Letter

Dear Shareholders,

The year 2008 has seen contraction and structural change in the world economy, which is likely to last for some time.

The tightening of credit and the resulting market turbulence, which started in 2007, worsened during 2008 causing an international financial crisis without precedent, which is having serious repercussions on the real economy and especially on levels of consumption. The crisis is a systemic one and has affected most sectors of the economy and business throughout the world, especially in the last quarter of 2008.

In this difficult context, our group managed to grow revenues and earnings. This was possible thanks to the positive contribution made by the main operating companies, to capital gains on disposals made by Medinvest and to extraordinary gains from the capital increases in Sorgenia and Holding Sanità e Servizi (HSS), which highlight the value creation that took place in last few years in the energy and healthcare businesses. In terms of financial position, at the end of 2008 CIR had an aggregate net financial surplus of 44 million euro.

Sorgenia confirmed its position as the main activity of the group in terms of revenues, generating 2.4 billion euro in 2008, up by over 30% compared to 2007. There was also growth in margins (gross operating income was approximately 190 million euro, posting an increase of 25%) and net income (67 million euro with an increase of 2%), despite the impact of the new income tax known as the Robin Hood Tax. The company consolidated its position as one of the main operators in the free energy market in Italy, getting close to its target of 500,000 clients. During the year Sorgenia continued to develop its plans for increasing thermoelectric generating capacity and strengthened its presence in renewable sources, especially photovoltaic and wind.

Although the Espresso Group reported earnings of 21 million euro, in 2008 it was affected by the difficult situation in the media sector and was penalized by a negative first half and more especially by the significant contraction of advertising investments in the later part of the year, which continued in the first two months of 2009. The company reacted promptly to the first signs of market deterioration, taking decisions even in the first half of the year that would cut costs structurally by 50 million euro on a full year basis. These actions showed their first effects in 2008, net of the extraordinary charges of implementing them, but will give their main benefits in 2009 and 2010. Moreover, to counter the further deterioration of the market over the last few months, more action has been taken to reduce costs structurally, starting with a stringent program for reorganizing the logistics of the printing centres.

Sogefi, in a year of global crisis for the automotive sector posted revenues of 1,018 million euro, down 5% on 2007, a gross operating margin of 105 million euro (-22%) and a net income of 29 million euro, down from 52 million in 2007. In Europe alone, which is the company's main market, new car registrations suffered the greatest fall in the last 15 years. However, in this environment Sogefi was able to counter the sharp contraction in demand by trimming its production capacity and significantly reducing labour costs, without jeopardizing its future plans: indeed, during the year the company set up a joint-venture to build innovative and more eco-compatible products, and it entered the new and very promising Indian market.

HSS continued in its trend of growth, which have in just five years of business enabled the company to become one of the main operators in private healthcare in Italy. The company generated revenues of 246 million euro (+35% from 183 million in 2007), a gross operating margin of 29 million, posting double digit growth (20 million in 2007), and further boosted its capacity in the rehabilitation sector with the purchase of Centro Cardinal Ferrari. Net income was negative by less than 2 million (compared to break-even in 2007) because of extraordinary provisions relating to past acquisitions. The objective of HSS is not just to grow its businesses, but also to become a point of reference in the sector for professionalism, quality of service and reception capacity.

In the financial services sector, Jupiter has continued to manage its portfolio of nonperforming loans with a nominal value of 1.3 billion euro and has collected a total of 56 million euro of which 33 million in 2008, which was higher than expected, while as for the shareholding in Oakwood, a sizeable write-down was made to this investment and the business is being refocused almost exclusively on the Italian company that operates in the salary secured lending market.

2009 is likely to be even more complex than last year because the downturn in the world economy is now universally recognized as a structural crisis rather than a cyclical one, and it is likely to continue and almost certainly to get worse while it is not possible, at least for the moment, to estimate how long it will last or how much worse it will get.

Our group, therefore, considers that strict financial discipline is absolutely essential and as part of this discipline the Board of Directors has opted not to distribute dividends for the year 2008.

After finally abandoning the proposed spin-off of our media businesses, our commitment for the immediate future will be to continue to strengthen the industrial part of the CIR group, which means mainly consolidating the current businesses and focusing on the following five business sectors: energy, media, automotive components, healthcare and financial services.

We will be concentrating on improving efficiency and reducing costs in the subsidiaries which operate in the sectors which have been more directly affected, and on further developing those businesses that are more able to weather the crisis and have the most potential for growth.

The aim for our companies is to use this phase of discontinuity as an opportunity to further build up their position in terms of competition and market share.

In 2009 our efforts will be focused mainly on the six following actions:

• Expanding the energy sector with Sorgenia engaged in the construction of new thermoelectric power generating plants and in the development of renewable sources in line with the business plan presented in July 2008;
• Strengthening the action to cut the fixed costs of the Espresso Group in a structural way, re-launching the Manzoni advertising arm and integrating new technologies to a much greater extent;
• Developing new eco-sustainable products and reducing the fixed costs of Sogefi, which has been negatively affected by the sharp decline in the automotive market;
• Growing the healthcare business with investment in new residences for the elderly, rehabilitation centres and outsourced innovative technologies;
• Consolidating the business of acquiring non-performing loans (Jupiter Finance);
• Focusing Oakwood's portfolio on Ktesios, the Italian company active in the salary secured lending market.

The fundamental role of the shareholder operating in close contact with the management team of the subsidiaries and human capital as the essential factor for achieving lasting success in our businesses, the two principles underpinning our strategic decisions, will be the determining factors as we face the challenges that await us in this difficult year of 2009.

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These financial statements are the last that I am signing as Chairman and Founder of the CIR Group, which has been at the centre of my commitment as an entrepreneur for more than thirty years. I would like to thank all members of staff who followed and helped me at various stages along the way and I wish my son Rodolfo and colleagues all the very best for the future and hope that they will continue to be as successful as we have been over the years.

Signed by The Chairman Carlo De Benedetti