzi 2000 project</I>&#148;. In
connection with this project, the 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 made
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 from 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 Industrial Activities the revision of the original &#147;Program
Agreement&#148; as follows: reduction of the investment to be made 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: 8%">On April&nbsp;27, 2004, the Technical-Scientific Committee of the Italian Education, University and
Research Ministry approved a four-year research project presented by the Company in February&nbsp;2002
related to improvement and development in leather manufacturing and processing. The Committee has
approved a maximum capital grant of <FONT face="'Times New Roman',times,serif">&#128;</FONT>2.4&nbsp;million and a 10-year subsidized loan for a maximum amount
of <FONT face="'Times New Roman',times,serif">&#128;</FONT>3.7&nbsp;million at a subsidized interest rate of 0.5% to be used in connection with industrial
research expenses and prototype developments (as published on August&nbsp;20, 2004, in the Italian
Official Gazette (<I>Gazzetta Ufficiale della Repubblica Italiana</I>) n&#176; 195). Industrial research and
prototype developments, planned as part of the project, are already underway thanks to the
collaborative efforts of specialized in-house personnel and university researchers from the
University of Lecce and the Polytechnic University of Bari. 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. Also in 2007, 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.
In July&nbsp;2008, the Company plans to provide the Committee with all the relevant remaining
documentation pertaining to the expenses incurred up to August&nbsp;2007 (date of completion of the
project).
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->24<!-- /Folio -->
</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: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In 2006, Natuzzi entered into an agreement with the Italian Ministry of Industrial Activities
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. On March&nbsp;20, 2006, the Italian Industrial Ministry issued
a concession decree providing for a provisional grant to the Company 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. The Group has already provided to the
Ministry of Industrial Activities the complete documentation of all the expenses incurred up to
November&nbsp;2007 (date of completion of the program).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%">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 euros. 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: 8%">The Group&#146;s products are sold under the &#147;Natuzzi&#148; and &#147;Italsofa&#148; trademarks. These trademarks
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>
<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: 8%">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>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->25<!-- /Folio -->
</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: 7.20in">
<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: 8%">The Group operates a leather dyeing and finishing factory located in <I>Pozzuolo del Friuli</I>, in
the province of Udine and a factory for polyurethane foam production in <I>Qualiano</I>, in the province
of Naples. The activities of these facilities are subject to both Italian and European laws and
regulations. The Group operates these and its 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: 8%">The Group maintains insurance against a number of risks. The Group insures against loss or
damage to its facilities, loss or damage to its products while in transit to customers, failure to
recover receivables, certain potential environmental liabilities and product liability claims.
While the Group&#146;s insurance does not cover 100% of these risks, management believes that the
Group&#146;s present level of insurance is adequate in light of past experience.
</DIV>
<DIV align="left">
<A name="122"></A>
</DIV>

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


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The location, approximate size and function of the principal physical properties used by the
Group as of April&nbsp;30, 2008 are set forth below:
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->26<!-- /Folio -->
</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: 7.20in">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="11%">&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="66%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Size</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(approximate</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">square</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&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="2" style="border-bottom: 1px solid #000000">meters)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Function</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="right">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD align="left" valign="top">Santeramo in Colle (BA) &#151; Italy</TD>
    <TD>&nbsp;</TD>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="right">29,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:0px; text-indent:-0px">Headquarters, prototyping,
manufacturing of wooden frames,
showroom (Owned)</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD align="left" valign="top"><FONT style="white-space: nowrap">Santeramo in Colle, Iesce (BA) &#151; Italy</FONT></TD>
    <TD>&nbsp;</TD>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="right">27,500</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:0px; text-indent:-0px">Sewing and product assembly (Owned)</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD align="left" valign="top">Matera La Martella &#151; Italy</TD>
    <TD>&nbsp;</TD>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="right">38,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:0px; text-indent:-0px">General warehouse of sofas and
accessory furnishing (Owned)</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD align="left" valign="top">Matera Iesce &#151; Italy</TD>
    <TD>&nbsp;</TD>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="right">12,500</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:0px; text-indent:-0px">Leather cutting, sewing and product
assembly (Owned)</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD align="left" valign="top">Altamura (BA) via dell&#146;Avena &#151; Italy</TD>
    <TD>&nbsp;</TD>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="right">5,800</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:0px; text-indent:-0px">Warehouse (Owned)</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD align="left" valign="top">Altamura (BA) via Graviscella &#151; Italy</TD>
    <TD>&nbsp;</TD>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="right">8,500</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:0px; text-indent:-0px">Warehouse (Owned)</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD align="left" valign="top">Altamura (BA) c.da Fornello &#151; Italy</TD>
    <TD>&nbsp;</TD>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="right">6,500</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:0px; text-indent:-0px">Warehouse (Owned)</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD align="left" valign="top">Altamura (BA) NDS &#151; Italy</TD>
    <TD>&nbsp;</TD>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="right">3,700</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:0px; text-indent:-0px">Accessory Furnishings warehouse
(Owned)</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD align="left" valign="top">Ginosa (TA) &#151; Italy</TD>
    <TD>&nbsp;</TD>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="right">14,500</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:0px; text-indent:-0px">Sewing and product assembly (Owned)</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD align="left" valign="top">Laterza (TA) &#151; Italy</TD>
    <TD>&nbsp;</TD>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="right">10,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:0px; text-indent:-0px">Leather cutting (Owned)</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD align="left" valign="top">Laterza (TA) &#151; Italy</TD>
    <TD>&nbsp;</TD>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="right">13,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:0px; text-indent:-0px">Fabric and lining cutting, leather
warehouse (Owned)</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD align="left" valign="top">Laterza (TA) &#151; Italy</TD>
    <TD>&nbsp;</TD>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="right">20,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:0px; text-indent:-0px">Accessory Furnishing Packaging and
Warehouse (Owned)</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD align="left" valign="top">Qualiano (NA) &#151; Italy</TD>
    <TD>&nbsp;</TD>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="right">12,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:0px; text-indent:-0px">Polyurethane foam production (Owned)</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD align="left" valign="top">Pozzuolo del Friuli (UD) &#151; Italy</TD>
    <TD>&nbsp;</TD>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="right">20,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:0px; text-indent:-0px">Leather dyeing and finishing (Owned)</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD align="left" valign="top">Montebello (VI) &#151; Italy</TD>
    <TD>&nbsp;</TD>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="right">5,500</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:0px; text-indent:-0px">Leather warehouse (Leased)</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD align="left" valign="top"><FONT style="white-space: nowrap">High Point &#151; North Carolina &#151; U.S.A.</FONT></TD>
    <TD>&nbsp;</TD>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="right">10,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:0px; text-indent:-0px">Office and showroom for Natuzzi
Americas (Owned)</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD align="left" valign="top">Baia Mare &#151; Romania</TD>
    <TD>&nbsp;</TD>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="right">75,600</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:0px; text-indent:-0px">Leather cutting, sewing and product
assembly, manufacturing of wooden
frames, polyurethane foam shaping,
fiberfill production and wood and
wooden product manufacturing (Owned)</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD align="left" valign="top">Shanghai &#151; China</TD>
    <TD>&nbsp;</TD>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="right">43,500</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:0px; text-indent:-0px">Leather cutting, sewing and product
assembly, manufacturing of wooden
frames, polyurethane foam shaping,
fiberfill production (Owned)</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD align="left" valign="top">Shanghai (Fengpu) &#151; China</TD>
    <TD>&nbsp;</TD>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="right">15,300</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:0px; text-indent:-0px">Leather and fabric cutting, leather
and fabric warehouse (Leased)</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD align="left" valign="top">Salvador de Bahia (Bahia) &#151; Brazil</TD>
    <TD>&nbsp;</TD>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="right">28,700</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:0px; text-indent:-0px">Leather cutting, sewing and product
assembly, manufacturing of wooden
frames, polyurethane foam shaping,
fiberfill production (Owned)</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD align="left" valign="top">Pojuca (Bahia) &#151; Brazil</TD>
    <TD>&nbsp;</TD>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="right">30,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:0px; text-indent:-0px">Leather cutting, sewing and product
assembly, manufacturing of wooden
frames, wooden feet, polyurethane
foam shaping, fiberfill production
(Owned)</DIV></TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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 2007, the Group continued
to utilize subcontractors to meet demand.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->27<!-- /Folio -->
</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: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">As of April&nbsp;30, 2008, the Group also owned 68 stores (25 of which are located in Italy) and 3
outlet stores, 2 of which are located in Italy and 1 in Spain.
</DIV>
<DIV align="left">
<A name="123"></A>
</DIV>

<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: 8%">The following table sets forth the Group&#146;s capital expenditures for each year in the
three-year period ended December&nbsp;31, 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="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>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" 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>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Land and plants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.3</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">3.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13.2</TD>
    <TD>&nbsp;</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>
</TR>
<TR style="font-size: 1px">
    <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">26.6</TD>
    <TD>&nbsp;</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>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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 2007, capital expenditures were primarily made to open new <I>Natuzzi</I>
stores and <I>Natuzzi </I>galleries, 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 2008 will be approximately <FONT face="'Times New Roman',times,serif">&#128;</FONT>19&nbsp;million, to be financed with cash flow from
operations. The Group plans to direct such capital expenditures mainly to improve the existing
plants and to open new <I>Natuzzi </I>stores and <I>Natuzzi </I>galleries.
</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: 8%">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: 8%">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: 8%"><B>Use of Estimates &#151;</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, judgment or
assumption were used.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><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: 8%"><B>Allowances for Returns and Discounts &#151; </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: 8%"><B>Allowance for Doubtful Accounts &#151; </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. 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: 8%"><B>Revenue Recognition &#151; </B> Under Italian GAAP, the Group recognizes sales revenue, and accrues
associated costs, 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>
<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: 8%"><B>Summary &#151; </B>In 2007, the Group had net losses of <FONT face="'Times New Roman',times,serif">&#128;</FONT>62.6&nbsp;million, as compared to net income of
<FONT face="'Times New Roman',times,serif">&#128;</FONT>12.3&nbsp;million in 2006, and reported a 13.7% decrease in net sales, from <FONT face="'Times New Roman',times,serif">&#128;</FONT>735.4&nbsp;million in 2006 to
<FONT face="'Times New Roman',times,serif">&#128;</FONT>634.4&nbsp;million
in 2007. In 2007 the Group sold 2,592,393 seats, down 14.1% as compared to 2006. In
2007, net sales of the Natuzzi branded products, which targets the high-end of the market,
decreased by 19.2% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>336.1&nbsp;million from <FONT face="'Times New Roman',times,serif">&#128;</FONT>416.2&nbsp;million in 2006, with the number of
Natuzzi-branded seat sold decreasing by 22.3% over 2006. Net sales of the medium/low-priced
Italsofa furniture decreased by 6.8% in 2007, to <FONT face="'Times New Roman',times,serif">&#128;</FONT>227.4&nbsp;million from <FONT face="'Times New Roman',times,serif">&#128;</FONT>244.0&nbsp;million in 2006, with the
number of Italsofa seats sold decreasing by 5.9%.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Group&#146;s negative performance in 2007 was due primarily to the increasingly difficult
macroeconomic environment, and the Euro&#146;s appreciation against the U.S. dollar. In addition, in
December&nbsp;2007 the Natuzzi-branded production and deliveries were negatively impacted by exceptional
bad weather conditions at the Italian manufacturing sites as well as by a nation-wide strike of
Italian transportation workers. As a result of the above, the Group reported a double-digit net
sales decrease year over year, in particular in the medium-high segment manufactured in Italy.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Due to lower volume sales, unfavourable currency conversion of U.S. dollar revenues, higher
raw material prices and the poor performance of the Group&#146;s retail network and South-American
manufacturing plants, the Group reported disappointing operating losses in 2007, while still
maintaining a sound net financial position.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Despite these challenges, in 2007 the Group continued to invest in the repositioning of the
Natuzzi brand and the reorganization of its sales activities, as well as in the ongoing
restructuring of its operations, with the aim of regaining its competitiveness and ensuring its
long-term profitability.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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>2007</B></TD>
    <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>


<!-- 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" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72.6</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27.4</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27.4</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">General and administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.7</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7.7</TD>
    <TD nowrap>)</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other income (expense), net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.4</TD>
    <TD nowrap>)</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.8</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net earnings (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9.9</TD>
    <TD nowrap>)</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>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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 sold, which are broken down by geographic
market, for the years ended December&nbsp;31, 2005 through 2007.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>2007 Compared to 2006</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>Net Sales </B>for 2007, 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), decreased 13.7% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>634.4&nbsp;million, as compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>735.4&nbsp;million in 2006.
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Net sales for 2007 of leather- and fabric-upholstered furniture decreased 14.6% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>563.5
million, as compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>660.2&nbsp;million in 2006. The 14.6% decrease was due to a 14.0% decrease in
the number of seats sold, a 2.9% decrease stemming from the appreciation of the Euro against the
U.S. dollar, partially offset by a 2.3% increase deriving from the change in the mix of products
sold and product prices. Net sales of Natuzzi-branded furniture accounted for 59.6% of our total
net sales in 2007, and net sales of Italsofa products accounted for 40.4% of our total net sales
for 2007. Net sales for 2007 of Natuzzi-branded furniture decreased 19.2% in 2007, while net sales
of Italsofa-branded furniture decreased 6.8%, in each case as compared to 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Net sales for 2007 of leather upholstered furniture decreased 12.2% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>502.9&nbsp;million, as
compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>573.1&nbsp;million in 2006, and net sales for 2007 of fabric upholstered furniture
decreased 30.5% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>60.6&nbsp;million, as compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>87.2&nbsp;million in 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In the Americas, net sales for 2007 of upholstered furniture decreased by 19.1% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>198.6
million, as compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>245.4&nbsp;million in 2006, and seats sold decreased by 13.8% to 1,176,584, as
compared to 1,364,873 in 2006. Net sales of the lower-priced Italsofa-branded furniture decreased
14.7% compared to 2006, while net sales of the higher-priced Natuzzi-branded furniture decreased
22.0%. In Europe, net sales for 2007 of upholstered furniture decreased 12.9% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>319.4&nbsp;million,
as compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>366.6&nbsp;million in 2006, due to a 18.5% decrease in net sales of Natuzzi-branded
furniture and to a 2.7% decrease in net sales of Italsofa-branded furniture. In the Rest of the
World, net sales for 2007 of upholstered furniture decreased 5.8% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>45.5&nbsp;million, as compared to
<FONT face="'Times New Roman',times,serif">&#128;</FONT>48.2&nbsp;million in 2006, due to a 12.7% decrease in net sales of Natuzzi-branded furniture, which was
partially offset by an 11.1% increase in net sales of Italsofa-branded furniture.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Net sales for 2007 of the Natuzzi-branded furniture decreased 19.2% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>336.1&nbsp;million, as
compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>416.2&nbsp;million in 2006, with the number of Natuzzi-branded seats sold decreasing by
22.3%. During 2007, net sales of the medium/low-priced Italsofa furniture decreased 6.8% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>227.4
million, as compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>244.0&nbsp;million in 2006, with the number of Italsofa seats sold decreasing
by 5.9%.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Total net sales of <I>Divani &#038; Divani by Natuzzi </I>and <I>Natuzzi Stores </I>decreased 17.0% in 2007 to
<FONT face="'Times New Roman',times,serif">&#128;</FONT>115.1&nbsp;million, as compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>138.7&nbsp;million in 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In 2007, total seats sold decreased 14.1% to 2,592,393 from 3,016,702 sold in 2006. Negative
performance was recorded in the Americas (down 13.8% to 1,176,584 seats), in Europe (down 15.4% to
1,225,882 seats) and the Rest of the World (down 6.0% to 189,926 seats).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 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; margin-left: 8%"><B>&#149; Natuzzi Brand</B><I>. </I>In terms of seats sold under the Natuzzi brand, the Group recorded
negative results in the United States (-23.1%), Italy (-21.8%), Spain (-30.2%), France
(-18.5%), Belgium (-24.9%), the United Kingdom (-37.9%), Germany (-25.3%) and Holland
(-36.9%). Positive performances were reported in Canada (&#043;5.5%), Korea (&#043;35.8%) and Eire
(&#043;24.5%).
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%"><B>&#149; Italsofa Brand</B>. In terms of seats sold under the Italsofa brand, the Group recorded
significant decrease in many countries, including the United States (-9.5%), Germany
(-10.7%), France (-8.2%), the United Kingdom (-9.9%), Belgium (-7.9%), Canada (-12.5%),
Sweden (-15.9%), Norway (-32.2%). Positive performances were reported in Spain (&#043;16.7%),
Holland (&#043;6.5%), Italy (&#043;6.3%) and Japan (&#043;37.4%).
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>Other Net Sales </B>(principally sales of polyurethane foam and leather sold to third parties, as
well as of accessories) decreased 5.7% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>70.9&nbsp;million, as compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>75.2 in 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>Cost of sales </B>in 2007 decreased in absolute terms by 6.1% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>460.6&nbsp;million (representing
72.6% of net sales), from <FONT face="'Times New Roman',times,serif">&#128;</FONT>490.5&nbsp;million (or 66.7% of net sales) in 2006. The increase in cost of sales, as a percentage of net sales, was due to the appreciation of the Euro against the U.S.
dollar, and to the increase, expressed in constant exchange rates, in the cost of leather and of
other principal raw materials, such as polyurethane foam, polyester fibers and chemical.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>Gross Profit. </B>The Group&#146;s gross profit decreased 29.0% in 2007 to <FONT face="'Times New Roman',times,serif">&#128;</FONT>173.8&nbsp;million, as compared
to <FONT face="'Times New Roman',times,serif">&#128;</FONT>244.9&nbsp;million in 2006 as a result of the factors described above.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>Selling Expenses </B>decreased 6.6% in 2007 to <FONT face="'Times New Roman',times,serif">&#128;</FONT>173.9&nbsp;million, as compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT> 186.2&nbsp;million in
2006, and, as a percentage of net sales, increased from 25.3% in 2006 to 27.4% in 2007. This
increase was mainly due to higher advertising and exhibition costs.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>General and Administrative Expenses. </B>The Group&#146;s general and administrative expenses increased
in 2007 16.1% to <FONT face="'Times New Roman',times,serif">&#128;</FONT>49.0&nbsp;million, as compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>42.2&nbsp;million in 2006, and, as a percentage of net
sales, increased from 5.74% in 2006 to 7.7% in 2007. The increase was primarily attributable to
higher administrative salaries and depreciation costs.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>Operating Loss. </B>The Group had an operating loss for 2007 of <FONT face="'Times New Roman',times,serif">&#128;</FONT>49.1&nbsp;million, as compared to an
operating income of <FONT face="'Times New Roman',times,serif">&#128;</FONT>16.5&nbsp;million in 2006, as a result of the factors described above.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>Other Income (expenses), net. </B>The Group registered other expenses, net, of <FONT face="'Times New Roman',times,serif">&#128;</FONT>2.6&nbsp;million in
2007 as compared to other income of <FONT face="'Times New Roman',times,serif">&#128;</FONT>2.8&nbsp;million in 2006. Net interest income, included in other
income (expense), net, in 2007 was <FONT face="'Times New Roman',times,serif">&#128;</FONT>1.7&nbsp;million, as compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>1.5&nbsp;million in 2006. See Note 24
to the Consolidated Financial Statement included in Item&nbsp;18 of this annual report.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Group registered a <FONT face="'Times New Roman',times,serif">&#128;</FONT>7.1&nbsp;million foreign-exchange net loss in 2007 (included in other
income (expense), net), as compared to a net gain of <FONT face="'Times New Roman',times,serif">&#128;</FONT>0.8&nbsp;million in 2006. The foreign exchange
loss in 2007 reflected primarily the following factors:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>&#149;</B> a net realized gain of <FONT face="'Times New Roman',times,serif">&#128;</FONT>5.9&nbsp;million in 2007 (compared to a gain of <FONT face="'Times New Roman',times,serif">&#128;</FONT>0.7&nbsp;million in 2006) 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>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>&#149;</B> a net realized loss of <FONT face="'Times New Roman',times,serif">&#128;</FONT>3.8&nbsp;million in 2007 (compared to a loss of <FONT face="'Times New Roman',times,serif">&#128;</FONT>8.2&nbsp;million in 2006),
from the difference between invoice exchange rates and collection/payment exchange rates;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>&#149;</B> a net unrealized loss of <FONT face="'Times New Roman',times,serif">&#128;</FONT>10.1&nbsp;million in 2007 (compared to an unrealized gain of <FONT face="'Times New Roman',times,serif">&#128;</FONT>2.8
million in 2006) on accounts receivable and payable;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>&#149;</B> a net unrealized gain of <FONT face="'Times New Roman',times,serif">&#128;</FONT>0.9&nbsp;million in 2007 (compared to an unrealized gain of <FONT face="'Times New Roman',times,serif">&#128;</FONT>5.5
million in 2006), from the mark-to-market of domestic currency swaps.
</DIV>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Group also recorded other income, included in other income (expense), net, in 2007 of <FONT face="'Times New Roman',times,serif">&#128;</FONT>2.8
million, compared to other income of <FONT face="'Times New Roman',times,serif">&#128;</FONT>0.5&nbsp;million reported in 2006. This income reflected the
following factors:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>&#149;</B> a <FONT face="'Times New Roman',times,serif">&#128;</FONT>3.0&nbsp;million contingent-liabilities provision for estimated losses related to some claims
(including tax claims) and legal actions. In 2006, the provisions for contingent liabilities
amounted to <FONT face="'Times New Roman',times,serif">&#128;</FONT>5.8&nbsp;million;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>&#149;</B> other expenses of <FONT face="'Times New Roman',times,serif">&#128;</FONT>2.3&nbsp;million deriving from the write-off of fixed assets. No such expenses
were registered in 2006;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>&#149;</B> in 2007 the Group did not register any revenue from export incentive benefits, while in 2006
it registered revenue of <FONT face="'Times New Roman',times,serif">&#128;</FONT>3.4&nbsp;million. This incentive is measured on the basis of the export sales
realized by the subsidiaries Italsofa Bahia Ltd and Minuano Nordeste S.A.;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>&#149;</B> a refund of <FONT face="'Times New Roman',times,serif">&#128;</FONT> 3.0&nbsp;million obtained from the Italian tax authorities for income and other
taxes not due related to prior years; in addition, the Italian tax authorities confirmed that a
portion of the income tax of <FONT face="'Times New Roman',times,serif">&#128;</FONT> 0.7 accrued in year 2006, was no longer due. In 2006 the Company did
not record revenues for tax refund;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>&#149;</B> an income of <FONT face="'Times New Roman',times,serif">&#128;</FONT>1.5&nbsp;million due to the write off of a provision for legal action accrued in
2006, which resulted from a settlement of the claim;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>&#149;</B> <FONT face="'Times New Roman',times,serif">&#128;</FONT>2.9&nbsp;million as other income, net, that is the same amount it had registered in 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Since 2003, the Group has not followed hedge accounting, and records all fair value changes of
its domestic currency swaps in its income statement.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>Income Taxes</B>. In 2007 the Group realized a negative rate of 22.0% of the loss before taxes and
minority interest, compared to a Group&#146;s effective income tax rate of 36.7% reported in 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The 2007 Group&#146;s effective income tax rate was negatively affected by the considerable
increase in deferred tax assets valuation allowance. In fact, in 2007 most of the Italian and
foreign subsidiaries realized significant pre-tax losses and were in a cumulative loss position, so
management did not consider it more likely than not that the deferred tax asset of those companies
will be realized in the scheduled reversal periods (see Note 14 to the Consolidated Financial
Statements in Item&nbsp;18 of this annual report). In addition, for the Group&#146;s Italian companies the
negative tax rate was due to 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 could be subject to
this regional tax. In 2007, most Italian companies within the Natuzzi Group reported losses but had
to pay &#147;Irap&#148; tax.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Some of the Group&#146;s foreign subsidiaries (Italsofa Shanghai Ltd, Softaly Shanghai Ltd,
Italsofa Bahia Ltd, Minuano Nordeste S.A. and Italsofa Romania) are entitled to 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, some of those foreign
subsidiaries reported a lower effective tax rate than the Group&#146;s Italian subsidiaries. See &#147;Item
4. &#147;Information on the Company&#151;Incentive Programs and Tax Benefits.&#148;
</DIV>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>Net Loss. </B>The Group reported a net loss of <FONT face="'Times New Roman',times,serif">&#128;</FONT>62.6&nbsp;million in 2007, as compared to net earnings
of <FONT face="'Times New Roman',times,serif">&#128;</FONT>12.3&nbsp;million in 2006. On a per-Ordinary Share, or per-ADS basis, the Group had net losses of
<FONT face="'Times New Roman',times,serif">&#128;</FONT>1.14 in 2007, as compared to a net earnings of <FONT face="'Times New Roman',times,serif">&#128;</FONT>0.23 in 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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 U.S. GAAP, for the years
ended December&nbsp;31, 2007, 2006 and 2005, the Group would have had net losses of <FONT face="'Times New Roman',times,serif">&#128;</FONT>60.0&nbsp;million, 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, respectively, compared to net losses of
<FONT face="'Times New Roman',times,serif">&#128;</FONT>62.6&nbsp;million, net earnings of <FONT face="'Times New Roman',times,serif">&#128;</FONT>12.3&nbsp;million, net losses of <FONT face="'Times New Roman',times,serif">&#128;</FONT>14.6&nbsp;million, respectively, under
Italian GAAP for the same periods.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><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: 8%"><B>Net sales </B>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 sold 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: 8%">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>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%">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 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>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%">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: 8%">In 2006 seats sold of the medium/low -priced Italsofa brand increased 11.0% while seats sold
of the medium/high -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: 8%">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: 8%">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>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%"><B>Cost of sales </B>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: 8%"><B>Gross Profit. </B>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&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: 8%"><B>Selling expenses </B>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: 8%"><B>General and Administrative Expenses </B>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: 8%"><B>Operating Income</B>. 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>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>Other income (expense), net </B>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: 8%">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="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></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="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></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>

</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="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></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
million in 2005) on accounts receivable and payable;</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="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></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>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: 8%">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>

<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="3%" nowrap align="left"><B>&#149;</B></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. 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>

</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="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">In 2006 the Group 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>

</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="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></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
million in 2005 to nil in 2006.</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="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></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>

</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="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></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: 8%">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>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>Income Taxes</B>. 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: 8%">The Group&#146;s Italian 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 Italian 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
Italian companies within the Natuzzi Group reported losses but had to pay &#147;Irap&#148;.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>Net Earnings</B>. 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&nbsp;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: 8%">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 U.S. 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&nbsp;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="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: 8%">The Group&#146;s cash and cash equivalents were at <FONT face="'Times New Roman',times,serif">&#128;</FONT>87.5&nbsp;million at December&nbsp;31, 2007, as compared
to <FONT face="'Times New Roman',times,serif">&#128;</FONT>128.1&nbsp;million at December&nbsp;31, 2006. The most significant changes in the Group&#146;s cash flows
between 2007 and 2006 are described below.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Cash flows used in operating activities were <FONT face="'Times New Roman',times,serif">&#128;</FONT>15.4&nbsp;million in 2007, as compared to cash flows
provided by operations of <FONT face="'Times New Roman',times,serif">&#128;</FONT>62.2&nbsp;million in 2006. This decrease of <FONT face="'Times New Roman',times,serif">&#128;</FONT>77.6&nbsp;million from 2006 to 2007
resulted principally from the Group&#146;s net loss of <FONT face="'Times New Roman',times,serif">&#128;</FONT>62.6&nbsp;million in 2007, as compared to a net
earnings of <FONT face="'Times New Roman',times,serif">&#128;</FONT>12.3&nbsp;million in 2006. In 2007 cash flow from operations were also affected by the
negative impact of inventories, compared to a considerable positive impact in 2006, partially
off-set by positive impact generated by accounts payable.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Cash flows used in investment activities in 2007 increased <FONT face="'Times New Roman',times,serif">&#128;</FONT>8.4&nbsp;million to <FONT face="'Times New Roman',times,serif">&#128;</FONT>26.1&nbsp;million. The
2007 increase in cash used in investment activities was due to higher capital expenditures. Capital
expenditures were <FONT face="'Times New Roman',times,serif">&#128;</FONT>26.5&nbsp;million and <FONT face="'Times New Roman',times,serif">&#128;</FONT>19.1&nbsp;million in 2007 and 2006, respectively. In both 2007 and
2006, capital expenditures related primarily to the opening of new Natuzzi stores and galleries as
well as improvements at existing manufacturing facilities in order to increase productivity and
production capacity, which included the purchase of equipment. In 2007 the Group continued to
invest in order to set up a new Enterprise Resource Planning (&#147;ERP&#148;) system denominated &#147;SAP&#148; for
its domestic and foreign companies. See &#147;Item&nbsp;3. Key Information &#151; Risk Factors &#151; Introduction of a
new integrated management system.&#148;
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Cash provided by financing activities in 2007 totalled <FONT face="'Times New Roman',times,serif">&#128;</FONT>3.5&nbsp;million, as compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>5.2
million of cash used by financing activities in the previous year. The 2007 cash provided by
financing activities was positively affected by the increase in short term borrowings and by the
lower repayment of long-term debt.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">As of December&nbsp;31, 2007, the Group had available lines of credit for cash disbursement
totalling <FONT face="'Times New Roman',times,serif">&#128;</FONT>47.4&nbsp;million, 16.0% of which were used. The unused portion of these lines of credit
amounted to approximately <FONT face="'Times New Roman',times,serif">&#128;</FONT>39.8&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, 2007 and 2006 (see Note 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: 8%">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, capital expenditures and restructuring of operations.
</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: 8%">The following tables set forth the contractual obligations and commercial commitments of the
Group as of December&nbsp;31, 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="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</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>1&#150;3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>4&#150;5</B></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>1 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>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"><!-- 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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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">2,433</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">317</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">672</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">553</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">891</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">281</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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">72,525</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,878</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,361</TD>
    <TD>&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">75,239</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,506</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,647</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,786</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,300</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

<DIV align="left"><DIV style="font-size: 10pt; margin-top: 10pt; width: 18%; border-bottom: 1px solid #000000">&nbsp;</DIV></DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</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 align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Under Italian law the Company and its Italian subsidiaries are required to pay a termination
indemnity to its employees when they cease their employment with the Company or the relevant
subsidiary. Likewise, the Company and its Italian subsidiaries are required to pay an indemnity to
their sales agents upon termination of the sales agent&#146;s agreement. As of December&nbsp;31, 2007, the
Group had accrued an aggregate employee termination indemnity of <FONT face="'Times New Roman',times,serif">&#128;</FONT>33.3&nbsp;million. In addition, the
Company as of December&nbsp;31, 2007, had accrued a provision for contingent liabilities of <FONT face="'Times New Roman',times,serif">&#128;</FONT>9.3&nbsp;million
and a sales agent termination indemnity of <FONT face="'Times New Roman',times,serif">&#128;</FONT>1.5&nbsp;million. See the Consolidated Balance Sheets, and
Notes 3(n) and 17, of the Consolidated Financial Statements included in Item&nbsp;18 of this Annual
Report. These amounts are not reflected in the table above since it is not possible to determine
when the amounts that have been accrued will become payable.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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

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<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: 7.20in">
<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 Period</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">(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</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
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    <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>1 year</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>1&#150;3 years</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>4&#150;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>


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


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


<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 1pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</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">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 Economic Development provides the Company with the final disbursement
of the capital grants already provided. See &#147;Item&nbsp;4 &#151; Information on the Company &#151; Incentive
Programs and Tax benefits.&#148;</DIV></TD>
</TR>

</TABLE>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Group is also involved in a number of claims (including tax claims) and legal actions
arising in the ordinary course of business. As of December&nbsp;31, 2007, the Group had accrued
provisions relating to these contingent liabilities in the amount of <FONT face="'Times New Roman',times,serif">&#128;</FONT>9.3&nbsp;million. (see Item&nbsp;8:
Financial Information&#151;Legal and Governmental Proceedings and Note 17 to the Consolidated Financial
Statements included in Item&nbsp;18 of this Annual Report).
</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: 8%">Please refer to Item&nbsp;7, &#147;Major Shareholders and Related Party Transactions&#148; of this annual
report.
</DIV>
<DIV align="left">
<A name="131"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Product &#038; Retail Development</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Product &#038; Retail Development department has set up, following a strategic analysis, a
Center for Retail Competence whose main objectives are, on a world wide basis, 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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">to draw the retail business model for the Group,</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">to design an auditing and control system for the Group&#146;s retail business
model under the supervision of top management,</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">to define the consumer segments to be targeted,</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">to define a product mix more consistent with targeted consumers and market,</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">to define store concept consistent with the Natuzzi brand&#146;s high-end positioning,</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">to define store formats (size, location, aesthetic and commercial features),</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">to define development plans and network re-positioning, and</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">to define the correct communication tools and training.</DIV></TD>
</TR>


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

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

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The expansion of products that the Group offers for the high-end segment has required an
adjustment to the lay-out of the products at the points of sale. The Natuzzi product offer is
increasingly oriented towards the concept of total living. Therefore, the mono-brand Natuzzi points
of sales have been recently refurnished in order to re-create a complete living room environment,
including the use of interior decorations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Innovation remains a strategic activity for the Group. Product and Retail Developments efforts
in 2007 have continued to focus on the design of new products, particularly the study of more
appropriate furniture coverings, and on improvement to the manufacturing process, with the goal of
anticipating the preferences of our target consumers. See &#147;Item&nbsp;4, &#147;Information on the
Company&#151;Products&#148; and &#147;Item&nbsp;4, &#147;Information on the Company&#151;Manufacturing.&#148;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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. The plant of Laterza and the Santeramo headquarters have received a
further ISO 9001 certification for the design and production of furnishing and accessories.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In 2007, the Group invested approximately <FONT face="'Times New Roman',times,serif">&#128;</FONT>10.1&nbsp;million in research and development
activities, compared to <FONT face="'Times New Roman',times,serif">&#128;</FONT>9.4&nbsp;million in 2006. More than 150 highly-qualified people work in these
activities, and more than 100 new sofa models are generally introduced each year. The Group
conducts its research and development efforts in its headquarters in Santeramo in Colle (Bari),
Italy.
</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: 8%">During the first three months of 2008, the Group reported a 12.4% increase in net sales, to
<FONT face="'Times New Roman',times,serif">&#128;</FONT>172.8&nbsp;million, and a 15.9% increase
in seats sold, as compared to the same period of last year.
These increases resulted primarily from sales of the backlog accumulated at the beginning of the
year. Operating results, during the same period, were, however, disappointing. The negative
performance was due to the strong price competition especially in the U.S. market, where the
furniture industry is still struggling to come out of one of the worst slowdowns of the last
decades, and the sharp devaluation of the U.S. Dollar against the currencies of the countries where
the Group manufactures the products it exports to the United States. In light of these challenges,
the Group announced in March&nbsp;2008 price increases across both the Natuzzi and Italsofa brands, that
the Group believes should produce results in the second half of the year, with the goal of enabling
the Group to recover margins.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Operating results were further burdened by the unsatisfactory performance of the Group&#146;s
Brazilian manufacturing plants, whose competitiveness has not only been adversely affected by the
above mentioned devaluation of the U.S. dollar against local currency, the Brazilian Real, but also
by the low productivity of the plants.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Group&#146;s
management is considering and planning measures to further control the cost
structure, including a temporary work force reduction at the Group&#146;s Italian locations that matches
its seat order flow in Italy, which, for the first five months of 2008, was more than 10% lower
than the same period of 2007. Furthermore, the Group recently announced a temporary work force
reduction of about 570 people at its Brazilian plants that the Group hopes to call back in the next
few months, should the order flow regarding the Brazilian plants recover. The Group is also
continuing to reorganize its manufacturing assets, both in Italy and abroad, to regain efficiency
in the remaining part of 2008.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Group is focusing its attention on the development of foreign markets, such as Eastern
Europe, the Middle East, China and India, where it has recently been achieving significant results
both in terms of sales and order flow. The Group plans to continue to invest in the Natuzzi brand
awareness worldwide and closely monitor the profitability of its retail activities, so as to close
non-performing units.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">All the above mentioned initiatives are part of a business plan that is still subject to a
critical review by the Group&#146;s top management regarding the overall scenario on which it is based.
Top management of the Group believes that this business plan, once implemented, will enable the
Group to regain competitiveness and profitability in the medium term.
However, in light of the uncertain
assumptions on which this plan would be based, including overall economic conditions and currency
exchange rate fluctuations, we can offer no assurance that these objectives will be achieved. See
&#147;Item&nbsp;3. Key Information &#151; Forward looking statement&#148;.
</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: 8%"><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, since 2005, to 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: 8%"><B>Italian GAAP &#151; </B>The are no recently issued accounting standard under Italian GAAP that have not
been adopted by the Group.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><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; text-indent: 8%"><B>SFAS No.&nbsp;141R and SFAS No.&nbsp;160:</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In December&nbsp;2007, the FASB issued FASB Statement No.&nbsp;141R, <I>Business Combinations </I>(Statement
141R) and FASB Statement No.&nbsp;160, <I>Noncontrolling Interest in Consolidated Financial Statements &#151; an
amendment to ARB No.&nbsp;51 </I>(Statement 160). Statement 141R and 160 require most identifiable assets,
liabilities, noncontrolling interest, and goodwill acquired in a business combination to be
recorded at &#147;full fair value&#148; and require noncontrolling interest (previously referred to as
minority interest) to be reported as a component of equity, which changes the accounting for
transactions with noncontrolling interest holders. Both Statements are effective for periods
beginning on or after December&nbsp;15, 2008, and earlier adoption is prohibited. Statement 141R will be
applied to business combinations occurring after the effective date. Statement 160 will be applied
prospectively to all noncontrolling interests, including any that arose before the effective date.
The Company is currently evaluating the impact of adopting Statement 141R and Statement 160 on its
results of operations and financial position.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>SFAS No.&nbsp;157:</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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 does
not expect a material impact from the adoption of Statement 157 on its results of operations and
financial position.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>SFAS No.&nbsp;159:</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In February&nbsp;2007, the FASB issued Statement of Financial Accounting Standards No.&nbsp;159, <I>The
Fair Value Option for Financial Assets and Financial Liabilities &#151; including an amendment of FASB
Statement No.&nbsp;115 </I>(Statement 159). Statement 159 gives the Company the irrevocable option to carry
most financial assets and liabilities at fair value that are not currently required to be measured
at fair value. If the fair value option is elected, changes in fair value would be recorded in
earnings at each subsequent reporting date. SFAS 159 is effective for the Company&#146;s 2008 fiscal
year. The Company has evaluated the impact of the adoption of this statement and has determined that the
adoption of SFAS No.&nbsp;159 is not applicable.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>SFAS No.&nbsp;161:</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In March&nbsp;2008, the FASB issued Statement of Financial Accounting Standards No.&nbsp;161, <I>Accounting
for Derivative Instruments and Hedging Activities </I>(SFAS No.&nbsp;161), which amends FASB Statement No.
133. SFAS No.&nbsp;161 requires companies with derivative instruments to disclose information about how
and why a company uses derivative instruments, how derivative instruments and related hedged items
are accounted for under FASB Statement No.133, and how derivative instruments and related hedged
items affect a company&#146;s financial position, financial performance, and cash flows. The required
disclosures include the fair value of derivative instruments and their gains or losses in tabular
format, information about credit-risk-related contingent features in derivative agreements,
counterparty credit risk, and the company&#146;s strategies and objectives for using derivative
instruments. The Statement expands the current disclosure framework in FASB Statement No.133. SFAS
No.161 is effective prospectively for periods beginning on or after November&nbsp;15, 2008. The Company
is evaluating the impact of adopting SFAS No.&nbsp;161 on its consolidated financial statements.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>EITF 06-4:</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In September&nbsp;2006, the FASB&#146;s Emerging Issues Task Force reached a consensus of <I>Issue No.
06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement
Split-Dollar Life Insurance Arrangements </I>(EITF 06-4). EITF 06-4 provides guidance on the accounting
for arrangements in which an employer owns and controls the insurance policy and has agreed to
share a portion of the cash surrender value and/or death benefits with the employee. This guidance
requires an employer to record a postretirement benefit, in accordance with FASB Statement No.&nbsp;106,
<I>&#147;Employers&#146; Accounting for Postretirement Benefit Other Than Pensions&#148; </I>or APB Opinion No.&nbsp;12,
&#147;Omnibus Opinion-1967&#148;, if there is an agreement by the employer to share a portion of the proceeds
of a life insurance policy with the employee during the postretirement period. This guidance is
effective for reporting periods beginning after December&nbsp;15, 2007. The adoption of EITF 06-4 will
not have an impact on the Company&#146;s consolidated financial statements.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>EITF 04-13:</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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 did not have an impact on the Company&#146;s
consolidated financial statements.
</DIV>
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<P align="center" style="font-size: 10pt"><!-- Folio -->42<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<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: 8%">The directors and executive officers of the Company at May&nbsp;31, 2008 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="31%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="57%">&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"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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">68</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chairman of the Board of Directors and Chief
Executive Officer</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Giuseppe Desantis * (1)
</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">Vice Chairman of the Board of Directors and
Worldwide Operations General Manager</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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">58</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="padding-top: 1px">
    <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">63</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; padding-top: 1px">
    <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">46</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Outside Director</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">57</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; padding-top: 1px">
    <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">59</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Outside Director</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Salvatore Gaipa
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">55</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Financial Officer</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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">44</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Executive Officer of Natco S.p.A. and
Product &#038; Retail Development General Manager <I>(ad
interim)</I></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Francesco Basile (1)
</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">Human Resources &#038; Organization Corporate Director</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Cary Benson
</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">President and Chief Executive Officer of Natuzzi
Americas Inc.</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Massimiliano Caforio
</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">Natuzzi Legal Director</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Angelo Colacicco
</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">Information Systems Director</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">44</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; padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Gaetano De Cataldo (1)
</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">Executive Vice President of Finance and Operations
of Natuzzi Americas, Inc.</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Nicola Dell&#146;Edera (1)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">46</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Finance Director</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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">50</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" style="padding-top: 1px">
    <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">40</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; padding-top: 1px">
    <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">41</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" style="padding-top: 1px">
    <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">75</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; padding-top: 1px">
    <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">41</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Benelux Country Manager</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">51</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; padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Ottavio Milano (1)
</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">Control Director</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">54</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; padding-top: 1px">
    <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">46</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" style="padding-top: 1px">
    <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">43</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Austria and Switzerland Country Manager</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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">49</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Germany Country Manager</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Stefano Sette (1)
</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">Executive Vice President Sales Worldwide, Regional
Manager East Europe, Middle East and India (ad
interim) and Chairman of Nacon S.p.A.</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Francesco Stasolla (1)
</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">Chairman and Managing Director of Italsofa Romania
S.r.l.</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">48</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>




<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">The above mentioned Members of the Board of Directors were elected at the Company&#146;s Annual
Ordinary Shareholders&#146; Meeting held on May&nbsp;3, 2007. Their term will conclude at the next Ordinary
Shareholders&#146; Meeting, which will be held on July&nbsp;2, 2008 (on first call), and, if necessary, on
July&nbsp;3, 2008 (on second call), in order to consider and vote upon the appointment of the new
members of the Board of Directors and determination of their compensation.</DIV></TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">These directors and officers have received ordinary shares pursuant to the Company&#146;s
incentive plan. In the aggregate those shares amount to less than 1% of the Company&#146;s outstanding
share capital.</DIV></TD>
</TR>

</TABLE>

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

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

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">





<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Pasquale Natuzzi, currently Chief Executive Officer and Chairman of the Board of Directors,
founded the Company in 1959. 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: 8%">Giuseppe Desantis is Vice Chairman of the Board of Directors and Worldwide Operations General
Manager . 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>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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. Mr.
Corvace 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: 8%">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: 8%">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: 8%">Ernesto Greco is an Outside Director of the Company. He was the Chief Executive Officer of the
Group from June&nbsp;2006 to September&nbsp;2007. Mr.&nbsp;Greco holds a degree in Mechanical Engineering and a
Master in Business Administration from CUOA (<I>Centro Universitario di Organizzazione Aziendale</I>),
Italy. He developed his career in various areas within multinational companies, such as Montedison,
Hewlett-Packard, Wang Laboratories. Before his appointment in Natuzzi, he was CFO of Bulgari, world
leader in the luxury goods business. Mr.&nbsp;Greco is currently Chief Financial Officer of Salvatore
Ferragamo Italia S.p.A.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Maurizia Iachino Leto di Priolo is an Outside Director of the Company. She has gained
expertise in the executive search field as a Partner at Spencer Stuart Italy, an executive search
consulting firm. Since 2001 she has been advising quoted and private companies on corporate
governance. Since 2007 she has been leading the Governance Practice at Key2people. Ms.&nbsp;Iachino was
President of Save the Children Italy from 2001 to 2007, she is board member in several non-profit
organizations, and is a member of the scientific committee of Ned Community, the Italian Community
of Non Executive Directors.
</DIV>

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

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

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Salvatore Gaipa has been the Chief Financial Officer of the Group since March&nbsp;22, 2008. He is
responsible for Finance, Accounting, Management Control, Legal and IT department. Mr.&nbsp;Gaipa, has
gained considerable expertise in accounting and finance having worked in multinational contexts
such as &#147;Snamprogetti &#151; ENI Group&#148; (until 1988) and &#147;Panasonic Italia&#148; (until 2005) where he served
as CFO with supervising responsibilities in the fields of human resources, information technology
and internal control, among others. Subsequently, he worked as a business consultant.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Annunziata Natuzzi is the Chief Executive Officer of Natco S.p.A. and the Group&#146;s Product &#038;
Retail Development General Manager (<I>ad interim</I>). 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 Group&#146;s Italian Sales Department and in the
International Sales Administration Department. She has worked in the Group&#146;s human resources
Department from 1990 to 2007.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Francesco Basile is Human Resources and Organization Director. He joined the Company in 1997
as Recruiting and Training Manager. Previously he worked in SIEMENS Nixdorf Information system AG
Group as HR manager and was in charge of trade union relations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Cary Benson has been the President and Chief Executive Officer of Natuzzi Americas since
November&nbsp;29, 2007. Beginning in 1997 he served as President and Chief Marketing Officer at American
Leather with responsibility for sales, marketing and merchandising. As an equity partner, he left
the company in 2006, when a buyout of American Leather took place. Prior to that, Mr.&nbsp;Benson was
President and CEO of Elmo American Leather from 1994 to 1997, and held several sales and marketing
positions with Steelcase from 1982 to 1994. He has a degree in advertising from Michigan State
University.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Massimiliano Caforio is the Legal Director of the Group. Mr.&nbsp;Caforio holds a degree in Law
from University of Perugia (Italy) and a Master&#146;s degree in Law from University of Alicante
(Spain). He is an Attorney at Law. He developed his career as a Lecturer in Commercial and
Intellectual Property Law at the University of Perugia and in private practice as an attorney with
international law firms such as Luis Barcala Sierra Law Firm (Spain) and Bugnion Patent and
Trademark Office (Italy), before joining the Versace Group for 7&nbsp;years as its Group Legal Officer.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Angelo Colacicco is the Information Systems Director. He joined the Company in May&nbsp;1996.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%">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>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%">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: 8%">Thomas Hagerup is Nordic Region Country Manager (<I>ad interim</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: 8%">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, Mr.&nbsp;Heil 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: 8%">Cesare Laberinti is Chairman and Managing Director of IMPE S.p.A., the subsidiary engaged in
the Group&#146;s polyurethane foam operations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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; text-indent: 8%">Giovanni Mercadante is Accounting Director. He joined the Company in 1983.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%">Marcelo Miraglia, is the Chairman and Managing Director of Minuano Nordeste S.A. and Italsofa
Bahia Ltd. He joined the Group 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. Mr.&nbsp;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, Mr.&nbsp;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: 8%">Nick Moore joined the Group in January&nbsp;2006 as Managing Director for Natuzzi United Kingdom
Ltd. Mr.&nbsp;Moore 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: 8%">Stefano Rezzin is the Austria and Switzerland Country Manager. He previously served as
Commercial and Brand Marketing Director of Casa Design at the Presotto Group.
</DIV>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Bodo Rupp is the Germany Country Manager, and has been leading Natuzzi Germany since December
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: 8%">Stefano Sette is Vice President of Sales Worldwide, Regional Manager for Eastern Europe, the
Middle East and India (ad interim) and Chairman of Nacon S.p.A.. 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: 8%">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: 8%">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>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Annunziata Natuzzi is the daughter of Pasquale Natuzzi. There are no other family
relationships among the current directors and executive officers of the Company.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>Ordinary Shareholders Meeting &#151;</B> The next ordinary shareholder&#146;s meeting is scheduled to take
place at the Company&#146;s executive offices at Santeramo in Colle (BA), Italy, Via Iazzitiello, no.
47, at 11:30&nbsp;a.m. (Central European Time) on July&nbsp;2, 2008 (on first call), and if necessary, at the
same location and time on July&nbsp;3, 2008 (on second call). The sole item on the agenda for this
meeting is the appointment of the new Board of Directors and the determination of the director&#146;s
compensation.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">ADS holders of record at the close of business on June&nbsp;16, 2008 are entitled to instruct the
Depositary, in accordance with instructions to be given by the Depositary, and in accordance with
Italian law and the Company&#146;s Article of Association, to vote or cause to be voted the amount of
Ordinary Shares of the Company represented by their ADSs at the ordinary shareholder meeting
referred to above. ADS holders of record at the close of business on June&nbsp;16, 2008 may also attend
the ordinary shareholder&#146;s meeting (without the right to vote or speak) following a written request
to the Depositary made in accordance with the instructions given by the Depositary.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Mr.&nbsp;Pasquale Natuzzi, the controlling shareholder, has informed the Company that he intends to
nominate himself and each of the following individuals to the Board:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>Antonisa Perrone </B>(38), the wife of Pasquale Natuzzi since 1997, has been involved in the main
areas of the Company&#146;s management, such as the definition of the strategy, retail distribution,
marketing and brand development, foreign operations. Since 1998 she has been the Sole Director of a
company, within the food industry, entirely controlled by the Natuzzi family. From 1994, when she
joined the Company, to 1997 she worked in the Company&#146;s Retail Development department, dealing,
primarily, with marketing and communication for the Italian market.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>Aldo Uva </B>(46), joined the Group on June&nbsp;4, 2008. He was formerly Global Vice President
Beverages at <I>Nestl&#232;</I>, based at the multinational&#146;s Headquarters in Switzerland, where he was in
charge of the strategic reorganization and implementation plan of the <I>Nestl&#232; </I>beverages business for
the food service channel. Before joining <I>Nestl&#232;</I>, he developed remarkable experiences in Italian and
U.S. multinational Companies such as <I>Sara Lee Corporation</I>, <I>Parmalat </I>and <I>Indesit Company</I>, where he
held executive positions in East and West Europe, North America, Latin America and the Far East.
The controlling shareholder intends to nominate Mr.&nbsp;Aldo Uva as Chief Executive Officer of the
Natuzzi Group.
</DIV>
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</DIV>

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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>Maurizia Iachino Leto di Priolo </B>(59)&nbsp;currently serves as an Independent Director of the Board.
For biographical information on Ms.&nbsp;Iachino see &#147;&#151;Directors, Management and employees&#148;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>Annamaria
Natuzzi </B>(43)&nbsp;is the daughter of Mr.&nbsp;Pasquale Natuzzi and Company&#146;s shareholder,
owning 2.6% of its share capital. She is currently involved in the definition of the Company&#146;s
strategic guidelines. She joined the Company in 1980 at the age of 15 and started to work within
the Production Department (until 1985) and, afterwards, within the Sales department (until 1995),
focusing in particular on the Italian and, later, European markets. She gained extensive experience
within the Research &#038; Development department until 2004.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>Giuseppe Antonio D&#146;Angelo </B>(43), currently Senior Vice President, President EMEA, and Latin
America Regions at <I>General Mills </I>(where he is also member of Corporate Operating Committee). Before
joining <I>General Mills </I>in 2000, he gained relevant international experience in sales and marketing
departments within multinational companies, such as <I>The Pillsbury Co. International </I>(from 1997 to
2000), <I>S.C. Johnson &#038; Son, Inc. </I>(from 1991 to 1997) and <I>Procter &#038; Gamble </I>(from 1989 to 1991). He
holds a B.A. in Economics from L.U.I.S.S., Italy, and successfully attended the Advance
Management Program (AMP), at Harvard University in 2004. He would serve in the Board as an
Independent Director.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>Francesco Giannaccari </B>(43)&nbsp;is currently CEO of <I>Tom Ford Europe and International Franchisees</I>.
He is also the CEO of <I>Pelletteria Artigiana</I>, the company that produces the leather accessories for
the Tom Ford Brand. He joined <I>Pelletteria Artigiana </I>in September&nbsp;2007. Prior to this role he was
Head of the International Operations at <I>Abercrombie &#038; Fitch</I>, from 2005 to 2007. He developed his
career as a controller in <I>Gruppo Rinascente</I>, Italy (from 1991 to 1997), and afterwards within the
<I>GUCCI Group</I>, where he became CFO <I>Gucci Europe </I>(from 1998 to 2001) and then Executive Vice President
of <I>Bottega Veneta </I>(a subsidiary of <I>GUCCI Group NV</I>), from 2001 to 2005. He holds a Degree in
Business Administration from &#147;L. Bocconi&#148; University, Italy. He would serve in the Board as an
Independent Director.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>Mario Lugli </B>(60)&nbsp;is a lawyer specialized in corporate law. He developed his professional
experience (from 1973 to 2006) as General Counsel and Head of Corporate and Legal Affairs of
important Groups such as <I>Luxottica</I>, <I>Albacom </I>(today known as <I>British Telecom Italia</I>), <I>RCS Media
Group</I>, <I>FIAT</I>, <I>Montedison</I>, <I>IRI-Italstat</I>. Since 2007 Mr.&nbsp;Lugli has been and currently is Independent
Director in companies such as <I>Banca Italease Network S.p.A. </I>(where he also holds the position of
Vice Chairman), <I>AMSA SpA</I>, and member of the Board of Statutory Auditors in <I>Investimenti
Infrastrutture SpA</I>, <I>ENI Trading and Shipping Spa</I>, <I>ENI Servizi SpA</I>. He is an auditor registered
since 1995 at the Ministry of Justice in Italy. He is also Senior Advisor in Corporate Governance
in &#147;<I>Key2People Executive Search</I>&#148;. He holds a Degree in Law <I>cum laude </I>from University of Modena and
Master of law from Oxford University. He would serve in the Board as an Independent Director.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The controlling shareholder has informed the Company that he intends to propose a total annual
compensation for the members of the Board of Directors in an amount up to EUR 769,000.00, of which
EUR 30,000.00 would be paid to each member and the remainder in an amount up to EUR 529,000.00
would be assigned by the Board of Directors on the basis of their respective duties.
</DIV>


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<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: 8%">The Company has not established a compensation committee. As a matter of Italian law, the
compensation of executive directors is determined by the board of directors, while the Company&#146;s
shareholders determine the base compensation of all the Board members, including non-executive
directors. Compensation of the Company&#146;s executive officers is determined by the Chairman of the
Board. A list of significant differences between the Group&#146;s corporate governance practices and
those followed by U.S. companies listed on the New York Stock Exchange may be found at
www.natuzzi.com.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Aggregate compensation paid by the Group to the directors and officers was approximately &#128;
6.4&nbsp;million in 2007.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">On January&nbsp;24, 2008, pursuant to the Natuzzi Stock Incentive Plan 2004-2009 (the &#147;Plan&#148;)
approved by the Shareholders&#146; Ordinary Meeting on July&nbsp;23, 2004, the last tranche relating to the
2005 MBO awards was assigned to the Natuzzi Directors and Officers participating in the Plan. The
last tranche of 28,818 Natuzzi ordinary shares were assigned in January&nbsp;2008 and represents 0.05%
of the outstanding ordinary shares at the same date. These same Directors and Officers were
awarded, in connection with the Plan, stock options to acquire 312,626 Ordinary Shares. The
exercise price of these options was fixed at $12.53 and they can be exercised until January&nbsp;15,
2009. For more information, see &#147;Item&nbsp;10. Additional information &#151; By Laws&#148;. See Note 20 to the
Consolidated Financial Statements included in Item&nbsp;18 of this Annual report for additional
information on the Plan.
</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: 8%">Mr.&nbsp;Pasquale Natuzzi, who founded the Company and is currently its Chief Executive Officer and
Chairman of the Board of Directors, beneficially owns 29,358,089 Ordinary Shares, representing
53.5% of the Ordinary Shares outstanding (58.6% of the Ordinary Shares outstanding if the 5.1% of
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 Group, 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. On April&nbsp;18, 2008, INVEST 2003 purchased 3,293,183 American Depositary
Shares, each representing one Ordinary Share, at the price U.S.$ 3.61 per ADS. For more
information, refer to Schedule&nbsp;13D filed with the U.S. Securities and Exchange Commission (&#147;SEC&#148;)
on April&nbsp;24, 2008. In relation to the &#147;Natuzzi Stock Incentive Plan 2004-2009&#148; (see Item&nbsp;10.
Additional Information &#151; Authorization of Shares), the total number of new Natuzzi ordinary shares
that were assigned without consideration to the beneficiary employees in 2006, 2007 and 2008
represents 0.3% of the current outstanding shares.
</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: 8%">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="77%">&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>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Position</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">Francesco Venturelli </DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Chairman</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cataldo Sferra </DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Member</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Costante Leone </DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Member</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Giuseppe Pio Macario </DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Alternate</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Vittorio Boscia </DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Alternate</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


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<Div style="font-family: 'times new roman',times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">During 2007, our statutory auditors received in the aggregate approximately &#128;210,000.00 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: 8%">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: 8%">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;16D, &#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: 8%">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: 8%">As of December&nbsp;31, 2007, the Group had 8,219 employees (3,521 in Italy and 4,698 abroad), as
compared to 8,133 on December&nbsp;31, 2006. As at April&nbsp;30, 2008, the total number of employees was
8,145 (3,498 in Italy and 4,647 abroad), and their average age was approximately 33&nbsp;years. The
Group maintains a company intranet and, as a major employer in the Bari/Santeramo area, is an
important participant in community life. See Item&nbsp;4, &#147;Information on the Company &#151; Strategy&#148; for
more information about the Group&#146;s work force reduction. All the measures related to the work force
reduction are agreed upon with the Italian Unions.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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, 2007, the Company had
<font style="white-space: nowrap">&#128;33.3&nbsp;million</font> 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: 8%">The Group&#146;s training activities have not changed substantially during 2007, as they continued
in the production and marketing department. The Group is planning, in cooperation with an external
consultant, to launch the management training program and commercial training program. The first
aims to reinforce the managerial competence of the corporate structure, the second one aims to
develop the competence of the sales structure.
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<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: 8%">Mr.&nbsp;Pasquale Natuzzi, who founded the Company and is currently Chief Executive Officer and
Chairman of the Board of Directors, beneficially owns 29,358,089 Ordinary Shares, representing
53.5% of the Ordinary Shares outstanding (58.6% of the Ordinary Shares outstanding 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.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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. On April&nbsp;18,
2008, INVEST 2003 purchased 3,293,183 ADSs from Tweedy, Browne Co. LLC (acting on behalf of
its client accounts) in a privately negotiated transaction, at the price of U.S.$ 3.61 per ADS.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The following table sets forth information, as reflected in the records of the Company as at
March&nbsp;31, 2008, with respect to each person who owns 5% or more 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="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>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Percent</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>Shares Owned</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Owned</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">Pasquale Natuzzi<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,358,089</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">53.5</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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; padding-top: 1px">
    <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">3,857,922</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">7.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tweedy, Browne Co. LLC <SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,282,708</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">6.0</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

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



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 3pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</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">Includes ADSs purchased on April&nbsp;18, 2008. If Mr.&nbsp;Natuzzi&#146;s Ordinary Shares are
aggregated with those held by members of the Natuzzi Family, the amount owned would be 32,158,091
and the percentage ownership of Ordinary Shares would be 58.6%.</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 and during 2007 its position was reduced by 792,463 ADSs to
3,946,571 ADSs as of December&nbsp;31, 2007.</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">During the course of 2008 Tweedy, Browne Co. LLC sold 3,293,183 ADSs to Mr.&nbsp;Pasquale
Natuzzi.</DIV></TD>
</TR>

</TABLE>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">As of May&nbsp;31, 2008, 54,853,045 Ordinary Shares were outstanding. As of the same date, there
were 25,930,242 ADSs (equivalent to 25,930,242 Ordinary Shares) outstanding. The ADSs represented
47.3% of the total number of Natuzzi Ordinary Shares.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%">Since the beginning of 2005, neither the Company, nor its parent or any of its subsidiaries
was a party to a transaction with a related party that was material to the Company or the related
party, or any transaction that was unusual in its nature or conditions, involving goods, services,
or tangible or intangible assets, nor is any such transaction presently proposed. During the same
period, neither the Company, nor its parent or any of its subsidiaries made any loans to or for the
benefit of any related party. For purposes of the foregoing, &#147;related party&#148; refers to:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>&#149;</B>&nbsp;enterprises that directly or indirectly through one or more intermediaries, control or are
controlled by, or are under common control with, the Company, or unconsolidated enterprises in
which the Company has a significant influence or which has significant influence over the Company
(including enterprises owned by directors or major shareholders of the Company and enterprises that
have a member of key management in common with the Company),
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>&#149;</B>&nbsp;individuals owning, directly or indirectly, an interest in the voting power of the Company
that gives them significant influence over the Company, and close members of any such individual&#146;s
family,
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>&#149;</B>&nbsp;persons having authority and responsibility for planning, directing and controlling the
activities of the Company, including directors and senior management of the Company and close
members of such individuals&#146; families, and
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>&#149;</B>&nbsp;enterprises in which a substantial interest in the voting power is owned, directly or
indirectly, by any person described the previous two bullet points or over which such a person is
able to exercise significant influence.
</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: 8%">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: 8%">Export sales from Italy totaled approximately &#128;274.2&nbsp;million in 2007, down 19.3% from 2006.
That figure represents 48.7% of the Group&#146;s 2007 net leather- and fabric-upholstered furniture
sales.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<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: 8%">The National Institute for Social Security (INPS &#151; <I>Istituto Nazionale di Previdenza Sociale</I>)
requested, in 2005 with a preliminary notice and in 2007 with a final notice, that the Company pay
approximately &#128;19.7&nbsp;million of social security contributions related to the periods between
November&nbsp;1995 to May&nbsp;2001. The Company did not pay these contributions because it benefited from
certain exemptions granted by the Italian government in connection with personnel employed under
&#147;Training and Work Experience&#148; contracts (<I>Contratti di formazione e lavoro</I>). In 2004, the European
Court of Justice ruled that such exemptions constitute State financial aid, and thus conflict with
European Union laws and regulations on free competition, and the European Commission ordered the
Italian government to collect all social security contributions not paid in reliance on these
exemptions. The Company believes that it complied with the law in force at the time it 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 &#128;475,000 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: 8%">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 estimated the probable amount of these legal costs to be &#128;1.5&nbsp;million. This amount has
been charged to other income (expense), net in 2006. During 2007 the Company settled its
liabilities in connection with these proceedings through an out of court agreement with the
opposing party. See Note 24 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: 8%">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 &#128;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 believes that
the probable liability related to the aforementioned tax assessments is approximately &#128;1.3
million. Therefore, the Company has charged this amount of &#128;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: 8%">During 2006 the Company charged to other income (expense)&nbsp;the amount of &#128;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: 8%">During 2007 the Company has charged to other income (expense)&nbsp;net the amount of &#128;2.2
million for the probable tax contingent liabilities related to income taxes and other taxes of some
foreign subsidiaries. This amount represents the probable amount that could be claimed back by the
tax authorities in case of tax audit. See Note 24 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: 8%">Furthermore, the Company in 2007 set up a provision of &#128;0.8&nbsp;million for contingent
liabilities related to several minor claims and legal actions arising in the ordinary course of
business. See Note 24 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: 8%">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: 8%">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>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<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: 8%">Historically, the Group&#146;s policy has been to maintain a dividend payout ratio of approximately
20% of profits earned during the fiscal year. Considering that the Group reported a negative net
result in 2007, it decided not to distribute dividends for the year ended on December&nbsp;31, 2007
because of the capital requirements necessary to implement the restructuring of its operations and
its planned retail and marketing activities.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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">2007</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="padding-top: 1px">
    <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" style="background: #cceeff; padding-top: 1px">
    <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="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2004</DIV></TD>
    <TD>&nbsp;</TD>
<TD align="left">&nbsp;&#128;</TD>
    <TD align="right">0.0673</TD>

    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;$</TD>
    <TD align="right">0.09</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2003</DIV></TD>
    <TD>&nbsp;</TD>
<TD align="left">&nbsp;&#128;</TD>
    <TD align="right">0.1366</TD>

    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;$</TD>
    <TD align="right">0.15</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%">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="justify" style="font-size: 10pt; margin-top: 10pt"><B>Item&nbsp;9. The Offer and Listing</B>
</DIV>

<DIV align="left">
<A name="148"></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: 8%">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>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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="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 style="font-size: 10pt">
<TD>&nbsp;</TD>
</tr>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>2003 </B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.240</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>2004 </B></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">9.230</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>2005 </B></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">6.760</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>2006 </B></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">6.320</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>2007 </B></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">4.360</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>2006</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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="padding-top: 1px">
    <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" style="background: #cceeff; padding-top: 1px">
    <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="padding-top: 1px">
    <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" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>2007</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="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">First 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">8.150</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Second Quarter</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">7.180</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Third Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.310</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.260</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Fourth Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.840</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.360</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <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; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">December-07</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.190</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.360</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">January-08</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.630</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.200</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">February-08</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.190</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.780</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">March-08</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.229</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">April-08</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.390</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">May-08</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.020</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.470</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">June&nbsp;2008 (through June&nbsp;24) </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.532</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.210</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

<DIV align="left">
<A name="149"></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="150"></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: 8%">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="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>


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

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

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

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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%">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: 8%"><B>General &#151; </B>The issued share capital of the Company consists of 54,853,045 Ordinary Shares, with
a par value of &#128;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: 8%">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: 8%">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: 8%"><B>Authorization of shares &#151; </B>At 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 &#128;500,000.00, and a capital increase against payment of up to &#128;3.0&nbsp;million
to be issued, in connection with the grant of stock options to employees of the Company. On January
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 beneficiary employees.
Consequently, the number of Natuzzi ordinary shares increased on the same date from 54,738,538 to
54,824,227. On January&nbsp;24, 2008 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 28,818 new
Natuzzi ordinary shares in favor of the beneficiary employees. Consequently, the number of Natuzzi
ordinary shares increased on the same date from 54,824,227 to 54,853,045.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><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>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><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>
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</DIV>

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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%"><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: 8%">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: 8%"><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 (see &#147;Item&nbsp;6. Directors, Senior
Management and Employees&#148; for further information regarding the Ordinary Shareholders Meeting, that
will appoint the new board), 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: 8%">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: 8%">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: 8%">&nbsp;

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</DIV>

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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%">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: 8%">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: 8%">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: 8%">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>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><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: 8%">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: 8%">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: 8%">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>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><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>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%">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: 8%">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: 8%"><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: 8%">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;,
&#146;<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: 8%">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: 8%">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>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%">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: 8%">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: 8%"><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: 8%"><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>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%"><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>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%"><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: 8%"><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: 8%">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>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In July&nbsp;2000, the shareholders of the Company approved a share repurchase program to buy-back
up to 4&nbsp;million shares or &#128;51.6&nbsp;million during a period of up to 18&nbsp;months. The Company spent
&#128;23.2&nbsp;million in 2000 and &#128;14.6&nbsp;million in 2001 to repurchase shares. The Company
repurchased 1,782,700 shares in 2000 at an average cost of US$ 11.3 per share and 1,061,200 shares
in 2001 at an average cost of US$ 12.3 per share. The repurchase program is no longer in effect.
At an extraordinary meeting held in November&nbsp;2003 the shareholders approved the cancellation of all
the treasury shares. Such treasury shares were cancelled effective on February&nbsp;21, 2004.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><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>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><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: 8%">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: 8%">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: 8%">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>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%">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: 8%"><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: 8%">The Company is subject to the direction and coordination of INVEST 2003 S.r.l..
</DIV>
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<DIV align="left">
<A name="151"></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: 8%">As of December&nbsp;31, 2007, 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 located either in, or within a 25-mile radius of the Santeramo area.
</DIV>
<DIV align="left">
<A name="152"></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: 8%">There are currently no exchange controls, as such, in Italy restricting rights deriving from
the ownership of shares. Residents and non-residents of Italy may hold foreign currency and
foreign securities of any kind, within and outside Italy. Non-residents may invest in Italian
securities without restriction and may transfer to and from Italy cash, instruments of credit and
securities, in both foreign currency and Euro, representing interest, dividends, other asset
distributions and the proceeds of any dispositions.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Certain procedural requirements, however, are imposed by law. Updated reporting and
record-keeping requirements are contained in Italian legislation implementing EC Directive No.
88/361/EEC regarding the free movement of capital (Law Decree No.&nbsp;167/1990). Such legislation
requires that transfers into or out of Italy of cash or securities in excess of &#128;10,000 be
reported in writing to the Bank of Italy by residents or non-residents that effect such transfers
directly, or by credit institutions and other intermediaries that effect such transactions on their
behalf. Moreover, pursuant to EC Directive No.&nbsp;91/308/EEC, EU Directive No.&nbsp;2001/97/EC and EU
Directive No.&nbsp;2005/60/EC regarding the prevention of the use of the financial system for the
purpose of money laundering and terrorist financing and the relevant Italian implementing measures,
credit institutions and other intermediaries effecting such transactions on behalf of residents or
non-residents of Italy are required to maintain records of such transactions for ten years, which
may be inspected at any time by Italian tax and judicial authorities. Non-compliance with the
reporting and record-keeping requirements may result in administrative fines or, in the case of
false reporting and in certain cases of incomplete reporting, criminal penalties. The Bank of
Italy is required to maintain reports for ten years and may use them, directly or through other
government offices, to police money laundering, tax evasion and any other unlawful activity.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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)&nbsp;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 &#128;10,000. In addition, no such tax
disclosure is required in respect of securities deposited for management with qualified Italian
financial intermediaries and in respect of contracts entered into through their intervention,
provided that the items of income derived from such foreign financial assets are collected through
the intervention of the same intermediaries. 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: 8%">There can be no assurance that the current regulatory environment in or outside Italy will
persist 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 EU and
other international organizations and its adherence to various bilateral and multilateral
international agreements.
</DIV>
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<DIV align="left">
<A name="153"></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: 8%">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: 8%">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: 8%">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: 8%">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: 8%">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: 8%"><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>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%">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: 8%">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>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>United
States Tax Considerations &#151;</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 category&#148; income for U.S. tax purposes.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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 2006 or 2007 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
2008 taxable year.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%">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: 8%">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>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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; margin-left: 8%"><B>Taxation of Capital Gains</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>Italian Tax Considerations &#151; </B>Under Italian law, capital gains tax (&#147;CGT&#148;) is levied on
capital gains realized by non-residents from the disposal of shares in companies resident in Italy
for tax purposes even if those shares are held outside of Italy. Capital gains realized by
non-resident holders on the sale of non-qualified shareholdings (as defined below) in companies
listed on a stock exchange and resident in Italy for tax purposes (as is Natuzzi&#146;s case) are not
subject to CGT.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">A &#147;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 exceed
either of these thresholds. 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: 8%">Capital gains realized upon disposal of a &#147;qualified&#148; shareholding are included in the
shareholders&#146; taxable income for an amount equal to 40%. If 40% of the capital gains realized by
such person exceeds 40% of similar capital losses incurred by such person in the same tax year, the
excess amount is included in such person&#146;s total taxable income. If 40% of such person&#146;s capital
losses exceeds 40% of its capital gains, then the excess amount can be carried forward and deducted
from the taxable amount of similar capital gains realized by such person in the following tax
years, up to the fourth, provided that it is reported in the tax report in the year of disposal.
Following the enactment of Law No.&nbsp;244 of December&nbsp;24, 2007 (the 2008 Budget Law), the amount of
such capital gains subject to tax will be equal to 49.72% with respect to capital gains realized on
&#147;qualified&#148; shareholdings as of January&nbsp;1, 2009.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%"><B>United
States Tax Considerations &#151;</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>
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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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; margin-left: 8%"><B>Taxation of Distributions from Capital Reserves</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>Italian
Tax Considerations &#151; </B>Special rules apply to the distribution of capital reserves.
Under certain circumstances, such a distribution may be considered as taxable income in the hands
of the recipient depending on the reserves of the distributing company outstanding at the time of
distribution and the actual nature of the reserves distributed. The application of such rules may
also have an impact on the tax basis in the Ordinary Shares or ADSs held and/or the
characterization of any taxable income received and the tax regime applicable to it. Non-resident
shareholders may be subject to withholding tax and CGT as a result of such rules. You should
consult your tax advisor in connection with any distribution of capital reserves.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%"><B>Other Italian Taxes</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>Estate
and Inheritance Tax &#151; </B> A transfer of Ordinary Shares or ADSs by reason of death or gift
is subject to an inheritance and gift tax levied on the value of the inheritance or gift, as
follows:
</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="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Transfers to a spouse or direct descendants or ancestors up to Euro
1,000,000 to each beneficiary are exempt from inheritance and gift tax. Transfers
in excess of such threshold will be taxed at a 4% rate on the value of the
Ordinary Shares or ADSs exceeding such threshold;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Transfers between relatives up to the fourth degree other than
siblings, and direct or indirect relatives by affinity up to the third degree are
taxed at a rate of 6% on the value of the Ordinary Shares or ADSs (where
transfers between siblings up to a maximum value of Euro 100,000 for each
beneficiary are exempt from inheritance and gift tax); and</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Transfers by reason of gift or death of Ordinary Shares or ADSs to
persons other than those described above will be taxed at a rate of 8% on the
value of the Ordinary Shares or ADSs.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">If the beneficiary of any such transfer is a disabled individual, whose handicap is recognized
pursuant to Law No.&nbsp;104 of February&nbsp;5, 1992, the tax is applied only on the value of the assets
received in excess of Euro 1,500,000 at the rates illustrated above, depending on the type of
relationship existing between the deceased or donor and the beneficiary.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The tax regime described above will not prevent the application, if more favorable to the
taxpayer, of any different provisions of a bilateral tax treaty, including the convention between
Italy and the United States against double taxation with respect to taxes on estates and
inheritances, pursuant to which non-Italian resident shareholders are generally entitled to a tax
credit for any estate and inheritance taxes possibly applied in Italy.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><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>
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<DIV align="left">
<A name="154"></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: 8%">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
<u>http://www.sec.gov</U>. The Form 20-F and reports and other information filed by the Company with the
Commission will also be available for inspection by ADS holders at the Corporate Trust Office of
The Bank of New York at 101 Barclay Street, New York, New York 10286.
</DIV>
<DIV align="left">
<A name="155"></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: 8%">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: 8%">The Group is exposed to market risks principally from fluctuations in the exchange rates
between the euro and other currencies, including in particular the U.S. dollar, and to a
significantly lesser extent, from variations in interest rates.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%"><B>Exchange Rate Risks</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Group&#146;s foreign exchange rate risks in 2007 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: 8%">As at December&nbsp;31, 2007 and 2006, the Group had outstanding trade receivables denominated in
foreign currencies totaling &#128;59.1&nbsp;million and &#128;55.4&nbsp;million, respectively, of which 66.5% and
66.7%, respectively, were denominated in U.S. dollars. On those same dates, the Group had &#128;14.4
million and &#128;21.9&nbsp;million, respectively, of trade payables denominated in foreign currencies,
principally U.S. dollars. See Notes 6 and 12 to the Consolidated Financial Statements included in
Item&nbsp;18 of this annual report.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">As at December&nbsp;31, 2007, 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 totaled
&#128;162.5&nbsp;million (compared to &#128;164.9&nbsp;million at December&nbsp;31, 2006), consisting of forward
exchange contracts with notional amounts of U.S. dollar 82.5&nbsp;million, Canadian dollar 28.8&nbsp;million,
Euro 49.0&nbsp;million, Swiss franc 1.0&nbsp;million, Australian dollar 27.0&nbsp;million, Japanese yen 45.0
million, British pound 6.0&nbsp;million, Swedish kroner 24.0&nbsp;million, Danish kroner 20.0&nbsp;million, and
Norwegian kroner 57.0&nbsp;million. Such contracts had various maturities extending through December
2007. See Note 25 to the Consolidated Financial Statements included in Item&nbsp;18 of this annual
report.
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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, 2007 and 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="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 </B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px 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: 1px solid #000000"><B>of forward exchange contracts as of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <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>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<tr style="font-size: 10pt">
<TD>&nbsp;</TD>
</tr>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">U.S. dollars </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&#128;</TD>
    <TD align="right">58,724</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&#128;</TD>
    <TD align="right">90,744</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Euro </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,326</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,154</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Canadian dollars </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,930</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,703</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Australian dollars </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,503</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,934</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">British pounds </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,751</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,121</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Norwegian kroner </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,071</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,027</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Danish kroner </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,681</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">924</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Swedish kroner </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,616</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,887</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Swiss francs </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">620</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,584</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Japanese yen </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">292</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">864</TD>
    <TD>&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>&#128;</TD>
    <TD align="right">162,514</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&#128;</TD>
    <TD align="right">164,942</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">As at December&nbsp;31, 2007, these forward exchange contracts had a net unrealized gain of &#128;0.9
million, versus a net unrealized gain of &#128;5.5&nbsp;million at December&nbsp;31, 2006. The Group recorded
this amount in other income (expense), net in its Consolidated Financial Statements. See Note 24
to the Consolidated Financial Statements included in Item&nbsp;18 of this annual report.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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, 2007</B></TD>
    <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>
</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>Unrealized</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>Unrealized</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>gains</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>gains</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>(losses)</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>(losses)</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">97,967</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,995</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,049</TD>
    <TD nowrap>)</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>
</TR>
<TR style="font-size: 1px">
    <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">162,514</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">946</TD>
    <TD>&nbsp;</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>
</TR>
<TR style="font-size: 1px">
    <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: 8%">The Group&#146;s forward exchange contracts as at December&nbsp;31, 2007 had maturities of maximum 15
months. The potential loss in fair value of the Group&#146;s forward exchange contracts at December&nbsp;31,
2007 that would have resulted from a hypothetical, instantaneous and unfavorable 10% change in
currency exchange rates would have been approximately &#128;15.8&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>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->71<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%"><B>Interest Rate Risks &#151;</B> To a significantly lesser extent, the Group is also exposed to interest
rate risk. At December&nbsp;31, 2007, the Group had
&#128;10.0&nbsp;million (equivalent to 1.6% 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), which is for the most
part subject to floating interest rates. 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: 8%">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="156"></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; text-indent: 8%">Not applicable.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->72<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<DIV align="left">
<A name="157"></A>
</DIV>

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

<DIV align="left">
<A name="158"></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: 8%">None.
</DIV>
<DIV align="left">
<A name="159"></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: 8%">None.
</DIV>
<DIV align="left">
<A name="160"></A>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Item&nbsp;15. Controls and Procedures</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>Disclosure Controls and Procedures &#151;</b> The Company carried out an evaluation under the
supervision and with the participation of the Company&#146;s management, including the Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the design and operation of the
Company&#146;s disclosure controls and procedures as of December&nbsp;31, 2007. 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: 8%">Based on the Company&#146;s evaluation of its disclosure controls and procedures, the Chief
Executive Officer and Chief Financial Officer concluded that the Company&#146;s disclosure controls and
procedures were effective as of December&nbsp;31, 2007 to provide reasonable assurance that information
required to be disclosed in the reports the Company files and submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified in the SEC&#146;s
applicable rules and forms, and that it is accumulated and communicated to the Company&#146;s
management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to
allow timely decisions regarding required disclosure.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>Management&#146;s annual report on internal control over financial reporting &#151;</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 controls over financial reporting may not prevent or
detect misstatements. Even when determined to be effective, they can provide only reasonable
assurance regarding the reliability of financial reporting and the preparation and presentation of
financial statements. 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: 8%">To assess the effectiveness of the Company&#146;s internal control over financial reporting, the
Company&#146;s management, including the Chief Executive Officer and the Chief Financial Officer, used
the criteria described in &#147;Internal Control&#151;Integrated Framework&#148; issued by the Committee of
Sponsoring Organizations of the Treadway Commission (&#147;COSO&#148;).
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->73<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Company&#146;s management assessed the effectiveness of its internal control over financial
reporting as of December&nbsp;31, 2007. Based on such assessment, the Company&#146;s management has concluded
that as of December&nbsp;31, 2007, the Company&#146;s internal control over financial reporting was effective
and that there were no material weaknesses in the Company&#146;s internal control over financial
reporting.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The effectiveness of internal control over financial reporting as of December&nbsp;31, 2007 has
been audited by KPMG S.p.A., an independent registered public accounting firm, as stated in their
report on the Company&#146;s internal control over financial reporting, which follows below.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>Report of Independent Registered Public Accounting Firm</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">To the Shareholders of Natuzzi S.p.A.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We
have audited Natuzzi S.p.A. and subsidiaries (the &#145;Natuzzi
Group&#146;) internal control over
financial reporting as of December&nbsp;31, 2007, based on criteria established in Internal Control -
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). The Natuzzi Group&#146;s management is responsible for maintaining effective internal control
over financial reporting and for its assessment of the effectiveness of internal control over
financial reporting, included in the accompanying Management&#146;s annual report on internal control
over financial reporting. Our responsibility is to express an opinion on the Natuzzi Group&#146;s
internal control over financial reporting based on our audit.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We conducted our audit 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 effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of internal control based on the assessed
risk. Our audit also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">A company&#146;s 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. A company&#146;s internal control over financial reporting includes those policies and
procedures that (1)&nbsp;pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the company; (2)&nbsp;provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3)&nbsp;provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company&#146;s assets that could have
a material effect on the financial statements.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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 or procedures may deteriorate.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In our opinion, the Natuzzi Group maintained, in all material respects, effective internal
control over financial reporting as of December&nbsp;31, 2007, based on criteria established in Internal
Control &#151; Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->74<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of Natuzzi S.p.A. and subsidiaries
as of December&nbsp;31, 2007 and 2006, 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
31, 2007, and our report dated June&nbsp;24, 2008 expressed an unqualified opinion on those consolidated
financial statements.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">KPMG S.p.A.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">Bari, Italy<BR>
June&nbsp;24, 2008
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>Changes in Internal Control Over Financial Reporting &#151; </B>In the Annual Report on Form 20-F for
the year ending December&nbsp;31, 2006 (the &#147;2006 20-F&#148;) the Company&#146;s management identified several
material weaknesses in its internal control over financial reporting. During 2007, the Company took
the following actions to remediate those material weaknesses and to remedy control deficiencies:
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">1. adopted a Group Accounting Handbook;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">2.&nbsp;formalized an accounting training program for employees, including specific training
relating to the Group&#146;s accounting principles and related disclosures;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%">The actions undertaken effectively remedied the material weaknesses identified in the 2006
20-F. Other than as described above, there were no changes in the Company&#146;s internal control over
financial that occurred during the period covered by this report that have materially affected, or
that were reasonably likely to material affect, the Company&#146;s internal control over financial
reporting.
</DIV>
<DIV align="left">
<A name="161"></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="162"></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: 8%">The Company has determined that, because of the existence and nature of its board of statutory
auditors, it qualifies for an exemption provided by Exchange Act Rule&nbsp;10A-3(c)(3) from many of the
Rule&nbsp;10A-3(c)(3) audit committee requirements. The board of statutory auditors has determined that
each of its members is an &#147;audit committee financial expert&#148; as defined in Item&nbsp;16A of Form 20-F.
For the names of the members of the board of statutory auditors and information regarding the
independence of the board of statutory auditors, see &#147;Item&nbsp;6. Directors, Senior Management and
Employees&#151;Statutory Auditors.&#148;
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->75<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<DIV align="left">
<A name="163"></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: 8%">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 <font style="white-space: nowrap">e-mail</font> 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="164"></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: 8%">The following table sets forth the aggregate fees billed and billable to the Company by its
independent auditors, KPMG in Italy and abroad during the fiscal years ended December&nbsp;31, 2007 and
2006, for audit fees, audit-related fees, tax fees and all other fees for audit ICOFR (SOA 404).
</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>2007</B></TD>
    <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>
</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">1,063,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">595,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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; padding-top: 1px">
    <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" style="padding-top: 1px">
    <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">1,063,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">595,000</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>
    <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: 8%">Audit fees in the above table are the aggregate fees billed and billable by KPMG in connection
with the audit of the Company&#146;s annual financial statements.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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
pre-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; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->76<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<DIV align="left">
<A name="165"></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: 8%">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"><B>&#149;</B></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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></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
<font style="white-space: nowrap">10A-3</font>
apply to the Board of Statutory Auditors.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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="166"></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: 8%">From January&nbsp;1, 2007, to December&nbsp;31, 2007, 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>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">On April&nbsp;18, 2008, Mr.&nbsp;Pasquale Natuzzi, the Company&#146;s controlling shareholder, acting through
his personal holding company, INVEST 2003 S.r.l., purchased 3,293,183 American Depositary Shares,
each representing one Ordinary Share, at a price of U.S.$3.61 (&#128;2.32) per ADS. The purchase
consisted of single, privately negotiated transaction, with a single entity (acting on behalf of
its client accounts) and was effected through the Institutional Delivery System of Depository Trust
Company. This purchase was not carried out as part of a publicly announced plan or program, nor is
there any such plan or program in place.
</DIV>


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

<P align="center" style="font-size: 10pt"><!-- Folio -->77<!-- /Folio -->
</DIV>



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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<DIV align="left">
<A name="167"></A>
</DIV>

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

<DIV align="left">
<A name="168"></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; margin-left: 8%">Not applicable.
</DIV>
<DIV align="left">
<A name="169"></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="77%">&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>Page</B></TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#300">Report of Independent Registered Public Accounting Firm</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#301">Consolidated Balance Sheets as of December&nbsp;31, 2007 and 2006</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#302">Consolidated Statements of Operations for the Years Ended December
31, 2007, 2006 and 2005</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#303">Consolidated Statements of Changes in Shareholders&#146; Equity for the
Years Ended December&nbsp;31, 2007, 2006 and 2005</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#304">Consolidated Statements of Cash Flows for the Years Ended December
31, 2007, 2006 and 2005</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#305">Notes to the Consolidated Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-7</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

<DIV align="left">
<A name="170"></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;24, 2008.</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">2.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><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 style="font-size: 8pt">
    <TD>&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 style="font-size: 8pt">
    <TD>&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 style="font-size: 8pt">
    <TD>&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 style="font-size: 8pt">
    <TD>&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"><!-- Folio -->78<!-- /Folio -->
</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: 7.20in">


<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, 2007 and 2006 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, 2007. 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 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, 2007 and 2006 and
the results of its operations and its cash flows for each of the years in the three-year period
ended December&nbsp;31, 2007, 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)&nbsp;to the consolidated financial statements, 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">We have also audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), Natuzzi Group&#146;s internal control over financial reporting as of December&nbsp;31,
2007, based on criteria established in Internal Control &#151; Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated June
24, 2008 expressed an unqualified opinion on the effectiveness of Natuzzi Group&#146;s internal control
over financial reporting.
</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;24, 2008

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

<P align="center" style="font-size: 10pt"><!-- Folio -->F-1<!-- /Folio -->
</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: 7.20in">

<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, 2007 and 2006</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">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</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 style="font-size: 10pt">
<TD>&nbsp;</TD>
</tr>

<TR valign="bottom" style="padding-top: 1px">
    <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; padding-top: 1px">
    <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">87,459</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">128,109</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">4</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; padding-top: 1px">
    <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">117,722</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119,274</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other receivables (note 7)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,784</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,681</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Inventories (note 8)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">107,290</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,358</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">946</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,463</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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">1,847</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,955</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred income taxes (note 14)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,079</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,463</TD>
    <TD>&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:60px; text-indent:-15px">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">364,131</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">407,308</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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; padding-top: 1px">
    <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">413,730</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">405,870</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">(177,880</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(159,547</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:45px; text-indent:-15px">Net property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">235,850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">246,323</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other assets (note 10)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,276</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,752</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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">212</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,291</TD>
    <TD>&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:60px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">617,469</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">674,674</TD>
    <TD>&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 style="font-size: 10pt">
<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" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <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; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Short-term borrowings (note 11)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,801</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">317</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">318</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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">89,247</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79,519</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">29,813</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,067</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income taxes (note 14)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,585</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,611</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">17,531</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,674</TD>
    <TD>&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:60px; text-indent:-15px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">146,069</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132,990</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Employees&#146; leaving entitlement (note 3 (n) )</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,343</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,269</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">2,116</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,433</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred income taxes (note 14)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred income for capital grants (note 3 (m) )</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,332</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,075</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other liabilities (note 17)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,866</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,460</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <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">146</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">605</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Shareholders&#146; equity (note 19):</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Share capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,824</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,739</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Reserves</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,292</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,292</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Retained earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">306,199</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">373,529</TD>
    <TD>&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:60px; text-indent:-15px">Total shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">411,597</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: 1px solid #000000">&nbsp;</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" style="padding-top: 1px">
    <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">617,469</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">674,674</TD>
    <TD>&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"><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"><!-- Folio -->F-2<!-- /Folio -->
</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: 7.20in">

<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, 2007, 2006 and 2005</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">2007</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>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net sales (note 22)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">634,402</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">(460,589</TD>
    <TD nowrap>)</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>
</TR>
<TR style="font-size: 1px">
    <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; padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">173,813</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <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">(173,885</TD>
    <TD nowrap>)</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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">(49,038</TD>
    <TD nowrap>)</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>
</TR>
<TR style="font-size: 1px">
    <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="padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Operating income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(49,110</TD>
    <TD nowrap>)</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>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other income (expense), net (note 24)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,646</TD>
    <TD nowrap>)</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>
</TR>
<TR style="font-size: 1px">
    <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="padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Earnings (loss)&nbsp;before taxes
and minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(51,756</TD>
    <TD nowrap>)</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>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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; padding-top: 1px">
    <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">(11,387</TD>
    <TD nowrap>)</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>
</TR>
<TR style="font-size: 1px">
    <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="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Earnings (loss)&nbsp;before minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(63,143</TD>
    <TD nowrap>)</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>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">496</TD>
    <TD>&nbsp;</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>
</TR>
<TR style="font-size: 1px">
    <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="padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net earnings (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(62,647</TD>
    <TD nowrap>)</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>
</TR>
<TR style="font-size: 1px">
    <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; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic earnings (loss)&nbsp;per share (note 3 <I>(w</I>))</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.14</TD>
    <TD nowrap>)</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>
</TR>
<TR style="font-size: 1px">
    <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="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted earnings (loss)&nbsp;per share (note 3 <I>(w</I>))</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.14</TD>
    <TD nowrap>)</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>
</TR>
<TR style="font-size: 1px">
    <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"><!-- Folio -->F-3<!-- /Folio -->
</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: 7.20in">

<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, 2007, 2006 and 2005</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"><!-- 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; padding-top: 1px">
    <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="padding-top: 1px">
    <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" style="background: #cceeff; padding-top: 1px">
    <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="padding-top: 1px">
    <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" style="background: #cceeff; padding-top: 1px">
    <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="padding-top: 1px">
    <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" style="background: #cceeff; padding-top: 1px">
    <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="padding-top: 1px">
    <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" style="background: #cceeff; padding-top: 1px">
    <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>
<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="padding-top: 1px">
    <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>&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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Increase share capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,689</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85</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">(85</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">(4,598</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,598</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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">(62,647</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(62,647</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" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balances at December&nbsp;31, 2007</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,824,227</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,824</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">306,199</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">411,597</TD>
    <TD>&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"><!-- Folio -->F-4<!-- /Folio -->
</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: 7.20in">

<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; margin-top: 0pt"><B>
Consolidated Statements of Cash Flows<BR>
Years ended December&nbsp;31, 2007, 2006 and 2005</B><BR>
(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">2007</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>
</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" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net earnings (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(62,647</TD>
    <TD nowrap>)</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>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Adjustments to reconcile net earnings (loss)&nbsp;to net cash
provided by (used in) 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" style="padding-top: 1px">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,331</TD>
    <TD>&nbsp;</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">30,272</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Write off of fixed assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,285</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">2,770</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Employees&#146; leaving entitlement</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,389</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,463</TD>
    <TD>&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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">(496</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(103</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(216</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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">116</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">767</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(149</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Unrealized foreign exchange losses and (gains)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,517</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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">(743</TD>
    <TD nowrap>)</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Equity in affiliated company</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,221</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="padding-top: 1px"><!-- 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; padding-top: 1px">
    <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" style="padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Receivables, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">599</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,932</TD>
    <TD nowrap>)</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">108</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,474</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,026</TD>
    <TD nowrap>)</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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">(4,143</TD>
    <TD nowrap>)</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">406</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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">(9,315</TD>
    <TD nowrap>)</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>
</TR>
<TR style="font-size: 1px">
    <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="padding-top: 1px">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Total adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,254</TD>
    <TD>&nbsp;</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>
</TR>
<TR style="font-size: 1px">
    <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; padding-top: 1px">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Net cash provided by (used in)
operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(15,393</TD>
    <TD nowrap>)</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>
</TR>
<TR style="font-size: 1px">
    <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="padding-top: 1px">
    <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; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Property, plant and equipment:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Additions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(21,445</TD>
    <TD nowrap>)</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Disposals</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">589</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">(5,039</TD>
    <TD nowrap>)</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Government grants received</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">605</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,002</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">(230</TD>
    <TD nowrap>)</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>
</TR>
<TR style="font-size: 1px">
    <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; padding-top: 1px">
    <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">(26,125</TD>
    <TD nowrap>)</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>
</TR>
<TR style="font-size: 1px">
    <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"><!-- Folio -->F-5<!-- /Folio -->
</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: 7.20in">
<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">2007</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>
</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" style="padding-top: 1px">
    <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; padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Proceeds</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">363</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">533</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Repayments</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">(1,620</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,094</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Short-term borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,775</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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>&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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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>&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"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Net cash provided by (used in)
financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,457</TD>
    <TD>&nbsp;</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>
</TR>
<TR style="font-size: 1px">
    <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; padding-top: 1px">
    <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">(2,589</TD>
    <TD nowrap>)</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>
</TR>
<TR style="font-size: 1px">
    <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="padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Increase (decrease)&nbsp;in cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(40,650</TD>
    <TD nowrap>)</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>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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; padding-top: 1px">
    <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">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: 1px solid #000000">&nbsp;</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="padding-top: 1px">
    <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">87,459</TD>
    <TD>&nbsp;</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>
    <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; padding-top: 1px">
    <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" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <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">665</TD>
    <TD>&nbsp;</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>
</TR>
<TR style="font-size: 1px">
    <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; padding-top: 1px">
    <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">5,409</TD>
    <TD>&nbsp;</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>
</TR>
<TR style="font-size: 1px">
    <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="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Non cash investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,093</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,844</TD>
    <TD>&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"><!-- Folio -->F-6<!-- /Folio -->
</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: 7.20in">

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

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes to the consolidated financial statements</B></font>
</DIV>

<DIV align="justify" style="font-size: 10pt">(Expressed in thousands of euros except as otherwise indicated)</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>1.&nbsp;Description of business and Group composition</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%">The subsidiaries included in the consolidation at December&nbsp;31, 2007, 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="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="11%">&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>Percent of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&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"><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" colspan="2" style="border-bottom: 1px solid #000000"><B>Activity</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">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="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi China 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="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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="left">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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="left">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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="left">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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="left">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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="left">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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="left">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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" nowrap>Kaltbrunn, Switzerland</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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="left">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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="left">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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="left">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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="left">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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="left">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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="left">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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="left">&nbsp;</TD>
    <TD align="right">(5</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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="left">&nbsp;</TD>
    <TD align="right">(5</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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="left">&nbsp;</TD>
    <TD align="right">(6</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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="left">&nbsp;</TD>
    <TD align="right">(7</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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="left">&nbsp;</TD>
    <TD align="right">(7</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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="left">&nbsp;</TD>
    <TD align="right">(7</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>




<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</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"><!-- Folio -->F-7<!-- /Folio -->
</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: 7.20in">





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

</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><FONT style="font-variant: SMALL-CAPS"><B>Notes
to the consolidated financial statements</B></font>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 0pt">
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">On June&nbsp;14, 2007, the Company acquired from a third party 100% of a business which main asset
was a store located in one of the several shopping and commercial areas of Rome (Tiburtina area).
The cash consideration paid by the Company for this acquisition was 230. At the date of the
acquisition there were no employees, inventory or revenues associated with this asset. The net
assets acquired were composed mainly as follows: (a)&nbsp;operating lease agreement; (b)&nbsp;leasehold
improvements incorporated in the store; (c)&nbsp;commercial license authorization obtained from the Rome
Municipality for trading sofas and other furniture to the public. During 2008, the Company started
some construction work in order to set up in this store Natuzzi&#146;s layout selling system. The
acquisition resulted in a goodwill of 225, 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">225</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Leasehold improvements</DIV></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: 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">230</TD>
    <TD>&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: 8%">The main factor that has contributed to the determination of the consideration paid is the
presence of the store in a key geographic location of Rome. The results of this business
acquisition have been included in the consolidated statement of operations from the date of
acquisition.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In March&nbsp;2007 the Company incorporated a new subsidiary, Natuzzi China Ltd, which is engaged
in the cutting of leather hides to be used as upholstery.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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" style="padding-top: 1px">
    <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; padding-top: 1px">
    <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" style="padding-top: 1px">
    <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: 8%">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>

<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-8<!-- /Folio -->
</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: 7.20in">

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

</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>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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" style="padding-top: 1px">
    <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; padding-top: 1px">
    <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: 8%">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: 8%">During 2005 the Company tried to sell to third party its twelve stores located in the 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: 8%">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: 8%">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: 8%">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: 8%">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>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-9<!-- /Folio -->
</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: 7.20in">

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

</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>
(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="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" style="padding-top: 1px">
    <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; padding-top: 1px">
    <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" style="padding-top: 1px">
    <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; padding-top: 1px">
    <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: 8%">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 for the entire year ended at December&nbsp;31, 2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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 franchisee. Prior to the date of 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 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" style="padding-top: 1px">
    <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; padding-top: 1px">
    <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" style="padding-top: 1px">
    <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; padding-top: 1px">
    <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: 8%">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 statement of operations from the
date of acquisition.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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" style="padding-top: 1px">
    <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"><!-- Folio -->F-10<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

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

</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>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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 metres); (c)&nbsp;advertising of Natuzzi&#146;s &#147;trademark&#148; and
&#147;product&#148; in the heart of Milan shopping area. The results of this business acquisition have been
included in the consolidated statement of operations from the date of acquisition.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In 2005 the Company incorporated two new subsidiaries, Natuzzi Sweden AB and Natuzzi Japan KK,
which provide sales support for the Group in the respective countries.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>2. Basis of preparation</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The financial statements utilized for the consolidation are the financial statements of each
Group company at December&nbsp;31, 2007, 2006 and 2005. The 2007, 2006 and 2005 financial statements
have been approved by the respective shareholders of the relevant companies. The 2007 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: 8%">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.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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; text-indent: 8%">&nbsp;

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

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

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

</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>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>3. Summary of significant accounting policies</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The significant accounting policies followed in the preparation of the consolidated financial
statements are outlined below.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 0%"><B>a) Principles of consolidation</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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. 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 align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 0%"><B>b) Foreign currency transactions</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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 align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 0%"><B>c) Forward exchange contracts</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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, 2007, 2006 and 2005 all unrealized gains or losses on such
contracts 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: 0%"><B>d) Financial statements of foreign operations</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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; text-indent: 8%">&nbsp;

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

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

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

</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>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%">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: 8%">(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: 8%">(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: 8%">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: 8%">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>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>e) Cash and cash equivalents</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%">&nbsp;

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

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

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

</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>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>f) Marketable debt securities</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%">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: 8%">Realized gains and losses are charged to other income (expense), net.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>g) Accounts receivable and payable</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Receivables are stated at nominal value net of an allowance for doubtful accounts. Payables
are stated at face value.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>h) Inventories</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%">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: 8%">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 align="justify" style="font-size: 10pt; margin-top: 10pt"><B>i) Property, plant and equipment</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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 align="justify" style="font-size: 10pt; margin-top: 10pt"><B>j) Other assets</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Other assets primarily include software, 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>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

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

</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>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Software, trademarks, patents and goodwill are amortized on a straight-line basis over a
period of five years.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>k) Impairment of long-lived assets and long-lived assets to be disposed of</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Company reviews long-lived assets, including intangible assets with estimable useful
lives, for impairment whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future discounted cash flows expected to be
generated by the asset. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the assets exceeds the fair
value of the assets. Estimated fair value is generally based on either appraised value or measured
by discounted estimated future cash flows. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>l) Income taxes</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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 align="justify" style="font-size: 10pt; margin-top: 10pt"><B>m) Government grants</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Capital grants compensate the Group for the partial cost of an asset and are part of the
Italian government&#146;s investment incentive program, under which the Group receives amounts generally
equal to a percentage of the aggregate investment made by the Group in the construction of new
manufacturing facilities, or in the improvement of existing facilities, in designated areas of the
country.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%">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: 8%">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>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-15<!-- /Folio -->
</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: 7.20in">

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

</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>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">At December&nbsp;31, 2007 and 2006 the deferred income for capital grants shown in the consolidated
balance sheet amounts to 13,332 and 14,075, respectively.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The amortization of these grants recorded in net sales of the consolidated statement of
operations for the years ended December&nbsp;31, 2007, 2006 and 2005, amounts to 1,026, 1,111 and 1,239,
respectively.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Cost reimbursement grants relating to training and other personnel costs are credited to
income when there is a reasonable assurance of receipt from government agencies.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>n) Employees&#146; leaving entitlement</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%">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: 8%">The expense recorded for the leaving entitlement for the years ended December&nbsp;31, 2007, 2006
and 2005 was 7,389, 6,778 and 6,877, respectively.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The number of workers employed by the Group totalled 8,219, and 8,133 at December&nbsp;31, 2007 and
2006, respectively.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>o) Net sales</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%">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>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-16<!-- /Folio -->
</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: 7.20in">

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

</DIV>

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

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>p) Shipping and handling costs</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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, 2007, 2006 and 2005 were 51,568, 69,433 and 69,730, respectively.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>q) Advertising costs</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Advertising costs are expensed in the periods incurred and are included in selling expenses.
Advertising expenses recorded for the years ended December&nbsp;31, 2007, 2006 and 2005 were 34,424,
31,621 and 31,273, respectively.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>r) Commission expense</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Commissions payable to sales representatives and the related expenses are recorded at the time
shipments are made by the Group to customers. Commissions are not paid until payment for the
related sale&#146;s invoice is remitted to the Group by the customer.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>s) Warranties</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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 align="justify" style="font-size: 10pt; margin-top: 10pt"><B>t) Research and development costs</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Research and development costs are expensed in the periods incurred.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>u) Contingencies</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Liabilities for loss contingencies are recorded when it is probable that a liability has been
incurred and the amount of the loss can be reasonably estimated.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>v) Use of estimates</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-17<!-- /Folio -->
</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: 7.20in">

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

</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>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>w) Earnings per share</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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.
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 2007, 2006 and 2005 share grants and options of 439,651,
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">2007</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>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net earnings (loss)&nbsp;attributable to
ordinary shareholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(62,647</TD>
    <TD nowrap>)</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>
</TR>
<TR style="font-size: 1px">
    <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">Weighted-average number of ordinary
shares outstanding during the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,817,086</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>
</TR>
<TR style="font-size: 1px">
    <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" 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">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>    <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">54,817,086</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>
</TR>
<TR style="font-size: 1px">
    <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>4. Cash and cash equivalents</B>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">Cash and cash equivalents are analyzed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="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">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash on hand</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">381</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">510</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bank accounts in Euro</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,531</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,746</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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">79,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">110,798</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Money market instruments</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">55</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</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">87,459</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">128,109</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: 3px double #000000">&nbsp;</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>5. Marketable debt securities</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Details regarding marketable debt securities are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="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">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign corporate bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">4</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>


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

<P align="center" style="font-size: 10pt"><!-- Folio -->F-18<!-- /Folio -->
</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: 7.20in">

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

</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>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">Further information regarding the Group&#146;s investments in marketable debt securities is as
follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="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">2007</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"><!-- 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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign corporate bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</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">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">4</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">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: 3px double #000000">&nbsp;</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">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"><!-- 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; padding-top: 1px">
    <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" style="padding-top: 1px">
    <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; margin-left: 8%">The contractual maturity of the Group&#146;s marketable debt securities at December&nbsp;31, 2007 is
between 1 &#151; 5&nbsp;years.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>6. Trade receivables, net</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Trade receivables are analyzed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="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">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">North American customers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,408</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other foreign customers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,032</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,217</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Domestic customers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,638</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,163</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Trade bills receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,537</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,543</TD>
    <TD>&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">123,421</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">125,331</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Allowance for doubtful accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,699</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,057</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">117,722</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119,274</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: 3px double #000000">&nbsp;</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: 8%">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: 8%">As of December&nbsp;31, 2007, 2006 and 2005 and for each of the years in the three-year period
ended December&nbsp;31, 2007, 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"><!-- 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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">21</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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" style="background: #cceeff; padding-top: 1px">
    <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>
<!-- End Table Body --></TABLE>
</DIV>

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

<P align="center" style="font-size: 10pt"><!-- Folio -->F-19<!-- /Folio -->
</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: 7.20in">

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

</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>
(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">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"><!-- 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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</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">23</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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" style="background: #cceeff; padding-top: 1px">
    <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>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In 2007 one customer accounted for approximately 15% of the total net sales of the Group. This
customer operates many furniture stores throughout the world.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%">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">2007</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>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,057</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 valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Charges-bad debt expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,789</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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">(2,147</TD>
    <TD nowrap>)</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>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,699</TD>
    <TD>&nbsp;</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>
</TR>
<TR style="font-size: 1px">
    <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: 8%">Trade receivables denominated in foreign currencies at December&nbsp;31, 2007 and 2006 totalled
59,075 and 55,418, 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">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">U.S. dollars</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,293</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,938</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">British pounds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,760</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Canadian dollars</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,012</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,023</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Australian dollars</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,778</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,440</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other currencies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,497</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,257</TD>
    <TD>&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">59,075</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,418</TD>
    <TD>&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"><B>7. Other receivables</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Other receivables are analyzed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="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">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Receivable from tax authorities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,373</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,642</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">VAT</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,302</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,133</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Receivable from National Institute for Social Security</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,870</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,650</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Advances to suppliers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,837</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,301</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,604</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,157</TD>
    <TD>&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">47,784</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,681</TD>
    <TD>&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"><!-- Folio -->F-20<!-- /Folio -->
</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: 7.20in">

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

</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>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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: 4%">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: 4%">The VAT receivable includes value added taxes and interest thereon reimbursable to various
companies of the Group. While currently due at the balance sheet date, the collection of the VAT
receivable may extend over a maximum period of up to two years.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The receivable from National Institute for Social Security represents the amounts anticipated
by the Company on behalf of such governmental institute related to salaries for those employees
subject to temporary work force reduction. The Company will recover these amounts anticipated by
the end of the year.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>8. Inventories</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Inventories are analyzed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="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">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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">63,698</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,060</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goods in process</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,770</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,696</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Finished products</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,822</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,602</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">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">107,290</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,358</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"><B>9. Property, plant and equipment and accumulated depreciation</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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">2007</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"><!-- 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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Land and industrial buildings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">200,424</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(44,763</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">0 &#150; 10</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Machinery and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119,371</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(80,163</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">10 &#150; 25</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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">(6,500</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="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Office furniture and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,373</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19,650</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">10 &#150; 20</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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">29,932</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18,232</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">25 &#150; 35</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Transportation equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,044</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,962</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">20 &#150; 25</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Leasehold improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,969</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,610</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">10 &#150; 20</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Construction in progress</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,542</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">413,730</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(177,880</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"><!-- Folio -->F-21<!-- /Folio -->
</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: 7.20in">

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

</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>
(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">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"><!-- 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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Land and industrial buildings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">201,974</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">0 &#150; 10</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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 &#150; 25</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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="padding-top: 1px">
    <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 &#150; 20</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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 &#150; 35</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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 &#150; 25</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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 &#150; 20</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Construction in progress</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,508</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>



<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">Construction in progress relates principally to manufacturing facilities.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>10. Other assets</B>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">Other assets consist of the following:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="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">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,202</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,977</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity in affiliated enterprises</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,646</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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,664</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,786</TD>
    <TD>&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">38,512</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,630</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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">(21,236</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(15,878</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">17,276</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,752</TD>
    <TD>&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: 8%">At December&nbsp;31, 2007 and 2006 the net book value of goodwill may be analyzed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="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">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross carrying amount</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,202</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,977</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">(7,516</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,676</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">6,686</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,301</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: 3px double #000000">&nbsp;</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: 8%">At December&nbsp;31, 2007 and 2006 investments in affiliated enterprises are accounted for under
the equity method. These affiliated enterprises are Salena S.r.l. and Alfa Omega S.r.l., in which
the Company owns 49% and 20% interest, respectively. Salena S.r.l. is engaged in the building
construction sector. Alfa Omega S.r.l. owns buildings that are rented as office space or store
space. The Company has a significant influence on these two entities.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-22<!-- /Folio -->
</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: 7.20in">

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

</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>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The line others primarily includes software, trademarks and patents. At December&nbsp;31, 2007 and
2006 the net book value of these other assets may be analyzed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="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">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross carrying amount</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,664</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,786</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">(13,720</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,202</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net book value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,944</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,584</TD>
    <TD>&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: 8%">Amortization expense recorded for these other assets was 2,679, 1,831 and 1,793 for the years
ended December&nbsp;31, 2007, 2006 and 2005, respectively. Estimated amortization expense for the next
five years is: 2,725 in 2008, 2,246 in 2009, 1,608 in 2010, 1,365 in 2011, and nil in 2012.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>11. Short-term borrowings</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Short-term borrowings consist of the following:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="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">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bank borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,068</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,351</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bank overdrafts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,508</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">450</TD>
    <TD>&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">7,576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,801</TD>
    <TD>&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: 8%">While bank overdrafts are payable on demand, bank borrowings consist of unsecured credit line
agreements with banks and have various short maturities.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">At December&nbsp;31, 2007 and 2006 the short-term borrowings included 3,068 and 3,351 denominated
in foreign currencies, respectively.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The weighted average interest rates on the above-listed short-term borrowings at December&nbsp;31,
2007, 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="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">2007</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>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <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; padding-top: 1px">
    <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">6.18</TD>
    <TD nowrap>%</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" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bank overdrafts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5.03</TD>
    <TD nowrap>%</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>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Credit facilities available to the Group, including amounts guaranteed under surety bonds,
amounted to 47,351 and 59,491 at December&nbsp;31, 2007 and 2006, respectively. The unused portion of
these facilities amounted to 39,775 and 55,690 at December&nbsp;31, 2007 and 2006, respectively.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>12. Accounts payable-trade</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Accounts payable-trade totalling 89,247 and 79,519 at December&nbsp;31, 2007 and 2006,
respectively, represent principally amounts payable for purchases of goods and services in Italy
and abroad, and include 14,411 and 21,936 at December&nbsp;31, 2007 and 2006, respectively, denominated
in foreign currencies.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-23<!-- /Folio -->
</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: 7.20in">

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

</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>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>13. Accounts payable-other</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Accounts payable-other are analyzed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="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">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Advances from customers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,441</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for warranties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,627</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,561</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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">3,777</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,835</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Withholding taxes on payroll and on others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,996</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,059</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,153</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,578</TD>
    <TD>&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">29,813</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,067</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</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: 8%">The following table provides the movements in the provision for warranties:
</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">2007</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>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,561</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 valign="bottom" style="padding-top: 1px">
    <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">4,962</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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">(2,896</TD>
    <TD nowrap>)</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>
</TR>
<TR style="font-size: 1px">
    <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">8,627</TD>
    <TD>&nbsp;</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 style="font-size: 1px">
    <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>14. Taxes on income</B>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">Italian companies are subject to two income taxes at the following rates:
</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">2007</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>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <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; padding-top: 1px">
    <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" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">IRAP (regional tax)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">4.25</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">4.25</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">4.25</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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 2007, 2006 and 2005 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: 8%">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 expense and other financial costs).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In addition, on December&nbsp;24, 2007 the Italian Parliament definitively approved the budget law
(law n. 244) which enacted the changes to IRES and IRAP tax rate as from January&nbsp;1, 2008 as
follows: IRES tax rate passed from 33% to 27.50%, while IRAP tax rate passed from 4.25% to 3.90%.
As result of these changes in the tax rates, the Company adjusted the effect of changes in IRES and
IRAP tax rates on net deferred tax assets during the year ended December&nbsp;31, 2007, as it includes
the enactment date.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-24<!-- /Folio -->
</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: 7.20in">

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

</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>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">These changes in tax rates resulted in a decrease of gross deferred tax assets (gross of the
valuation allowance) by 3,809 as of December&nbsp;31, 2007. However, these changes in tax rates resulted
in no effect on the net deferred tax assets as of December&nbsp;31, 2007 due to the valuation allowance.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Certain foreign subsidiaries (Italsofa Shanghai Ltd, Softaly Shanghai Ltd, Natuzzi China 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 2007, 2006 and
2005 income tax charge.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Approximately 91.1%, 57.0% and 69.4% respectively, of the Group&#146;s consolidated earnings (loss)
before taxes were generated by domestic Italian operations during 2007, 2006 and 2005. 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">2007</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>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(47,137</TD>
    <TD nowrap>)</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,619</TD>
    <TD nowrap>)</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>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(51,756</TD>
    <TD nowrap>)</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>
</TR>
<TR style="font-size: 1px">
    <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: 8%">The effective income tax rates for the years ended December&nbsp;31, 2007, 2006 and 2005 were
22.0%, 36.7% and 26.5%, respectively. The actual income tax expense differs from the &#145;expected&#146;
income tax expense (computed by applying the state tax, which is 33% 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">2007</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>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected income tax (benefit)&nbsp;expense charge
at full tax rates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(17,079</TD>
    <TD nowrap>)</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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; padding-top: 1px">
    <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">(6,320</TD>
    <TD nowrap>)</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">(2,903</TD>
    <TD nowrap>)</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">- Italian regional tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,793</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">- Non-deductible expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,286</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">- Provisions for contingent liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">566</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">273</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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">28,503</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">- Effect of change in tax rates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,809</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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">- Tax effect of unremitted earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(541</TD>
    <TD nowrap>)</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>
</TR>
<TR style="font-size: 1px">
    <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="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Actual tax charge</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,387</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>
</TR>
<TR style="font-size: 1px">
    <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%">Total income taxes for the years ended December&nbsp;31, 2007, 2006 and 2005 relate to earnings
from operations.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-25<!-- /Folio -->
</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: 7.20in">

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

</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>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">Total income taxes for the years ended December&nbsp;31, 2007, 2006 and 2005 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="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">2007</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>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Italian</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,331</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,593</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>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total (a)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,924</TD>
    <TD>&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>
</TR>
<TR style="font-size: 1px">
    <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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Italian</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,507</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">956</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>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total (b)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,463</TD>
    <TD>&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>
</TR>
<TR style="font-size: 1px">
    <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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total (a &#043; b)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,387</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>
</TR>
<TR style="font-size: 1px">
    <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: 8%">The tax years from January&nbsp;1, 2003 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: 8%">The tax effects of temporary differences that give rise to deferred tax assets and deferred
tax liabilities at December&nbsp;31, 2007 and 2006 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">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">- Tax loss carry forwards</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,033</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,562</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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">2,796</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">590</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">- Provision for warranties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,589</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,047</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">- Inventory obsolescence</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,714</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,849</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">- Allowance for doubtful accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,506</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,746</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">- Provision for contingent liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,080</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,403</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">- Intercompany profit on inventory</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,027</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,051</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">- Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">666</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">374</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">- Provision for sales representatives</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">493</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">658</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">- Other temporary differences</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">641</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,698</TD>
    <TD>&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">48,545</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,978</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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">(43,654</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>
</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">4,891</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,832</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">(1,399</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,940</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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">(633</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(768</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">(570</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(655</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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">(998</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(715</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="padding-top: 1px">
    <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">(3,600</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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">1,291</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>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">A valuation allowance has been established for most of the deductible tax temporary
differences and tax loss carryforwards.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 4%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-26<!-- /Folio -->
</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: 7.20in">

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

</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>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The valuation allowance for deferred tax assets as of December&nbsp;31, 2007 and 2006 was 43,654
and 15,146, respectively. The net change in the total valuation allowance for the years ended
December&nbsp;31, 2007 and 2006 was an increase of 28,508 and 1,993, 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 and the tax loss carryforwards are utilized.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Given the cumulative loss position of the Company and of most of the Italian and foreign
subsidiaries as of December&nbsp;31, 2007, management considered the scheduled reversal of deferred tax
liabilities and tax planning strategies, in making this assessment. However, management after a
reasonable effort as of December&nbsp;31, 2007 has not identified any relevant tax planning strategies
prudent and feasible available to reduce the need for a valuation allowance. Therefore, at December
31, 2007 the realization of the deferred tax assets is primarily based on the scheduled reversal of
deferred tax liabilities.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Based upon this analysis, management believes it is more likely than not that Natuzzi Group
will realize the benefits of these deductible differences and net operating loss carryforwards, net
of the existing valuation allowance at December&nbsp;31, 2007 and 2006.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">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">2007</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"><!-- 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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,888</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,657</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,545</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Valuation allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,178</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(37,476</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(43,654</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,181</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,891</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,631</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,969</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,600</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,079</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">212</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,291</TD>
    <TD>&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">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"><!-- 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; padding-top: 1px">
    <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" style="padding-top: 1px">
    <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" style="padding-top: 1px">
    <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="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">As of December&nbsp;31, 2007 the tax loss carryforwards of the Group total 121,364 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" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,372</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,905</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2012</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,760</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,347</TD>
    <TD>&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">121,364</TD>
    <TD>&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"><!-- Folio -->F-27<!-- /Folio -->
</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: 7.20in">

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

</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>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">As of December&nbsp;31, 2007, taxes that are due on the distribution of the portion of
shareholders&#146; equity equal to unremitted earnings of most of the subsidiaries is 1,399 (1,940 at
December&nbsp;31, 2006). 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: 8%">The Group has not provided for such taxes, amounting to 136 (217 at December&nbsp;31, 2006), for
some subsidiaries for which the likelihood of distribution is remote and earnings are deemed to be
permanently reinvested.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>15. Salaries, wages and related liabilities</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Salaries and wages</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,991</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,320</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Social security contributions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,826</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,577</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Vacation accrual</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,714</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,777</TD>
    <TD>&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">17,531</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,674</TD>
    <TD>&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"><B>16. Long-term debt</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Long-term debt at December&nbsp;31, 2007 and 2006 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">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2.25% long-term debt payable in annual equal instalments
with final payment due May&nbsp;30, 2015</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,460</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <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">219</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">291</TD>
    <TD>&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="padding-top: 1px"><!-- 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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,433</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,751</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">(317</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(318</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; padding-top: 1px">
    <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">2,116</TD>
    <TD>&nbsp;</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>
    <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: 8%">Loan maturities after 2008 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">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">332</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">340</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2012</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">280</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">891</TD>
    <TD>&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">2,116</TD>
    <TD>&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; margin-left: 8%">At December&nbsp;31, 2007 and 2006 there are no long-term debt denominated in foreign currencies.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-28<!-- /Folio -->
</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: 7.20in">

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

</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>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Interest expense related to long-term debt for the years ended December&nbsp;31, 2007, 2006 and
2005 was 64, 96 and 139 respectively. Interest expense is paid with the related instalment
(quarterly, semi-annual or annual).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>17. Other liabilities</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for contingent liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,344</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,696</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">1,522</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,764</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</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">10,866</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,460</TD>
    <TD>&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 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, 2007 and 2006 amounts to 9,344 and 8,696,
respectively), will not have a material adverse effect on the Group&#146;s consolidated financial
position or results of operations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>18. Minority interest</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Minority interest shown in the accompanying consolidated balance sheet at December&nbsp;31, 2007 is
146 (605 at December&nbsp;31, 2006).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>19. Shareholders&#146; equity</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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">47.5</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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; padding-top: 1px">
    <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" style="padding-top: 1px">
    <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">47.4</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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" style="padding-top: 1px">
    <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; padding-top: 1px">
    <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: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: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: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; text-indent: 8%">The number of ordinary shares issued at December&nbsp;31, 2007 and 2006 is 54,824,227 and
54,738,538, respectively. The par value of one ordinary share is euro 1.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-29<!-- /Folio -->
</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: 7.20in">

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

</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>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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, 2007 and 2006, respectively.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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: 4%">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, 2007 was a debit of 7,576 (debit of
2,978 at December&nbsp;31, 2006).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>20. Share grants and options</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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: 4%">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: 4%">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: 4%">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 has been issued in two equal installments during January&nbsp;2007 and 2008. The vesting period
for these grants is considered to be reference year (2004 or 2005), as continuation of employment
after that date is not a condition for the said share grants.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 4%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-30<!-- /Folio -->
</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: 7.20in">

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

</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>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The share options have an exercise price of euro 8.51 (U.S. dollars 12.53 at December&nbsp;31, 2007
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
are determined to be the above dates.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The status of the share grants and options under the plan, as of December&nbsp;31, 2007 and 2006,
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"><!-- 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; padding-top: 1px">
    <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 valign="bottom" style="padding-top: 1px">
    <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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(56,876</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">(56,876</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">(77,138</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">(77,138</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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, 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">203,868</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">203,868</TD>
    <TD>&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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average remaining
contractual life</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">1.04 years</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>&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"><!-- 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; padding-top: 1px">
    <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 valign="bottom" style="padding-top: 1px">
    <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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(28,813</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">(28,813</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">(33,166</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(70,963</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(104,129</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,813</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">108,760</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">137,573</TD>
    <TD>&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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average remaining
contractual life</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">0.04 years</TD>
    <TD>&nbsp;</TD>

    <TD>&nbsp;</TD>

    <TD colspan="2" align="right">1.04 years</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>&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="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">During 2007, 2006 and 2005 the Company did not grant any shares, options and additional
options.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The total intrinsic value of shares exercised during the years ended December&nbsp;31, 2007, 2006
and 2005 was 268, 368 and nil, respectively. During 2007, 2006 and 2005 there were no options and
additional options exercised as the intrinsic value was negative (the exercise price as of December
31, 2007, 2006 and 2005 exceeded the market value). The grant date fair value of shares vested
during the years ended December&nbsp;31, 2007, 2006 and 2005 was 674, 447 and nil, respectively.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-31<!-- /Folio -->
</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: 7.20in">

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

</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>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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 12.53 at December&nbsp;31, 2007 exchange
rate). At December&nbsp;31, 2007, 2006 and 2005 the market price of Natuzzi&#146;s shares is euro 3.13 (U.S.
dollars 4.61 at December&nbsp;31, 2007 exchange rate), euro 6.46 (U.S. dollars 8.51 at December&nbsp;31, 2006
exchange rate) and euro 5.93 (U.S. dollars 7.00 at December&nbsp;31, 2005 exchange rates), respectively.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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 align="justify" style="font-size: 10pt; margin-top: 10pt"><B>21. Commitments and contingent liabilities</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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, 2007, 2006 and 2005 was 15,768, 14,125 and 13,970, respectively. As of December&nbsp;31,
2007, 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">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,114</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,685</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,193</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,888</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2012</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,284</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,361</TD>
    <TD>&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">72,525</TD>
    <TD>&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: 8%">Certain banks have provided guarantees at December&nbsp;31, 2007 to secure payments to third
parties amounting to 2,674 (4,468 at December&nbsp;31, 2006). These guarantees are unsecured and have
various maturities extending through December&nbsp;31, 2013.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In December&nbsp;1996, the Company and the &#147;Contract Planning Service&#148; of the Italian Ministry of
the Industrial Activities signed a &#147;Program Agreement&#148; with respect to the &#147;Natuzzi 2000 project&#148;.
In connection with this project, Natuzzi Group prepared a multi-faceted program of industrial
investments for the increase of the production capacity of leather and fabric upholstered furniture
in the area close to its headquarters in Italy. According to this &#147;Program Agreement&#148;, Natuzzi
should have realized investments for 295,156 and at the same time the Italian government should
have contributed in the form of capital grants for 145,455. During 2003 Natuzzi revised its growth
and production strategy due to the strong competition of products realized by competitors in
countries like China and Brazil. Therefore, as a consequence of this change in the economic
environment in 2003 Natuzzi requested 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>
<P align="center" style="font-size: 10pt; text-indent: 4%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-32<!-- /Folio -->
</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: 7.20in">

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

</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>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%">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, in 2005 with a preliminary notice and in 2007 with a final notice, to the Company and
certain Italian subsidiaries to reimburse all the social contribution due and not paid, amounting
to 19,732. The Company, based on the advice of its legal consultants, did not pay the amounts
claimed back and, at the same time, has taken a legal action against the National Institute for
Social Security in order to obtain the cancellation of the above request of 19,732. 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, 2007, 2006 and 2005,
as this amount is considered the probable final liability.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">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 align="justify" style="font-size: 10pt; margin-top: 10pt"><B>22. Segmental and geographical information</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Group operates in a single industry segment, that is, the design, manufacture and
marketing of contemporary and traditional leather and fabric upholstered furniture. It offers a
wide range of upholstered furniture for sale, manufactured in production facilities located in
Italy and abroad (Romania, Brazil and China).
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">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">2007</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>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Leather upholstered furniture</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">502,913</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fabric upholstered furniture</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,597</TD>
    <TD>&nbsp;</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>
</TR>
<TR style="font-size: 1px">
    <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">563,510</TD>
    <TD>&nbsp;</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>
</TR>
<TR style="font-size: 1px">
    <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: 8%">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>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-33<!-- /Folio -->
</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: 7.20in">

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

</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>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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">2007</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>
</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" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">United States of America</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">159,289</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Italy</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68,734</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Spain</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,677</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">England</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,965</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Canada</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,190</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">France</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,433</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Germany</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,714</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Belgium</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,138</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Australia</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,354</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Holland</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,594</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">116,422</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">124,580</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102,612</TD>
    <TD>&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">563,510</TD>
    <TD>&nbsp;</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>
</TR>
<TR style="font-size: 1px">
    <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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Italy</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132,789</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">135,956</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Romania</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,468</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,088</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Brazil</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,355</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,791</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">China</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,769</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,983</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">United States of America</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,147</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,381</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other countries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,322</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,124</TD>
    <TD>&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">235,850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">246,323</TD>
    <TD>&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: 8%">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 2007, 2006
and 2005 totalled 70,892, 75,188 and 75,089, respectively.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>23. Cost of sales</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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">2007</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>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Opening inventories</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>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">112,601</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">308,234</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Labor</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">101,664</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Third party manufacturers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,499</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other manufacturing costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,124</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">(107,290</TD>
    <TD nowrap>)</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>
</TR>
<TR style="font-size: 1px">
    <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">460,589</TD>
    <TD>&nbsp;</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>
</TR>
<TR style="font-size: 1px">
    <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"><!-- Folio -->F-34<!-- /Folio -->
</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: 7.20in">

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

</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>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>24. Other income (expense), net</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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">2007</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>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,557</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expense and bank commissions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,884</TD>
    <TD nowrap>)</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>
</TR>
<TR style="font-size: 1px">
    <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 income, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,673</TD>
    <TD>&nbsp;</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>
</TR>
<TR style="font-size: 1px">
    <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="padding-top: 1px">
    <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">(8,096</TD>
    <TD nowrap>)</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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">946</TD>
    <TD>&nbsp;</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>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gains (losses)&nbsp;on foreign exchange</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,150</TD>
    <TD nowrap>)</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>
</TR>
<TR style="font-size: 1px">
    <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="padding-top: 1px"><!-- 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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,831</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">503</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,462</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,646</TD>
    <TD nowrap>)</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>
</TR>
<TR style="font-size: 1px">
    <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: 8%">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">2007</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>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <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; padding-top: 1px">
    <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">5,877</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">(3,865</TD>
    <TD nowrap>)</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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 nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,108</TD>
    <TD nowrap>)</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>
</TR>
<TR style="font-size: 1px">
    <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">(8,096</TD>
    <TD nowrap>)</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>
</TR>
<TR style="font-size: 1px">
    <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: 8%">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">2007</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>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <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; padding-top: 1px">
    <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">(2,956</TD>
    <TD nowrap>)</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Incentive from landlord</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">1,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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; padding-top: 1px">
    <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">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,380</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Export incentive benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,371</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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; padding-top: 1px">
    <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>&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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax refund</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,961</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="padding-top: 1px"><!-- 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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Write off of a provision</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,500</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="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income tax not due</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">668</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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Write off of fixed assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,285</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,770</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">495</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,943</TD>
    <TD>&nbsp;</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>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,831</TD>
    <TD>&nbsp;</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>
</TR>
<TR style="font-size: 1px">
    <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"><!-- Folio -->F-35<!-- /Folio -->
</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: 7.20in">

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

</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>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>Provisions for contingent liabilities</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Company has charged to other income (expense), net in 2007, 2006 and 2005 the amount of
2,956, 5,828 and 560, 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: 8%">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: 8%">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.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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 of 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: 8%">During 2006 the Company has charged to other income (expense)&nbsp;the amount of 1,223 because of
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: 8%">For 2006 the remaining amount of 1,845 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: 8%">Below are reported the comments on the 2007 legal and tax actions.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">During 2007 the Company has charged to other income (expense)&nbsp;net the amount of 2,172 for the
probable tax contingent liabilities related to income taxes and other taxes of some foreign
subsidiaries. This amount represents the probable amount that could be claimed back by the tax
authorities in case of tax audit.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">For 2007 the remaining amount of 784 of the provisions for contingent liabilities is related
to several minor claims and legal actions arising in the ordinary course of business.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-36<!-- /Folio -->
</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: 7.20in">

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

</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>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%"><B>Incentive from landlord</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%"><B>Revenue for capital grants</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%">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: 8%">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; margin-left: 8%"><B>Export incentive benefits</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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; margin-left: 8%"><B>Penalties to landlords</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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; margin-left: 8%"><B>Tax refund</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">During 2007, the Company obtained from tax authorities a refund of 2,961 for income and other
taxes not due related to prior years. As these amounts were not recorded previously due to
uncertainty, the Company recorded such amounts in the consolidated statement of operations for
those years.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%"><B>Write off a provision for contingent liability</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">As indicated above under the title &#147;provisions for contingent liability&#148;, 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. During 2007 the Company and the defendant signed a settlement
agreement that provided the following: (a)&nbsp;the Company renounced to proceed against the defendant
for other infringements of Natuzzi&#146;s models and other requests; (b)&nbsp;the defendant renounced to the
reimbursement of the legal cost of 1,500. As a consequence of this settlement the Company has
recorded as other income (expense), net in 2007 the amount of 1,500 as income.
</DIV>


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

<P align="center" style="font-size: 10pt"><!-- Folio -->F-37<!-- /Folio -->
</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: 7.20in">

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

</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>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>Income tax not due</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">During 2007 an Italian subsidiary of the Parent Company obtained from the Italian tax
authorities the confirmation that a portion of the income tax amounting to 668 related to year 2006
was not due. As this amount was not recorded due to uncertainty, the Company recorded such amount
in the consolidated statement of operations for that year.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>Write off of fixed assets</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The write off of fixed assets include the net book value of those fixed assets that refer
mainly to damaged items and that were no longer in conformity with the production quality
standards. As of December&nbsp;31, 2007, 2006 and 2005 the write off of fixed assets amount to 2,285,
nil and 2,770, respectively.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>25. Financial instruments and risk management</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%">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
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-38<!-- /Folio -->
</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: 7.20in">

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

</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>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 0%">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, 2007 and
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="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">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">U.S. dollars</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,724</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,744</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Euro</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,326</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,154</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Canadian dollars</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,930</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,703</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Australian dollars</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,503</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,934</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">British pounds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,751</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,121</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Norwegian kroner</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,071</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,027</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Danish kroner</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,681</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">924</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Swedish kroner</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,616</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,887</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Swiss francs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">620</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,584</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Japanese yen</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">292</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">864</TD>
    <TD>&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">162,514</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">164,942</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2006</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"><!-- 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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97,967</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,995</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,049</TD>
    <TD nowrap>)</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>
</TR>
<TR style="font-size: 1px">
    <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">162,514</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">946</TD>
    <TD>&nbsp;</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>
</TR>
<TR style="font-size: 1px">
    <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: 8%">At December&nbsp;31, 2007 and 2006, the forward exchange contracts had a net unrealized gain of 946
and 5,463, 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: 8%">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; text-indent: 8%">Refer to note 3 (c)&nbsp;for the Group&#146;s accounting policy on forward exchange contracts.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-39<!-- /Folio -->
</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: 7.20in">

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

</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>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>26. Fair value of financial instruments</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2006</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"><!-- 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; padding-top: 1px">
    <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" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">- Marketable debts securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</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; padding-top: 1px">
    <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" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">- Long-term debt</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">2,151</TD>
    <TD>&nbsp;</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>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%">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: 8%">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 align="justify" style="font-size: 10pt; margin-top: 10pt"><B>27. Application of generally accepted accounting principles in the United States of America</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-40<!-- /Folio -->
</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: 7.20in">

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

</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>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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">2007</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>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net earnings (loss)&nbsp;under Italian GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(62,647</TD>
    <TD nowrap>)</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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; padding-top: 1px">
    <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">27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(b)&nbsp;Government grants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,188</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(c)&nbsp;Revenue recognition</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,887</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(j)&nbsp;Goodwill and intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,970</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(k)&nbsp;Share grants and options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(56</TD>
    <TD nowrap>)</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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(l)&nbsp;Translation of foreign financial statements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">191</TD>
    <TD>&nbsp;</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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(m)&nbsp;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 align="right">658</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">(2,567</TD>
    <TD nowrap>)</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>
</TR>
<TR style="font-size: 1px">
    <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 nowrap align="left">&nbsp;</TD>
    <TD align="right">(60,007</TD>
    <TD nowrap>)</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>
</TR>
<TR style="font-size: 1px">
    <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="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic earnings (loss)&nbsp;per share in conformity
with US GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.09</TD>
    <TD nowrap>)</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>
</TR>
<TR style="font-size: 1px">
    <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 nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.09</TD>
    <TD nowrap>)</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>
</TR>
<TR style="font-size: 1px">
    <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>Reconciliation of shareholders&#146; equity:</B>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="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">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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">411,597</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">478,842</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">(561</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(588</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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">(12,848</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14,036</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">(4,373</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,260</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(j)&nbsp;Goodwill and intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,355</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,251</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(l)&nbsp;Translation of foreign financial statements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,213</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,424</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(v)&nbsp;Unrecognized tax benefits</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="padding-top: 1px">
    <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">(2,909</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(208</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">Shareholders&#146; equity in conformity with US GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">408,474</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">468,425</TD>
    <TD>&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: 8%">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">(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"><!-- Folio -->F-41<!-- /Folio -->
</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: 7.20in">

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

</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>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

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

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">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 consolidated 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">The adjustments to net income (loss)&nbsp;represent mainly the annual amortization of the pre December
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">Amortization of deferred income related to grants recognized as revenues under Italian GAAP of
1,026, 1,111 and 1,239 for the years ended December&nbsp;31, 2007, 2006 and 2005 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">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">(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>

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

<P align="center" style="font-size: 10pt"><!-- Folio -->F-42<!-- /Folio -->
</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: 7.20in">

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

</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>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">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, 2007 and 2006 and related consolidated statements of operations for each of the years
in the three-year period ended December&nbsp;31, 2007 are indicated below:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="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">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Effects</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Effects</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Increase</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Increase</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Consolidated balance sheet</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(Decrease)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(Decrease)</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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">(22,893</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(29,721</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,946</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,824</TD>
    <TD>&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">(6,947</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,897</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" style="padding-top: 1px">
    <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">(2,574</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,637</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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">(89</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,741</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">(2,663</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,378</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" style="background: #cceeff; padding-top: 1px">
    <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">(4,284</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,519</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: 1px solid #000000"><B>Consolidated statement of operations</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</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>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,828</TD>
    <TD>&nbsp;</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>
</TR>
<TR style="font-size: 1px">
    <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="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,950</TD>
    <TD>&nbsp;</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>
</TR>
<TR style="font-size: 1px">
    <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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,887</TD>
    <TD>&nbsp;</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>
</TR>
<TR style="font-size: 1px">
    <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="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total effect on net operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">235</TD>
    <TD>&nbsp;</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>
</TR>
<TR style="font-size: 1px">
    <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; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-43<!-- /Folio -->
</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: 7.20in">

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

</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>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 0%">(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 consolidated 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" style="padding-top: 1px">
    <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" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <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; padding-top: 1px">
    <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" style="padding-top: 1px"><!-- 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; padding-top: 1px">
    <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; padding-top: 1px">
    <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>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Under US GAAP the above pre-acquisition amounts would not be included in the consolidated
statement of operations for the year ended December&nbsp;31, 2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 0%">(e)&nbsp;During 2005 (see notes 1 and 27 (j)) the Company acquired 100% of the equity interest of
Koine&#232; S.r.l., and the purchase price was 2,019. Koine&#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"><!-- 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; padding-top: 1px">
    <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" style="padding-top: 1px">
    <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; padding-top: 1px">
    <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" style="padding-top: 1px">
    <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; padding-top: 1px">
    <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" style="padding-top: 1px">
    <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; padding-top: 1px">
    <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: 8%">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">(f)&nbsp;On December&nbsp;23, 2005 (see notes 1 and 27 (j)) 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"><!-- Folio -->F-44<!-- /Folio -->
</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: 7.20in">

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

</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>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 8%">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"><!-- 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; padding-top: 1px">
    <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" style="padding-top: 1px">
    <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; padding-top: 1px">
    <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" style="padding-top: 1px">
    <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: 0%">(g)&nbsp;During June&nbsp;2006 (see notes 1 and 27 (j)) 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"><!-- 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; padding-top: 1px">
    <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" style="padding-top: 1px">
    <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; padding-top: 1px">
    <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" style="padding-top: 1px">
    <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; padding-top: 1px">
    <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" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Payable to employees</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>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 0%">(h)&nbsp;During September&nbsp;2006 (see notes 1 and 27 (j)) 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.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-45<!-- /Folio -->
</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: 7.20in">

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

</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>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">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"><!-- 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; padding-top: 1px">
    <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" style="padding-top: 1px">
    <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; padding-top: 1px">
    <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" style="padding-top: 1px">
    <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; padding-top: 1px">
    <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: 8%">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: 0%">(i)&nbsp;On June&nbsp;14, 2007 (see notes 1 and 27 (j)) the Company acquired from a third party 100%
of a business which main asset was a store located in one of the several shopping and commercial
areas of Rome (Tiburtina area). The cash consideration paid by the Company for this acquisition was
230. At the date of the acquisition there were no employees, inventory or revenues associated with
this asset. The net assets acquired were composed mainly as follows: (a)&nbsp;operating lease agreement;
(b)&nbsp;leasehold improvements incorporated in the store; (c)&nbsp;commercial license authorization obtained
from the Rome Municipality for trading sofas and other furniture to the public. Further during
2008, the Company started some construction work in order to set up in this store the Natuzzi
layout selling system.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Under Italian GAAP the acquisition of this store was considered to be a business acquisition,
while under US GAAP the same has been accounted for 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 the 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 359 is depreciated over
the term of the operating lease agreement (twelve years). 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: 8%">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"><!-- 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; padding-top: 1px">
    <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">225</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(225</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">359</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">359</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Leasehold improvements</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">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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">(134</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">(134</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">230</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">230</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">(j)&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>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-46<!-- /Folio -->
</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: 7.20in">

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

</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>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In addition, under Italian GAAP, the Company has allocated certain intangible assets, having
definite lives and arising from a business acquisition and asset acquisition under the caption
goodwill. Under US GAAP the Company would have classified such as intangible assets, would have
amortized these over their estimated useful lives to their residual values, and would have reviewed
these for impairment in accordance with SFAS No.&nbsp;144.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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: 1px solid #000000">Goodwill</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Intangibles</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px 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"><!-- 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; padding-top: 1px">
    <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" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Acquisition of Koine&#232; S.r.l.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">985</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,664</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,082</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="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>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Acquisition of stores in Rome</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,709</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,709</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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; padding-top: 1px">
    <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" style="padding-top: 1px">
    <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" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <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; padding-top: 1px">
    <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" style="padding-top: 1px">
    <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 valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Acquisition of one store</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">225</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">359</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">(134</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; padding-top: 1px">
    <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">(2,840</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(870</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">438</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>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</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, 2007</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">6,686</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,281</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">(2,077</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(921</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: 8%">Estimated amortization expense of the intangibles assets for the next five years is as
follows: 883 in 2008, 883 in 2009, 864 in 2010, 855 in 2011 and 672 in 2012.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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, 2007, 2006 and 2005 goodwill was not impaired.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 0%">(k)&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>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Effective January&nbsp;1, 2006, the Company adopted FASB Statement No.&nbsp;123 (R) <I>Share-Based Payment</I>
(Statement 123 (R)). This statement replaces FASB Statement No.&nbsp;123, <I>Accounting for Stock-Based
Compensation </I>(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>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-47<!-- /Folio -->
</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: 7.20in">

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

</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>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">During 2006 and 2007 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 and 2007 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: 8%">As of December&nbsp;31, 2007 and 2006 for US GAAP purposes the Company for its compensation cost
related to its stock awards plan recorded a cost of 56 and 254, respectively. At December&nbsp;31, 2007
there is 2 of total unrecognized compensation cost related to non vested share-based compensation
arrangements granted under the 2004 plan. That cost is expected to be recognized over a weighted
average period of one year.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Prior to fiscal year 2006 under US GAAP, the provisions of Statement of Financial Accounting
Standards No.&nbsp;123 (SFAS No.&nbsp;123), <I>Accounting for Stock Based Compensation</I>, 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: 8%">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 operations over the vesting
period of the shares and options, as identified in note 20. For US GAAP purposes in 2005 the
Company recorded an income of 136.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Under current Italian tax legislation, issuance of shares to satisfy share based compensation
plans does not result in a deduction for tax purposes and, as such, no deferred taxation impacts
have been recognized for US GAAP.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Company&#146;s pro forma net loss for the year ended December&nbsp;31, 2005 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="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 loss 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>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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>
</TR>
<TR style="font-size: 1px">
    <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">Pro forma net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,781</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>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-48<!-- /Folio -->
</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: 7.20in">

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

</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>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">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="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">Expected life and performance related conditions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap>2 years &#150; 5.3 years</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected volatility of the underlying share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">23</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected dividend yield of the underlying share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Risk-free interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">2.43% &#150; 3.79</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Company&#146;s pro forma loss per share for the year ended December&nbsp;31, 2005 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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">As reported</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Pro-forma</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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="justify" style="font-size: 10pt; margin-top: 10pt">(l)&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)&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 (see note 3 (d)).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Under US GAAP as of December&nbsp;31, 2007, 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: 8%">At December&nbsp;31, 2007, 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 191, 762
and 1,684 for 2007, 2006 and 2005, respectively; (b)&nbsp;shareholders equity a positive adjustment of
10,213 and 5,424 for 2007 and 2006, respectively.
</DIV>

<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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

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<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: 7.20in">

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

</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>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">(m)&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 statement 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">(n)&nbsp;During 2007, 2006 and 2005 the Company under Italian GAAP has recognized the write-off of
tangible assets of 2,285, nil and of 2,770, 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">(o)&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
31, 2007, 2006 and 2005 to 4,321, 4,236 and 2,311, respectively.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">(p)&nbsp;Under Italian GAAP, the Company includes its warranty cost as a component of selling expenses
in the consolidated 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, 2007, 2006 and 2005 warranty cost
amounting to 4,143, 4,294 and 3,168, 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">(q)&nbsp;In 2007, 2006 and 2005 the Company under Italian GAAP has recognized certain export incentives
of nil, 3,371 and 2,100, 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">(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">(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, 2007, 2006 and 2005 the above deferred taxes amount to nil,
1,051 and 475, 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">(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, 2007, 2006 and 2005 the above income
taxes amount approximately to 519, 310 and 55. 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">(u)&nbsp;During 2007 the Company obtained from tax authorities a refund of income taxes related to prior
years for an amount of 1,888. In addition, during 2007 a subsidiary of the Company obtained from
tax authorities the confirmation that a portion of income tax of 668 related to 2006 was not due.
As these amounts were not recorded previously due to uncertainty, the Company recorded in 2007 such
amounts in
other income (expense), net (see note 24). Under US GAAP these amounts would be classified in the
line income taxes of the consolidated statement of operations for the year ended December&nbsp;31, 2007.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->F-50<!-- /Folio -->
</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: 7.20in">

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

</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>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">(v)&nbsp;Under Italian GAAP the Company records a tax contingent liability (income tax exposure) when it
is probable that the liability has been incurred and the amount of the loss can be reasonably
estimated.
</DIV>

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

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">The Company adopted the provisions of FASB Interpretation No.&nbsp;48, <I>Accounting for Uncertainty in
Income Taxes</I>, on January&nbsp;1, 2007. As a result of the implementation of Interpretation No.&nbsp;48, the
Company did not recognize any increase or decrease in the liability for unrecognized tax benefits
as of January&nbsp;1, 2007. A reconciliation of the beginning and ending amount of unrecognized tax
benefits 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">Balance at January&nbsp;1, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,054</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Additions based on tax positions related to the current year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">831</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Additions for tax positions of prior years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">602</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Reductions for tax positions of prior years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(568</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Settlements</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">Balance at December&nbsp;31, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,919</TD>
    <TD>&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: 8%">If the Company had recognized the above uncertain tax positions, the income taxes for the year
ended December&nbsp;31, 2007, 2006 and 2005 would have decreased of 1,460, 941 and 644, respectively.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">As of December&nbsp;31, 2007 and 2006 the Company does not expect that any unrecognized tax
benefits could significantly increase or decrease in the next twelve months.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Company recognized interest and penalties accrued related to unrecognized tax benefits in
other income (expense), net. During the years ended December&nbsp;31, 2007, 2006 and 2005, the Company
recognized approximately 346, 629 and 261 in interest and penalties, respectively. The Company had
approximately 1,459 and 1,113 for the payment of interest and penalties accrued at December&nbsp;31,
2007 and 2006, respectively.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The following table reports the difference between US GAAP and Italian GAAP as regards the
accounting for uncertainty in income taxes:
</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">Balance at January&nbsp;1, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,054</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,054</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Additions based on tax positions related
to the current year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">831</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">831</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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Additions for tax positions of prior years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Reductions for tax positions of prior years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(568</TD>
    <TD nowrap>)</TD>


    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(568</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; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Settlements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <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 at December&nbsp;31, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,919</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,919</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"><!-- Folio -->F-51<!-- /Folio -->
</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: 7.20in">

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

</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>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Under Italian GAAP the Company includes the provisions for income tax contingent liabilities
under the line other liabilities of the non current part of the balance sheet. For the years ended
December&nbsp;31, 2007 and 2006 the above provisions for income tax contingent liabilities amount to
2,919 and 2,054, respectively. Under US GAAP these amounts would be classified in part in the line
income taxes of the current part of the balance sheet for the income taxes (1,460 and 941 for the
years ended December&nbsp;31, 2007 and 2006, respectively), and for the other part in the line accounts
payable-other for penalties and interest (1,459 and 1,113 for the years ended December&nbsp;31, 2007 and
2006, respectively) of the current part of the balance sheet.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">(w)&nbsp;The consolidated statements of cash flows for the years ended December&nbsp;31, 2007, 2006 and 2005
prepared by the Company under Italian GAAP is in conformity with US GAAP (SFAS No.&nbsp;95).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>Comprehensive Income</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Company has adopted SFAS No.&nbsp;130, <I>Reporting Comprehensive Income</I>, which established
standards for the reporting and presentation of comprehensive income and its components in a full
set of financial statements. Comprehensive income/(loss) generally encompasses all changes in
shareholders&#146; equity (except those arising from transactions with owners). The Company&#146;s
comprehensive income (loss)&nbsp;does not differ from its US GAAP net income (loss).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Recently issued but not yet adopted U.S. Accounting pronouncements relevant for the Company
are as follows:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>SFAS No.&nbsp;141R and SFAS No.&nbsp;160:</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In December&nbsp;2007, the FASB issued FASB Statement No.&nbsp;141R, <I>Business Combinations </I>(Statement
141R) and FASB Statement No.&nbsp;160, <I>Noncontrolling Interest in Consolidated Financial Statements &#151; an
amendment to ARB No.&nbsp;51 </I>(Statement 160). Statement 141R and 160 require most identifiable assets,
liabilities, noncontrolling interest, and goodwill acquired in a business combination to be
recorded at &#147;full fair value&#148; and require noncontrolling interest (previously referred to as
minority interest) to be reported as a component of equity, which changes the accounting for
transactions with noncontrolling interest holders. Both Statements are effective for periods
beginning on or after December&nbsp;15, 2008, and earlier adoption is prohibited. Statement 141R will be
applied to business combinations occurring after the effective date. Statement 160 will be applied
prospectively to all noncontrolling interests, including any that arose before the effective date.
The Company is currently evaluating the impact of adopting Statement 141R and Statement 160 on its
results of operations and financial position.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>SFAS No.&nbsp;157:</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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 does not expect a material impact from the adoption of
Statement 157 on its results of operations and financial position.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

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

</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>
(Expressed in thousands of euros except as otherwise indicated)

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>SFAS No.&nbsp;159:</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In February&nbsp;2007, the FASB issued Statement of Financial Accounting Standards No.&nbsp;159, <I>The
Fair Value Option for Financial Assets and Financial Liabilities &#151; including an amendment of FASB
Statement No.&nbsp;115 </I>(Statement 159). Statement 159 gives the Company the irrevocable option to carry
most financial assets and liabilities at fair value that are not currently required to be measured
at fair value. If the fair value option is elected, changes in fair value would be recorded in
earnings at each subsequent reporting date. SFAS 159 is effective for the Company&#146;s 2008 fiscal
year. The Company has evaluated the impact of the adoption of this statement and has determined
that the adoption of SFAS No.&nbsp;159 is not applicable.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>SFAS No.&nbsp;161:</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In March&nbsp;2008, the FASB issued Statement of Financial Accounting Standards No.&nbsp;161, <I>Accounting
for Derivative Instruments and Hedging Activities </I>(SFAS No.&nbsp;161), which amends FASB Statement No.
133. SFAS No.&nbsp;161 requires companies with derivative instruments to disclose information about how
and why a company uses derivative instruments, how derivative instruments and related hedged items
are accounted for under FASB Statement No.133, and how derivative instruments and related hedged
items affect a company&#146;s financial position, financial performance, and cash flows. The required
disclosures include the fair value of derivative instruments and their gains or losses in tabular
format, information about credit-risk-related contingent features in derivative agreements,
counterparty credit risk, and the company&#146;s strategies and objectives for using derivative
instruments. The Statement expands the current disclosure framework in FASB Statement No.133. SFAS
No.161 is effective prospectively for periods beginning on or after November&nbsp;15, 2008. The Company
is evaluating the impact of adopting SFAS No.&nbsp;161 on its consolidated financial statements.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>EITF 06-4:</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In September&nbsp;2006, the FASB&#146;s Emerging Issues Task Force reached a consensus of <I>Issue No.
06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement
Split-Dollar Life Insurance Arrangements </I>(EITF 06-4). EITF 06-4 provides guidance on the accounting
for arrangements in which an employer owns and controls the insurance policy and has agreed to
share a portion of the cash surrender value and/or death benefits with the employee. This guidance
requires an employer to record a postretirement benefit, in accordance with FASB Statement No.&nbsp;106,
<I>&#147;Employers&#146; Accounting for Postretirement Benefit Other Than Pensions&#148; </I>or APB Opinion No.&nbsp;12,
&#147;Omnibus Opinion-1967&#148;, if there is an agreement by the employer to share a portion of the proceeds
of a life insurance policy with the employee during the postretirement period. This guidance is
effective for reporting periods beginning after December&nbsp;15, 2007. The adoption of EITF 06-4 will
not have an impact on the Company&#146;s consolidated financial statements.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>EITF 04-13:</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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 did not have an impact on the Company&#146;s consolidated
financial statements.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<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: 8%">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>

<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">NATUZZI S.<FONT style="font-variant: SMALL-CAPS">p.</FONT>A.<BR>
(REGISTRANT)<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="0" style="border-bottom: 0px solid #000000" align="left">By&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="0" style="border-bottom: 1px solid #000000" align="left">/s/ Pasquale Natuzzi</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD colspan="0" align="left">Pasquale Natuzzi&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD colspan="0" align="left">Chief Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">Date: June&nbsp;30, 2008
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

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

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt"><B>Exhibit&nbsp;Index</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="6%" 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;24, 2008.</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" 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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" 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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" 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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" 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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" nowrap align="left">13.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Certifications 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"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>



</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-1.1
<SEQUENCE>2
<FILENAME>c73762exv1w1.htm
<DESCRIPTION>EXHIBIT 1.1
<TEXT>
<HTML>
<HEAD>
<TITLE>Filed by Bowne Pure Compliance</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<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 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; text-indent: 8%"><B>1</B>.&nbsp;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; text-indent: 8%"><B>2.&nbsp;</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; text-indent: 8%"><B>3.&nbsp;</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; text-indent: 8%">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="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the production of software and hardware;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the granting of financing in any form;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">foreign exchange transactions;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the collection, payment and transfer of funds;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></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>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></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; text-indent: 8%">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"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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; text-indent: 8%">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; text-indent: 8%"><B>4.&nbsp;</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; text-indent: 8%"><B>5.&nbsp;</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; text-indent: 8%"><B>6.&nbsp;</B>The share capital is fifty-four million, eight hundred fifty three thousand and forty-five
euro (<FONT face="'Times New Roman',times,serif">&#128;</FONT>54,853,045) and is divided into fifty-four million, eight hundred fifty three thousand
and forty-five (<FONT face="'Times New Roman',times,serif">&#128;</FONT>54,853,045) 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; text-indent: 8%">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; text-indent: 8%">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; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%"><B>7.3 </B>The resolution issuing the participation certificates shall establish the characteristics
of the certificates thereof with regards to the contribution by each holder, specifying the rights
attached to the certificate and the penalties in the event of failure to make the relevant
contribution.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><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; text-indent: 8%"><B>7.5 </B>The participation certificates are represented by registered credit instruments.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<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; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%"><B>10.&nbsp;</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; text-indent: 8%"><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; text-indent: 8%"><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="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" 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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" 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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" 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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" 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>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" 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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" 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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" 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>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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; text-indent: 8%"><B>12.2 </B>The shareholder must notify his or her intention to withdraw in writing, by registered
mail, to the managing body.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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

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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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; text-indent: 8%">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; text-indent: 8%">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; text-indent: 8%">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; text-indent: 8%">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; text-indent: 8%"><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; text-indent: 8%">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; text-indent: 8%">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; text-indent: 8%">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; text-indent: 8%">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; text-indent: 8%"><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>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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; text-indent: 8%">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; text-indent: 8%">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>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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; text-indent: 8%">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; text-indent: 8%">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; text-indent: 8%">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; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%"><B>14.&nbsp;</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>

<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; text-indent: 8%"><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; text-indent: 8%"><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="4%" 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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" 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>

</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="4%" 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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" 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>

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

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

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<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; text-indent: 8%"><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="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" 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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" 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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" 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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" 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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" 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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" 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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" 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; text-indent: 8%"><B>16.2 </B>The empowerment of the managing body to resolve upon certain subject matters that,
according to applicable laws, fall within the powers of the meeting of shareholders, such as the
subject matters set forth in article 31.2 of these by-laws, but not to the prejudice of the main
competence of the shareholders&#146; meeting, which shall maintain its powers to resolve upon such
subject matters.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Article&nbsp;17. Call of the meeting</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%">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; text-indent: 8%"><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>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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

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<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><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="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the date and time of the meeting;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the items on the agenda;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></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; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%">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; text-indent: 8%"><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; text-indent: 8%"><B>20.2 </B>On second or subsequent call, the ordinary meeting is duly established regardless of the
portion of share capital represented.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><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; text-indent: 8%">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>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<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; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%">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="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" 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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" 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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">c.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">early winding up;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">d.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">extension of the duration;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" 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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" 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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" 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; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%"><B>22.3 </B>Shares whose voting rights cannot be exercised are included in the calculation of the
quorum necessary to validly establish the meeting; the same shares (without prejudice to any
different provision provided for by applicable laws) and shares whose voting rights have not been
exercised, further to a statement made by the shareholder asserting his or her conflict of interest
in the relevant resolution, are not included in the calculation of the majority necessary for the
approval of the relevant resolution.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Article&nbsp;23. Postponement of the meeting</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>23.&nbsp;</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; text-indent: 8%"><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; text-indent: 8%"><B>24.2 </B>Each share entitles to one vote at the meeting.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>24.3 </B>Holders of shares that do not carry voting rights have the right to receive the notice of
call.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<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; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%">Alternatively, the company may delegate one of its employees or collaborators.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%"><B>26.1 </B>The meeting is chaired by the sole director, by the chairman of the board of directors
or, in his absence, by a person nominated by the intervening shareholders.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%"><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>
 <P align="center" style="font-size: 10pt">&nbsp;

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

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><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="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" 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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" 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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" 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>


</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="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" 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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" 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; text-indent: 8%"><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; text-indent: 8%"><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="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></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>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></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>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%"><B>29.3 </B>The special meeting shall appoint and remove the common representative.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%"><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>

<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; text-indent: 8%"><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; text-indent: 8%"><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="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" 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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" 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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" 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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" 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; text-indent: 8%">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; text-indent: 8%"><B>32.&nbsp;</B>Directors are prohibited from competing with the company pursuant to article 2390 of the
civil code.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<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; text-indent: 8%"><B>33.&nbsp;</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; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%"><B>34.3 </B>If, during the fiscal year, one or more directors are to retire, the others may replace
them through a resolution approved by the board of statutory auditors, so long as the majority of
the board of directors is composed by directors appointed by the meeting (or indicated in the deed
of incorporation). Directors who have been appointed by the board shall remain in the office until
the subsequent shareholders meeting is held.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%"><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>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%"><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>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%">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>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">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; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%"><B>39.2 </B>The amount to be paid to directors with special duties shall be defined by the board of
directors, after hearing the opinion of the board of statutory auditors, in compliance with the cap
defined by the meeting.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Article&nbsp;40. Board of statutory auditors</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%"><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>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<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; text-indent: 8%"><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="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></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; text-indent: 8%"><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; text-indent: 8%"><B>41.3 </B>Upon the appointment of the external auditor, the shareholders meeting must also
establish its compensation for the entire duration of its appointment, which in any case may not
exceed three fiscal years.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><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; text-indent: 8%"><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; text-indent: 8%"><B>42.1 </B>Each fiscal year shall end on December&nbsp;31.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><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; text-indent: 8%"><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="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" 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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" 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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" 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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" 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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" 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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" 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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" 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>
<P align="center" style="font-size: 10pt">&nbsp;

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

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


</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>43.3 </B>In all the cases of termination, the managing body must fulfill the publicity
requirements prescribed by the law within thirty days from the date of the event triggering the
termination.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><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="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">the number of liquidators;</DIV></TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" 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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" 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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" 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 style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" 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; text-indent: 8%"><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; text-indent: 8%">&nbsp;

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

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<DOCUMENT>
<TYPE>EX-8.1
<SEQUENCE>3
<FILENAME>c73762exv8w1.htm
<DESCRIPTION>EXHIBIT 8.1
<TEXT>
<HTML>
<HEAD>
<TITLE>Filed by Bowne Pure Compliance</TITLE>
</HEAD>
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<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="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="11%">&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>Percent of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&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"><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" colspan="2" style="border-bottom: 1px solid #000000"><B>Activity</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">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" nowrap>Bahia, Brazil</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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" nowrap>Pojuca, Brazil</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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" nowrap>Shanghai, China</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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" nowrap>Shanghai, China</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natuzzi China 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" nowrap>Shanghai, China</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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" nowrap>Baia Mare, Romania</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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" nowrap>Bari, Italy</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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" nowrap>Qualiano, Italy</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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" nowrap>Bari, Italy</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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" nowrap>Bari, Italy</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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" nowrap>High Point, NC, USA</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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" nowrap>Madrid, Spain</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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" nowrap>Kaltbrunn, Switzerland</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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" nowrap>Copenaghen, Denmark</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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" nowrap>Geel, Belgium</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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" nowrap>Dusseldorf, Germany</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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" nowrap>Stockholm, Sweden</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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" nowrap>Tokyo, Japan</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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" nowrap>London, UK</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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" nowrap>Bari, Italy</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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" nowrap>Amsterdam, Holland</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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" nowrap>Bari, Italy</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; padding-top: 1px">
    <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" nowrap>London, UK</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <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" nowrap>London, UK</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <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" nowrap>London, UK</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>




<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</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"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.1
<SEQUENCE>4
<FILENAME>c73762exv12w1.htm
<DESCRIPTION>EXHIBIT 12.1
<TEXT>
<HTML>
<HEAD>
<TITLE>Filed by Bowne Pure Compliance</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<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, Pasquale Natuzzi</B><B><I>, </I></B><B>certify that:</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 10pt">1. I have reviewed this annual report on Form&nbsp;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: 4%">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: 4%">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: 4%">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: 4%">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: 4%">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: 4%">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="38%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Pasquale Natuzzi
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Pasquale Natuzzi<BR>
Chief Executive Officer
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR>    <TD>&nbsp;</TD></TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">June&nbsp;30, 2008</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"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.2
<SEQUENCE>5
<FILENAME>c73762exv12w2.htm
<DESCRIPTION>EXHIBIT 12.2
<TEXT>
<HTML>
<HEAD>
<TITLE>Filed by Bowne Pure Compliance</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<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, Salvatore Gaipa</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: 4%">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: 4%">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: 4%">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: 4%">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: 4%">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: 4%">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="38%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Salvatore Gaipa
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Salvatore Gaipa<BR>
Chief Financial Officer
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR>    <TD>&nbsp;</TD></TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">June&nbsp;30, 2008</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"><!-- Folio -->&nbsp;<!-- /Folio -->
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<DOCUMENT>
<TYPE>EX-13.1
<SEQUENCE>6
<FILENAME>c73762exv13w1.htm
<DESCRIPTION>EXHIBIT 13.1
<TEXT>
<HTML>
<HEAD>
<TITLE>Filed by Bowne Pure Compliance</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<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; text-indent: 8%">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; text-indent: 8%">The Annual Report on Form 20-F for the fiscal year ended December&nbsp;31, 2007 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="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="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Dated: June&nbsp;30, 2008</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" style="padding-top: 1px"><!-- 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" style="padding-top: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">/s/ Pasquale Natuzzi</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Pasquale Natuzzi</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Executive Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- 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" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Dated: June&nbsp;30, 2008</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" style="padding-top: 1px"><!-- 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" style="padding-top: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">/s/ Salvatore Gaipa</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Salvatore Gaipa</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Financial Officer</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; text-indent: 8%">A signed original of this written statement required by 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) has
been provided to Natuzzi S.p.A. and will be retained by Natuzzi S.p.A. and furnished to the
Securities and Exchange Commission or its staff upon request.
</DIV>


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

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



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