Indesit Company

Half-year report as of 30 June 2005 Half-year report as of 30 June 2005

Company bodies:

Board of Directors Chairman Vittorio Merloni Chief Executive Officer Marco Milani Directors Innocenzo Cipolletta Adriano De Maio Alberto Fresco Mario Greco Carl H. Hahn Hugh Malim Andrea Merloni Antonella Merloni Ester Merloni Luca Cordero di Montezemolo Roberto Ruozi

Board of Statutory Auditors Chairman Angelo Casò Auditors Demetrio Minuto Paolo Omodeo Salè

Alternate Auditors Maurizio Paternò di Montecupo Serenella Rossano

Human Resources Committee Alberto Fresco (Chairman) Mario Greco Carl H. Hahn Marco Milani

Audit Committee Roberto Ruozi (Chairman) Innocenzo Cipolletta Hugh Malim Vittorio Merloni Innovation and Technology Committee Members who are Adriano De Maio (Chairman) directors Andrea Merloni Vittorio Merloni Marco Milani Members who are Valerio Aisa not directors Enrico Cola Silvio Corrias Marco Iansiti Adriano Mencarini Davide Milone Pasquale Pistorio Massimo Rosini Giuseppe Salvucci Andrea Uncini (Secretary) Representative of the savings shareholders Adriano Gandola

Indipendent Auditors KPMG S.p.A.

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Half-year report as of 30 June 2005

INDESIT COM PANY S.P.A. Registered Offices: Viale A. Merloni 47 - 60044 Fabriano Secondary Offices: Via della Scrofa 64 œ 00186 Rome Share Capital: Euro 102,140,744.40 fully paid Tax Code/VAT No. 00693740425 Ancona Companies Register No. 9677

REPORT ON OPERATIONS DURING THE PERIOD ENDED 30 JUNE 2005

CEO‘s comments The first half of this year has seen a continuation of the competitive conditions that marked the end of 2004, with sharply rising prices for the principal raw materials and lacklustre markets, even in Eastern Europe. During the first six months of 2005, Indesit Company has worked to counter the higher raw material prices that have increased the Group's costs by about 3.5% with respect to the prior year. Action has focused on pricing policy and the containment of sourcing and production costs. Regarding the former, the Group raised selling prices in the principal markets during the first quarter of 2005, achieving excellent results in terms of Average Unit Revenues (+ 2% with respect to the first quarter of 2004). However, partly due to strong competitive action by leading competitors, this strategy resulted in a marked contraction in the volume of sales which were about 10% lower than in the first quarter of 2004. Accordingly, the Group decided to defend market share during the second quarter of 2005, with a more aggressive pricing policy which ensured that sales remained in line with those for the same period in the prior year. As a result, overall volume fell by about 5% during the first six months, with a contraction in price/ mix by about 0.4%. W ith reference to production costs, the reduction programmes were implemented as planned and on schedule, achieving the expected results. In particular, the purchasing of raw materials and components from the so-called "low cost" countries has increased due to the ongoing rationalisation of the supplier base. At the same time, the volume of production has risen further at the factories opened during 2004 in Lodz (Poland) and Lipetzk (Russia), which are nearing full capacity operating levels. The plan to redistribute production has also continued, with the final closure of the factories in Portugal, the start of work to convert the Melano factory (Italy) from cooling to cooking and approval of the plan to restructure the factory at Thionville (France). Incisive work has also begun on the containment of selling costs and general and administrative expenses. The Group has already achieved results in this area and further significant efficiencies appear to be achievable. Implementation of the capital investment plan was in line with expectations. Investment during the first half of 2005 amounted to about 70 million euro, compared with the total planned for the year of around 140 million euro. Expenditure was mainly concentrated on the introduction of new products (about 30%) and the improvement of manufacturing efficiency (about 46%). The strategy to strengthen capabilities in the area of product innovation has seen major progress with the creation and activation of the new "Innovation and Technology" Department which focuses on medium/long-term technological innovation across product lines, with a view to seizing the escalating opportunities offered by technology and transforming them rapidly into new product features and performance.

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Half-year report as of 30 June 2005

Many new products were introduced during the first six months of 2005. In particular, several product categories previously unavailable on the market were presented, including the drawer refrigerator available for the 90 cm built-in modules and the new —Extendia“ line of large products (such as the refrigerator with built-in vacuum and home bar and the new washing machine with a capacity of 8.5 kg). The laundry segment has been further strengthened by the introduction of the new standard-size washing machines with a capacity of 7 kg and the start of local production for the CIS markets of the new —slim 33 cm“. The Experience range has been completed in the built-in segment, with elements that coordinate well with the minimalist style of the ovens. Lastly, in the cooling segment, all Group brands introduced the new 60 cm platform during the first half of 2005, with excellent features for the category (A++ Energy, integrated vacuum system, full no-frost technology, touch control panel, freezer compartment with adjustable temperature). In addition to the Innovation Department mentioned above, three further important organisational changes were made in order to face up better to future challenges. An Industrial Technical Department has been created in order to focus better on the development of products and the improvement of production processes. To achieve this, Product Technical Departments have been established by line(Cooking, Dishwashing, Cooling, Laundry), each with their own R&D, Engineering and Product Quality units. At the same time, industrial areas have been identified which encompass the manufacturing plant present in a geographical zone. In addition to guaranteeing process improvements, this also stimulates all forms of organisational synergies. Secondly, a Global Product Planning function has been established to guarantee the profitability of products via the definition and management of the product portfolio, the planning and allocation of investment in products, and the management of product development projects. Finally, the Sourcing and Logistics Departments have been combined within the new Supply Chain Department, as part of the ongoing drive for greater organisational efficiency and the search for all possible forms of synergy.

Market conditions are expected to be difficult during the second half of 2005, with a contraction in demand in several major markets œ particularly the UK œ and a smaller recovery in the markets of Eastern Europe with respect to expectations at the start of the year. Consistent with the long-term objective, the Group remains focused on defending and increasing its market shares, which œ by year end œ are expected to be at the same overall levels as 2004. There will be a number of important product initiatives during the second half of the year, with the launch of the new Scholtes cooking line and, in particular, the new range of Aqualtis washing machines. The results of this action, in economic terms, will however be more significant next year. W ith respect to initial plans, the industrial rationalisation and restructuring work already under way will be accelerated with a view to recovering additional profitability via the containment of costs. Despite the current sector difficulties, the Group expects the second half of the year to be better overall than the period just ended.

Sales of household appliances in Europe Sales of white goods to retailers (—industry shipment“) declined in volume terms during the first half of 2005, with a drop of 2.4% in W estern Europe and 2.8% in Eastern Europe. In W estern Europe, the performance of the British market (-11%) was particularly weak after five years of continuous, sustained growth. In Eastern Europe, the markets of the Czech Republic, Poland and, in particular, Hungary remained under pressure following difficulties during the second half of 2004, while there was an upturn in Romania (+29%). 4

Half-year report as of 30 June 2005

The CIS countries have continued to report healthy growth (+6%), although less than in prior periods. Retail prices contracted by 0.8% in W estern Europe and 1.5% in Eastern Europe (excluding the CIS countries), thus confirming the difficulties faced by the entire sector.

Currency M arkets W ith reference to the principal currencies used by the Group, the average exchange rate for the Euro during the first half of 2005, with respect to the comparative period in 2004(*), rose by 1.9% against the British pound, 4.7% against the US dollar, 1.8% against the rouble and 1.1% against the Turkish lira, but fell by 13.9% against the Polish zloty.

Significant events of the period and subsequent to period end In January 2005, following the signing of a commercial joint-venture agreement with W LS (W uxi Little Swan Company, China's leading producer of laundry products), a new company called W UXI Indesit Home Appliances Co. Ltd, was formed in which Indesit Company holds a 70% interest (W LS, 30%). This joint venture has acquired a line of business for the production of dishwashers from W LS. Initial production, due to start during the second half of 2005, will mainly be exported. A further 8% of the capital of General Domestic Appliances Holdings Ltd was acquired in March 2005, raising the Group's interest in this company to 76%. The shareholders' meeting of Indesit Company S.p.A. held in May 2005 approved the optional conversion of 2,502,844 non-convertible savings shares into ordinary shares. A total of 1,991,562 shares were converted, representing about 80% of all savings shares. In September 2005, Indesit Company S.p.A. sold its interest in MPE S.p.A. (33% of share capital) to Fineldo S.p.A. for 11.5 million euro (based on an independent appraisal since this was a related-party transaction), realising a capital gain of 3.8 million euro. The new warehouse in Lipetzk (Russia) was completed and inaugurated in October 2005, as the logistics hub for product distribution throughout the CIS. The total investment was about 30 million euro.

Accounting policies and adoption of international financial reporting standards - IFRSsTM This half-year report has been prepared in compliance with art. 81 of the Issuers' Regulation no.11971 dated 14 May 1999 and subsequent amendments, applying International Financial Reporting Standards - IFRSsTM (hereafter referred to as either IFRS or IAS) and, more specifically, the provisions of IAS 34 œ Interim Financial Reporting. The comparative 2004 information presented in this report has been restated in accordance with the new accounting standards. This half-year report is subject to a limited review by KPMG S.p.A. The effects of the first-time adoption of IFRS are described in the notes to the interim financial statements and in the related Appendix. The financial statements for the year ended 31 December 2004 were the last prepared under Italian GAAP. The quarterly reports presented from 30 September 2005 onwards are prepared in accordance with IFRS.

Approach taken In accordance with IAS 34, the comparative information presented together with the income statement and the statement of cash flows relates to the period ended 30 June 2004, while the comparative balance sheet information relates to the financial position as of 31 December 2004. The balance sheet as of 30 June 2004 is also presented for completeness. All commentary and

(*) Determined with reference to the average monthly rates reported by the Italian Exchange Office. 5

Half-year report as of 30 June 2005

comparisons contained in the half-year report are presented together with the comparative information (in brackets) required by IAS 34, unless stated otherwise. All amounts are stated in millions of euro. Percentages (margins and changes) are determined with reference to amounts stated in thousands of euro. The Group reporting to Indesit Company S.p.A. is hereafter referred to —Indesit Company“ or the —Group“. W hen the commentary relates to the parent company or individual subsidiaries, their names and legal form are stated in full.

For IFRS purposes, the income statement format adopted by the Group classifies expenses by function for which they were incurred. W ith a view to providing enhanced information, this report on operations presents the key operating indicators and statistics, together with the sales margins earned by the Group segmented by business sector.

Summary of consolidated results The Group's principal economic indicators are reported in the following table.

Key operating indicators and statistics 30 June 2005 30 June 2004 Change Euro m % Euro m % Euro m %

Sales 1.393,6 100,0% 1.451,4 100,0% (57,8) (4,0%) Gross operating profit (EBITDA) 122,1 8,8% 160,0 11,0% (37,9) (23,7%) Operating profit (EBIT) 53,0 3,8% 87,3 6,0% (34,3) (39,3%) Profit before taxation (PBT) 40,2 2,9% 76,7 5,3% (36,5) (47,6%) Group net profit 19,3 1,4% 46,9 3,2% (27,6) (58,9%)

The 4% reduction in sales to 1,393.6 million euro (1,451.4 million euro) was mainly due to the lower volume of finished products sold during the first quarter of 2005 and, to a lesser extent, to the price/mix effect.

The gross operating profit (EBITDA)1 of 122.1 million euro (160.0 million euro) represents 8.8% (11.0%) of sales. In addition to the contraction in sales, the reduction in EBITDA was due to the significant rise in the cost of the principal raw materials, which was only partially offset by efficiencies obtained from the redistribution of production among the various geographical areas in which the Group is active, and from —sourcing“ activities.

The operating profit (EBIT)2 of 53.0 million euro (87.3 million euro) represents 3.8% (6.0%) of sales. In addition to the information provided in relation to EBITDA, the change in EBIT also benefited from the revision in depreciation rates decided in 2005 and described in the explanatory notes.

Profit before taxation (PBT) amounts to 40.2 million euro (76.7 million euro), or 2.9% (5.3%) of sales.

Net profit totals 19.3 million euro (46.9 million euro). In addition to the effects described above, the reduction in total net profit was influenced by the provision for taxes recorded as of 30 June 2005, 20.9 million euro (29.8 million euro); as a consequence, the effective tax rate with respect to PBT has risen from 38.8% to 52.0%. This increase was principally due to the higher incidence of taxes that are not directly proportional to the level of profits (IRAP), and to the period losses incurred in certain countries of W estern Europe.

1 EBITDA: operating profit reported in the income statement, stated gross of depreciation and amortisation. 2 EBIT: operating profit reported in the consolidated income statement. 6

Half-year report as of 30 June 2005

Results by geographical area

Non-group sales Segment result % on sales 30 June '05 30 June '04Change 30 June '05 30 June '04Change 30 June '05 30 June '04Change W estern Europe 933,9 978,8 (44,9) 65,2 74,0 (8,8) 7,0% 7,6% (0,6%) Eastern Europe 364,9 370,3 (5,4) 60,4 71,5 (11,1) 16,6% 19,3% (2,8%) Other countries 94,7 102,3 (7,6) 8,4 8,9 (0,6) 8,8% 8,7% 0,1% Total 1.393,6 1.451,4 (57,8) 134,0 154,4 (20,5) 9,6% 10,6% (1,0%)

Sales decreased in W estern Europe by 4.6% as a result of weak operating conditions, with volume down by 2.4%. The reduction in sales did not follow the same pattern in every country within W estern Europe. Sales in Italy were essentially stable and unit prices moved higher, while there was substantial growth in both the volume of business and unit prices in France. The Group was adversely affected in both volume and unit price terms by the performance of the British market, where nevertheless Indesit Company maintains its leadership position. The result of the segment3 of this sector has fallen from 7.6% to 7.0%. The containment of this decrease was achieved by implementing an astute price/mix policy (especially during the first quarter) and by a careful redistribution of the geographic mix. Sales declined by 1.5% in Eastern Europe, although there was significant variability within the area: major reductions in certain countries (Poland and the Czech Republic) and strong growth in others (Romania and the Ukraine). Strong competitive pressure in an area where profits are still high resulted in a larger decline in profitability, which contracted by 2.8 percentage points (from 19.3% to 16.6%).

Summary of the consolidated financial position M ain financial figures and ratios

30 June '05 1 January '05 30 June '04

Trade receivables 647,3 625,8 516,6 Inventories 420,0 330,5 395,5 Trade payables (786,0) (863,4) (768,1) Net working capital 281,3 92,9 144,0 Tangible and intangible fixed assets 1.192,7 1.156,1 1.061,6 Other assets and liabilities (265,9) (292,9) (235,9) Net capital invested 1.208,2 956,1 969,7 Net financial indebtedness 726,2 512,0 396,1 Group shareholders' equity 467,0 433,2 434,1 Minority interests 14,9 10,9 139,5 Net capital invested 1.208,2 956,1 969,7

Cash flow from operating activities (70,1) na (19,3)

Net working capital / Sales (12 months) 9,2% 3,0% na Net financial indebtedness / shareholders' equity 1,5 1,2 na

The above table shows balance sheet amounts as of 1 January 2005, rather than 31 December 2004. This is because IAS 39 and IAS 32 have been applied as from 1 January 2005, with a significant effect on both the net financial position and net working capital (as detailed in the

3 The result of the segment is the operating profit of the geographical area, gross of all income and charges not allocated directly to that area. 7

Half-year report as of 30 June 2005

FTA Appendix). Accordingly, the information provided as of 30 June 2004 and 31 December 2004 is not consistent with that reported as of 30 June 2005.

Net working capital is 9.2% of sales over the past twelve months (3.0% as of 1 January 2005). The increase in net working capital since 1 January 2005 was principally due to the effects of seasonality on sales and production. The ratio of net financial indebtedness to total shareholders' equity is 1.5 (1.2 as of 1 January 2005). This indicator has also been influenced by the seasonality of sales and production.

By excluding the effects of applying IAS 32 and IAS 39 as of 30 June 2005, net working capital and net financial indebtedness (and the related indicators) would have been as follows:

Proforma financial figures and ratios 30 June '05 30 June '04 Proforma

Net working capital 154,3 144,0 Net financial indebtedness 466,2 396,1 Net working capital / Sales (12 months) 5,1% 4,6%

The increase in net working capital in both absolute terms and with respect to sales essentially reflects the rise in inventories due mainly to the higher unit value of stocks and a different product mix. The growth in net financial indebtedness derives from both the increase in net working capital and the reduction in EBITDA mentioned above.

Intercompany and related-party transactions Transactions between Group companies are settled on an arms‘ length basis, having regard for the quality of the goods and services provided. A specific section of the explanatory notes describes the nature of the principal transactions arranged by the parent and other group companies with related parties including, in particular, associates, subsidiaries and parent companies and companies controlled thereby. This section also contains the detailed information required by Consob regulations and IAS 24. Further information on the procedures adopted by the Group with regard to significant, related- party transactions can be found in the Corporate Governance report of Indesit Company S.p.A. (posted on the company's website).

Stock option plans granted Stock option plan for Group managers and supervisors The resolutions adopted by the shareholders at the extraordinary meetings held on 16 September 1998 (as modified at the meetings held on 5 May 2000 and 7 May 2001) and on 23 October 2001 authorised, pursuant to art. 2441.8 of the Italian Civil Code, two increases in share capital by up to 2,700,000 euro each, via the issue of a combined maximum of 6,000,000 ordinary shares, par value Euro 0.90 each, to service the stock option plan for Group managers and supervisors. The Board of Directors, in the person of the Chairman, determines the number of options to be granted each year and identifies - on the recommendation of the CEO - the beneficiaries of the options. The options granted subsequent to 24 July 2003 envisage a vesting period of 3 years for the first 50% and 4 years for the remaining 50%, while the options granted previously envisaged a vesting period of 2 years and 3 years respectively. The CEO, as an employee of Indesit Company S.p.A., benefits from a stock option plan linked to his continuity in office during the period 2004-2006 and to the achievement, during that period, of the sales and profitability objectives established in the MTP (medium-term plan) approved by the Board of Directors in October 2003. This plan involves the granting of 900,000 8

Half-year report as of 30 June 2005

options (300,000 each year) to purchase 900,000 own (ordinary) shares from the Company. Each tranche is granted at the end of each year. The exercise price for the options granted in each tranche is the average of the official market prices for the Company's ordinary shares during the period of 30 days prior to 31 December each year. W ith regard to the 2004 options granted, the exercise price of Euro 12.56 each exceeds the carrying amount of the related treasury shares.

Stock option plan for directors with significant duties who are not employees The extraordinary meetings held on 23 October 2001 and 6 May 2002 authorised two capital increases, by the issue of a maximum of 1,600,000 new shares, to service a stock option plan for the directors of the Company who perform significant duties. The options granted are exercisable from 31 March 2004 (until no later than 31 March 2006). The exercise price is Euro 4.76 for the 1,400,000 options granted in 2001 and Euro 9.70 for the 200,000 options granted in 2002.

The meeting held on 5 May 2004 approved a new share capital increase by up to 1,000,000 ordinary shares reserved for the exercise of options granted to the Chairman of the Company's Board of Directors. This plan is linked to his continuity in office and to the achievement of the profitability objectives established in the MTP for 2004-2006. The exercise price is Euro 14.70.

No new plans were authorised during the first half of 2005 and no stock options were granted.

Corporate Governance The system of corporate governance adopted by Indesit Company is consistent with the principles established in the —Code of Self-Regulation for Listed Companies“ (hereafter, the —Code“), adopted by the Board of Directors back in 2001, and with international best practice. On 24 March 2005, the Company's Board of Directors approved the Annual Report on Corporate Governance, which provides a complete description of the governance model adopted by the Company and reports on the implementation of the Code. The Parent Company has adopted the ordinary model of administration and control (envisaged under Italian law), with the presence of a Board of Directors, a Board of Statutory Auditors and Independent Auditors. The directors and officers are appointed at the Shareholders' Meeting and remain in office for a period of three years. The significant presence of Independent Directors and the important role they play, both on the Board and on Board Committees (Human Resources Committee, Audit Committee and Innovation and Technology Committee), ensures that the interests of all shareholders are appropriately balanced and guarantees a high level of discussion at Board meetings. Further information is available in the Annual Report on Corporate Governance.

W EEE and RoHS Directives The European Union adopted the W EEE (W aste Electrical and Electronic Equipment) Directive in December 2002, which makes manufacturers responsible at a European level for the recovery and disposal of waste products. The Directive describes the following levels of responsibility.

Old waste (regarding products put on the market before 13 August 2005) The costs of disposal are paid for by one or more systems financed proportionally (e.g. based on market share) by all the manufacturers present on the market at the time such costs are incurred. This approach identifies the collective responsibility of the manufacturers and the regulations establish, for a transitional period of 10 years from the time the Directive comes into force, that

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Half-year report as of 30 June 2005

consumers may be informed at the time of sale about the collection, processing and disposal costs (visible fee), where envisaged by local legislation.

New waste (regarding products put on the market after 13 August 2005) Each manufacturer is responsible for financing the collection, processing, recovery and disposal of the waste deriving from its products. The manufacturer may elect to fulfil this obligation directly or by joining a collective system. The Directive also requires manufacturers to provide adequate guarantees (e.g. by participating in suitable management systems, insurance etc.) to cover disposal costs relating to producers that are no longer present on the market. In this case, the Directive forbids the separate indication to the consumer of the visible fee. Based on these instructions, the costs of disposal under the old waste regime must be covered by the visible fee, while operation of the new waste regime will require accruals to be made to cover the future disposal costs of products put on the market after 13 August 2005.

At this time, certain major EU countries (principally the United Kingdom, in terms of Group operations) have not yet completed the process of adopting these EU regulations. Other countries have adopted them, establishing transition periods of, typically, one or two years during which these regulations will not be effective (principally Italy and Poland) and provisions will only be needed to the extent that local legislation confirms the principle of individual responsibility laid down in the community regulations. The European Council and Parliament also adopted Directive 2002/95/EC (known as the RoHS - Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment Directive) in December 2002. This Directive states that new electrical and electronic equipment put on the market from 1 July 2006 must not contain certain polluting materials. Indesit Company has acted to ensure compliance with this Directive by informing all suppliers that components which are not compliant with RoHS will not be accepted from July 2005; work to schedule the phase-out of non-compliant production is currently in progress. Based on the information available at this time, is it reasonable to expect that no problems will emerge regarding the realisable value of the inventories held as of 30 June 2005.

26 October 2005 for the Board of Directors

The Chairman Vittorio Merloni

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Half-year report as of 30 June 2005

Interim Financial Statements and Explanatory Notes

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Half-year report as of 30 June 2005

INDESIT COM PANY Consolidated interim income statement for the six-month period ended 30 June 2005

(in millions of EURO)

Notes 30 June '05 30 June '04

Revenue 1 1.393,6 1.451,4 Cost of sales (1.037,9) (1.031,1) Selling and distribution expenses 2 (236,8) (260,1) General and administrative expenses 3 (67,8) (74,7) Other income 4 1,8 3,1 Other expenses (0,0) (1,3) Operating profit 5 53,0 87,3

Net financial charges 6 (11,3) (10,6) Income and expense from associated companies 7 (1,5) - Profit before tax 40,2 76,7 Income tax expenses 8 (20,9) (29,8) Profit for the period 19,3 46,9 Profit attributable to minority interests (0,2) (0,7) Profit attributable to equity holders of the parent 19,0 46,3

Basic earnings per share (EPS) 20 0,19 0,46 Diluted earnings per share (EPS) 20 0,19 0,45

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Half-year report as of 30 June 2005

INDESIT COM PANY Consolidated balance sheet as of 30 June 2005 (in millions of EURO)

Notes 30 June '05 31 December '04 30 June '04 Assets Property, plant and equipment 9 776,9 751,3 713,7 Goodwill and other intangible assets with an 10 325,2 247,6 260,2 indefinite usefull life Other intangible assets 11 90,7 93,9 87,6 Investments in associates 12 27,9 26,6 46,6 Other investments 13 4,0 37,5 36,9 Deferred tax assets 57,0 45,8 33,6 Other non current financial assets 14 94,7 72,7 73,7 Total non-current assets 1.376,4 1.275,4 1.252,3

Inventories 15 420,0 330,5 395,5 Trade receivables 16 647,3 511,5 516,6 Current financial assets 17 2,9 33,2 35,7 Due from tax authorities 52,1 44,3 53,1 Other receivables and current assets 18 38,8 31,2 37,1 Cash and cash equivalents 19 180,9 212,2 182,4 Total current assets 1.342,1 1.162,8 1.220,3 Total assets 2.718,4 2.438,2 2.472,6

Share capital 92,2 101,0 100,4 Reserves 253,2 187,8 195,0 Retained earnings 102,5 83,5 92,5 Group net profit 19,0 100,0 46,3 Total equity attributable to equity holders 20 467,0 472,4 434,1 Minority interests 21 14,9 137,8 139,5 Total equity 481,9 610,1 573,6

Liabilities Medium to Long-term financial payables 22 478,1 396,0 192,8 Employee benefits 23 113,5 109,8 109,1 Provisions for risks and charges 24 40,1 39,6 35,1 Deferred tax liabilities 86,0 86,0 90,4 Other non-current liabilities 25 28,1 20,9 23,0 Total non-current liabilities 745,7 652,4 450,4 Bank overdrafts and other financial payables 26 526,7 133,2 495,1 Current provisions for risks and charges 27 20,3 29,9 22,0 Trade payables 786,0 863,4 768,1 Due to tax authorities 76,5 65,6 73,3 Other payables 28 81,4 83,6 90,1 Total current liabilities 1.490,8 1.175,7 1.448,6 Total liabilities 2.236,5 1.828,1 1.899,0

Total equity and liabilities 2.718,4 2.438,2 2.472,6

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Half-year report as of 30 June 2005

INDESIT COM PANY Consolidated interim statement of cash flows for the six-month period ended 30 June 2005 (in millions of EURO)

Notes 30 June '05 30 June '04

Total net profit 19,3 46,9 Income tax 20,9 29,8 Depreciation and amortisation 69,1 72,7 Other non-monetary income and expenses 10,5 20,9 Change in trade receivables (21,5) (29,1) Change in inventories (89,5) (112,0) Change in trade payables (29,2) (1,1) Change in other assets and liabilities (10,9) (5,2) Income taxes paid (30,2) (39,2) Interest paid (10,3) (5,8) Interest collected 1,8 2,9 Cash flow from operating activities (70,1) (19,3)

Investment in Property, Plant and Equipment 29 (100,8) (80,0) Proceeds from sale of Property, Plant and Equipment 6,9 3,6 Investment in intangible assets (8,4) (12,9) Payment of goodwill 30 - (52,9) Investment in non current financial assets and other investments 31 (4,4) (2,4) Cash flow from (absorbed by) investing activities (106,7) (144,6)

Proceeds from share capital increases 32 6,2 2,9 Dividends paid (36,7) (36,2) New long-term payables - 27,7 Repayment of GDAH acquisition (48,7) - Change in current financial payables 33 224,8 (21,5) Cash flow from (absorbed by) financing activities 145,6 (27,2)

Net cash flow (31,2) (191,0)

Cash and cash equivalents, start of period 212,2 373,5 Cash and cash equivalents, end of period 180,9 182,4 Total change in cash and cash equivalents (31,2) (191,0)

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Half-year report as of 30 June 2005

EXPLANATORY NOTES TO THE HALF-YEAR REPORT AS OF 30 JUNE 2005 Group structure and activities Indesit Company is a group led by Indesit Company S.p.A., an Italian company based in Fabriano, which is active in the production and sale of white goods, namely household appliances for the cooking sector (cookers, ovens and hobs), the cooling sector (refrigerators and freezers), the laundry sector (washing machines, dryers and combined washer-dryers) and the dishwashing sector. The Group operates mainly in W estern and Eastern Europe, with 19 factories and 22 subsidiaries. The primary and secondary segments of activity, as defined by IAS 14, are represented respectively by the geographical areas (W estern Europe, Eastern Europe and Other countries) and by the cooking, cooling, laundry and dishwashing business segments. The household appliances sector is highly seasonal, which affects all the main economic and financial parameters. The segment reporting required by IAS 14 is provided later in this report.

Approval of the consolidated half-year report as of 30 June 2005 The consolidated half-year report as of 30 June 2005 was approved by the Board of Directors on 26 October 2005 and is subject to a limited review by the independent auditors.

Accounting policies and adoption of IFRS As required by art. 81 of the Issuers' Regulation no. 11971 dated 14 May 1999 and subsequent amendments, the half-year report as of 30 June 2005 has been prepared in accordance with international financial reporting standards. As a result, the interim financial statements have been prepared in accordance with the provisions of IAS 1 and IAS 7, and the following explanatory notes comply with the requirements of IAS 34 œ Interim Financial Reporting. Due to the application of IAS 34, in the following are presented selected explanatory notes and, accordingly, do not include all the information required for annual financial statements.

W ith reference to the comparative information as of 30 June 2004 presented on the first-time adoption of IFRS, Attachments 1, 2 and 3 to this report show a reconciliation of such information with the balance sheet, income statement, equity and net profit as at 30 June 2004.

In accordance with the provisions of IFRS 1 and the above-mentioned Issuers' Regulation no. 11971 dated 14 May 1999 (as modified by Consob resolution no. 14990 dated 14 April 2005), the required reconciliation schedules and explanatory notes are presented in —FTA Appendix œ First-Time Adoption - Transition to International Financial Reporting Standards (IFRSs)TM “ (hereafter, the FTA Appendix), which is attached to this half-year report. This Appendix reports the effects of the adoption of IFRS as from 2005 (transition date 1 January 2004) on the balance sheets as of 1 January 2004, 31 December 2004 and 1 January 2005, and on the 2004 income statement. The above reconciliation of the IFRS balance sheets as of 1 January 2004, 31 December 2004 and 1 January 2005, the IFRS income statement for 2004, and the related explanatory notes, with the amounts determined under Italian GAAP, are subject to audit by the independent auditors appointed to examine the statutory financial statements.

The principal accounting policies adopted are described below. The following criteria adopted for the preparation of the consolidated interim financial statements and these explanatory notes are consistent with the current international financial reporting standards issued by the 16

Half-year report as of 30 June 2005

International Accounting Standards Board (IASB), including the interpretations provided by the International Financial Reporting Interpretations Committee (IFRIC) and the Standing Interpretations Committee (SIC) and endorsed by the European Union, on the assumption that such standards will also be in force for the preparation of the consolidated financial statements as of 31 December 2005. The same accounting policies were also applied to prepare the IFRS first-time adoption schedules presented in the FTA Appendix. These accounting policies may differ from the IFRS in force as of 31 December 2005, due to further orientations of the European Commission adopting the IFRS or to the issue of new standards and/or new interpretations by the relevant bodies. Accordingly, the above reconciliation schedules and the interim consolidated financial statements presented in this half-year report are subject to any changes that may be necessary should the IFRS be modified in 2005 subsequent to the publication of this half-year report, or as a result of new interpretations, and should such modifications and/or interpretations require retrospective application.

Principal accounting policies

Basis of preparation The half-year report of Indesit Company is prepared in accordance with the IFRS issued by the IASB and endorsed by the European Union. The presentation currency of the half-year report is the euro, and the financial statements balances are stated in millions of euro (except where stated otherwise). The half-year report is prepared on an historical cost basis, except with regard to derivative financial instruments, financial assets held for sale and financial instruments classified as available for sale, which are measured at their fair value. The accounting policies are applied on a consistent basis by all Group companies. The accounting policies adopted for the preparation of the consolidated half-year report as of 30 June 2005 have also been applied on a consistent basis to all the comparative financial information, except with regard to the application of IAS 32 and IAS 39 on the recognition and presentation of financial instruments, the effects of which, determined on a retrospective basis, are presented as from 1 January 2005, as allowed by IFRS 1. The comparative figures for such financial instruments as of 31 December 2004 and 30 June 2004 were determined in accordance with the previous accounting standards (issued by the Italian Accounting Profession). The consolidated half-year report comprises the income statement, the balance sheet, the statement of cash flows, the statement of changes in equity and the explanatory notes. The income statement format adopted by the Group classifies expense by function for which they were incurred. The statement of cash flows is presented using the indirect method. For information purposes, the attachments to this half-year report include the separate balance sheet (attachment 4) and income statement (attachment 5) of Indesit Company S.p.A. and the accounting policies adopted for the preparation of such statements (attachment 6) in accordance with Italian GAAP and current legislation.

Accounting estimates The preparation of the half-year report involves making assumptions and estimates on carrying amounts of assets and liabilities that could affect the recoverable amounts of such items and the related explanatory notes, as well as the amount of contingent assets and liabilities at the balance sheet date. The final amounts may therefore differ from the estimated amounts. The differences between such final amounts and the estimates at the inception are reflected in the income statement.

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Half-year report as of 30 June 2005

Basis of consolidation Subsidiaries Subsidiaries are those entities over which Indesit Company S.p.A. exercises control by virtue of the power to determine, directly or indirectly, their financial and operating policies and to obtain benefits from their activities. In general, companies in which Indesit Company holds more than 50% of the voting rights, considering any potential voting rights that may be exercised or converted at the time, are deemed to be subsidiaries. Subsidiaries‘ financial statements are fully consolidated line-by-line from the time that control is transferred to the group until the date on which control ceases. Significant intercompany transactions are fully eliminated. Minor subsidiaries whose impact is not material in consolidated financial statement are not consolidated.

Associates Associates are those entities over which Indesit Company S.p.A. exercises significant influence, but does not control their operations or have the power to determine their financial and operating policies or obtain benefits from their activities. In general, companies in which Indesit Company holds directly or indirectly between 20% and 50% of the share capital or voting rights, considering any potential voting rights that may be exercised or converted at the time, are deemed to be associates. Associates are accounted for by equity method from the time that significant influence is transferred to the Group until the date on which such influence ceases. If the Group's interest in the losses of an associates exceeds the book value of the related investment, such book value is written off and the additional losses are covered by a specific provision to the extent that Indesit Company has incurred in a legal or constructive obligation or, in any case, to make payments on its behalf. Unrealised gains and losses on transactions with associates are eliminated in proportion to the interest held.

Joint ventures Joint ventures are those entities over which Indesit Company exercises joint control together with other parties, as a consequence of holding the same percentage of voting rights or due to contractual agreements. Joint ventures are consolidated on a proportional basis, which involves combining their assets, liabilities, revenues and expenses on a line-by-line basis in proportion to the group's interest, from the time that joint control commences until the date on which it ceases. Unrealised gains and losses on transactions with joint ventures are eliminated in proportion to the interest held.

Investments in other companies Investments in other companies are those entities in which, in general, the Group holds less than 20% of the equity capital or voting rights. They are measured at cost as written down to reflect any impairment, since their fair value is not readily determinable. Dividends are recognised as financial income from investments at the time they are declared.

Accounting treatment of foreign currency transactions Foreign currency transactions All transactions are recorded in the functional currency of primary economic environment in which each Group company operates. Transactions not carried out in the functional currency are translated to this currency using the exchange rates applying at the time of the related transactions. Monetary assets and liabilities are translated using the exchange rates ruling at the balance sheet date and any exchange differences are recognised in the income statement. Non-

18

Half-year report as of 30 June 2005

monetary assets and liabilities are translated using the historical rates applying at the time of the related transactions.

Financial statements of foreign operation The financial statements of companies whose functional currency differs from that used to prepare the consolidated financial statements (Euro) and which do not operated in hyper- inflationary economies, are translated as follows: a) assets and liabilities, including the goodwill and fair value adjustments deriving from the consolidation process, are translated using the reference date exchange rates; b) revenues and expenses are translated using the average exchange rate for the period, which is deemed to approximate the rates applying on the dates when the individual transactions took place; c) the translation adjustments deriving from the above process are recorded in a specific equity reserve. On the disposal of a foreign operation, the cumulative amount of the exchange differences deferred in the separate component of equity relating to that foreign operation shall be recognised in profit or loss when the gain or loss on disposal is recognised. Cumulative translation differences for all foreign operations are deemed to be zero at the date of transition to IFRS, to this extent gains and losses on future disposal will arise solely in respect of translation differences starting from January 1st 2004.

The financial statements of each of the Group‘s entities in hyperinflationary economies expressed in a functional currency different from presentation currency (Euro), including comparatives, are restated to account for changes in the general purchasing power of the local currency by applying a relevant price index at the balance sheet date and then are translated into the Euro at the foreign exchange rates ruling at the balance sheet date thereafter they are restated to account for changes in the general purchasing power of the local currency by applying a relevant price index at the balance sheet date.

Net investments in foreign operation Exchange differences arising from the translation of the net investment in foreign operations, usually represented by intercompany monetary item that is receivables from or a payable to and relevant hedging financial instruments whose settlement is neither planned nor likely to occur in the foreseeable future, shall be are recognised initially in a separate component of equity. Such differences are recognised in profit or loss on disposal of the net investment.

Derivative financial instruments Indesit Company carries out transactions involving derivative financial instruments solely to hedge its exposure to changes in the market price of commodities, as well as to hedge its exposure to foreign exchange and interest-rate risks. Derivative financial instruments are initially recognised at cost and subsequently measured at their fair value. If the conditions established in IAS 39 regarding the formal designation of the hedging relationship are met and this relationship is shown to be highly effective, both ex ante when the transaction is arranged and ex post during subsequent accounting periods, derivative financial instruments are recorded on a hedge accounting basis. The effects of derivatives that do not qualify for hedge accounting are recognised in the income statement. W hen derivatives qualify for hedge accounting are recorded as described below.

Fair Value Hedges If a derivative financial instrument is designated to hedge the risk of changes in the fair value of an asset or liability recognised in the balance sheet (the hedged item), the gain or loss deriving 19

Half-year report as of 30 June 2005

from subsequent fair value adjustments to the hedging instrument is recognised in the income statement together with the gain or loss deriving from the measurement of the related hedged item.

Cash Flow Hedges If a derivative financial instrument is designated to hedge the risk of variability in the cash flows of a recognised asset or liability or a transaction that is very likely to occur, the gains or losses deriving from the measurement of such financial instrument are recognised in the cash flow hedging reserve, to the extent of the effective portion, while the ineffective portion (if any) is recognised in the income statement. The cash flow hedging reserve is reversed through profit or loss in a manner consistent with the hedged item. If a hedging instrument is terminated early with respect to the timing of the hedged transaction, or if the latter is no longer deemed to be very likely to occur, the related cash flow hedging reserve is recognised immediately in profit or loss.

Hedge of a net investment denominated in foreign operation If a derivative financial instrument is designated to hedge a net investment denominated in a foreign operation, the gains or losses deriving from the related fair value adjustment are recognised directly in equity through the statement of changes in equity and the ineffective portion (if any) is recognised in profit or loss.

Property, plant and equipment Investment in operating assets Property, plant and equipment are measured at their purchase cost or, in the case of self- constructed assets, at production cost, comprising the cost of materials, labour and a reasonable proportion of overheads and related charges, net of accumulated depreciation and any impairment determined on the basis described below. The measurement at the inception includes an initial estimate of dismantling and removal costs, if significant. Ordinary maintenance expenses are recognised in income statement, while the costs of replacing certain parts and extraordinary maintenance are capitalised when it is probable that they will generate measurable economic benefits in the future. The financial charges incurred to finance the purchase or production of the assets are capitalised when the associated loans relate solely to such assets. Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives; significant parts of plant and equipment with different useful lives are accounted for separately. Useful lives are verified each year and any changes are applied on a prospective basis. Residual value is verified with reference to the present value of the expected future cash flows and an impairment loss is charged on profit and loss every time events suggest that the carrying value may not be recoverable. Such impairment is reversed if the reasons for recording cease to apply. Land, whether or not used for the construction of civil or industrial buildings, is not depreciated since it is deemed to have an indefinite useful life. The useful lives of property, plant and equipment are grouped into the following categories:

Category Useful lives Buildings and temporary constructions from 10 to 33 years Plant and machinery from 5 to 10 years Industrial and commercial equipment from 3 to 10 years Other assets: - vehicles and internal transport from 3 to 6 years - furniture, IT and office machines from 3 to 8 years

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Half-year report as of 30 June 2005

Assets under finance leases Property, plant and equipment held under finance leases, in relation to which Indesit Company has assumed substantially all the risks and rewards of ownership, are recognised as non current assets at their fair value or, if lower, at the present value of the minimum lease instalments, and depreciated over their estimated useful lives. The liability to the lessor is classified among financial payables in the balance sheet.

Intangible assets Intangible assets are measured at cost, determined on the basis described for property, plant and equipment, when it is likely that the use of such assets will generate economic benefits and their cost can be determined reliably. Intangible assets with a definite useful life are amortised and stated net of the related accumulated amortisation, calculated on a straight-line basis over their estimated useful lives, and any impairment losses with respect to the period during which they are expected to generate economic benefits. Intangible assets with an indefinite useful life, comprising certain brands and goodwill, are not amortised but are tested for impairment on an annual basis, or more frequently if specific events suggest that the assets they might be impaired. Subsequent expenditure on intangible assets are capitalised only if it increases the future economic benefits expected to derive from the specific capitalised asset; otherwise, it is charged to the income statement as incurred.

Goodwill Goodwill is an indefinite intangible asset recognised in a business combination and initially measured at its cost, being the excess of the cost of the business combination over the acquirer‘s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. The aforementioned accounting treatment is applicable to every business combination starting from December 31st 2002, being the preceding accounted for as acquisition according to Italian Gaap. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the acquirer‘s cash- generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, thereafter future cash flows are verified. To this purpose expected future cash flows are discounted at a rate that reflects cost of capital and the risks specific to cash generating unit. An impairment loss is recognized to profit and loss if carrying amount deriving from this calculation is lower than cost. In case of disposal of a going concern including this asset, gains and losses are determined taking into account the carrying amount of goodwill. No reversal of impairment losses is recognised in respect of goodwill.

Research and development Expenditure on research activities incurred to acquire new knowledge are charged to the income statement. Expenditure on development activities incurred to create new products or improve existing products, or to develop and improve production processes, are capitalised if the innovations made result in technically feasible processes and/or commercially saleable products, on condition that sufficient resources are available to complete the related development activities and that the economic benefits deriving from such innovations are measurable. Capitalised expenditure includes both internal and external design costs (including payroll and materials) and the appropriate proportion of overheads. Capitalised development expenditure is treated as an intangible asset with a definite life and is amortised over the expected period of economic benefit, which is generally taken to be 5 years.

Other intangible assets 21

Half-year report as of 30 June 2005

Other intangible assets expected to generate future measurable economic benefits are deemed to have a definite life and are measured at cost. They are amortised on a straight-line basis over the period of expected economic benefit, which is deemed to be 20 years for brands with a definite life and between 5 and 10 years for other assets.

Receivables and other financial assets - current and non-current The other current and non-current financial assets principally comprise non-consolidated investments, held-to-maturity securities, securities held for sale, non-current receivables and other financial assets. Held-to-maturity securities are initially recognised at cost, as increased by the transaction costs incurred to acquire these financial assets. Subsequently, they are measured at amortised cost using the effective interest rate method. Securities and other financial assets held for trading and available for sale are measured at their fair value, as increased by directly-related costs. Gains and losses deriving from financial assets available for sale are recognised directly in equity, except for impairment losses and exchange rate losses, until the time of sale when such gains and losses are recognised in profit or loss. Non interest-bearing receivables due after one year or with a lower interest rather than the market are discounted using market rates.

Trade receivables Trade receivables, generally due within one year, are measured at their estimated realisable value. Net realizable value is determined by the allowance for doubtful accounts, which takes account of the solvency of debtors and the effective recoverability of the receivables concerned. Trade receivables sold with or without recourse which do not meet all the requirements established in IAS 39 for the derecognition of financial assets are booked in the balance sheet, while receivables sold without recourse which satisfy all the requirements of IAS 39 for the derecognition of financial assets are derecognised.

Inventories Inventories are measured at the lower of cost and net realisable value. Cost is determined on a weighted-average cost basis and includes all purchasing-related expenses, inclusive of indirect charges, and the costs of converting products and bringing them to their present location and condition. Net realisable value is determined with reference to market prices after deducting completion costs and selling expenses. Obsolete and slow-moving materials and finished products are written down, considering their realisable value.

Cash and cash equivalents Cash and cash equivalents comprise cash on hand, bank and postal deposits and equivalents that can be liquidated in the very-short or short term which are not subject to significant fluctuations in value.

Share capital Share capital, including the portion represented by savings shares, is stated at nominal value. The buy-back of treasury shares, stated at cost including related charges, is recognised as a change in equity; the nominal value of treasury shares is deducted from share capital, while the difference between cost and nominal value is deducted from the equity reserves.

Financial liabilities Financial liabilities are initially recognised at their fair value, net of related charges, and measured in subsequent periods at amortised cost using the effective interest rate method. The difference between amortised cost and redemption value is recognised in the income statement 22

Half-year report as of 30 June 2005

over the life of the loan in proportion to the related interest accrued. W here hedge accounting applies, the financial liabilities hedged by derivative instruments are measured on a basis consistent with the hedging instrument (see the —Derivative financial instruments“ paragraph).

Trade payables and other payables Trade payables and other payables, generally due within one year, are not discounted and are stated at nominal value, which represents their settlement value.

Employee benefits The costs of defined contribution plans for employee pensions and similar benefits are charged to the income statement on an accruals basis. The net liability to employees under defined benefit plans, principally represented by severance indemnities and pension funds, is recorded at the expected future value of the benefits to be received by employees and accrued by them in the current and prior periods. These benefits are then discounted and stated net of the fair value of the plan assets. The net liability is determined based on actuarial assumptions and is calculated each year, at least, by an independent actuary using the projected unit credit method. The discount rate used is the yeld on AA credit rated bonds with a maturity date that is consistent with expiring date of the pension plan. Actuarial gains and losses are recognised to profit or loss on a straight-line basis over the residual working lives of employees, to the extent that their cumulative net value exceeds the greater of 10% of the total liability arising under defined benefit plans or 10% of the fair value of the plan assets (corridor approach) at the end of the prior year.

Stock options The remuneration recognised to employees and directors by the granting of stock options is recognised as an expense directly crediting a corresponding increase in equity. Such costs are measured based on the fair value of the options at the grant date. The cost of stock options, determined on the above basis, is charged to the income statement over the related vesting period. The fair value of the stock options at the grant date is determined using a mathematical model.

Provisions for risks and charges The provisions for risks and charges are recognised to cover obligations deriving from past events and it is probable that an outflow of economic benefits will be required to settle such obligations. If the settlement of such obligations is likely to take place after more than one year, they are discounted using a rate that takes account of the time value of money and the specific risks associated with the liabilities concerned. In particular, the principal liabilities covered by provisions are described below.

Provision for product warranty A provision legally-required and voluntary warranty costs is recognised at the time the related products are sold. The provision is determined with reference to the call rate for the products still under warranty cover, the period of time between sell in and sell out (start of the warranty period) and the average unit cost of the work performed.

Provision for restructuring A provision for restructuring is recognised when the directors of Group companies have formally approved a restructuring plan that was communicated to the parties concerned prior to the balance sheet date.

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Half-year report as of 30 June 2005

Provision for onerous contracts A provision for onerous contracts is recognised when the expected benefits are less than the related costs in the accounting periods in which they become known and measurable.

Provision for product disposal (WEEE) The European Union adopted the W EEE (W aste Electrical and Electronic Equipment) Directive in December 2002, which makes manufacturers responsible at a European level for the recovery and disposal of waste products. The Directive describes the following levels of responsibility: a) old waste (regarding products put on the market before 13 August 2005): the costs of disposal are incurred collectively by the manufacturers which contribute in proportion to their market share; b) new waste (regarding products put on the market after 13 August 2005): each manufacturer is responsible for the disposal of its own products. At this time, certain major EU countries (principally the United Kingdom, in terms of Group operations) have not yet completed the process of adopting these EU regulations. Other countries have adopted them, establishing transition periods of, typically, one or two years during which these regulations will not be effective (principally Italy and Poland) and provisions will only be needed to the extent that local legislation confirms the principle of individual responsibility laid down in the community regulations. Provisions are therefore recognised to cover the charges deriving from the application of the W EEE regulations solely in relation to new waste arising in the countries that have already adopted the Directive.

Other provisions Provisions are recognised for other future charges deriving from court cases, disputes and other obligations when the requirements for the recognition of a liability are met, being in the accounting period in which such charges become known and measurable.

Revenue Sales Revenue from the sale of goods is recognised in profit or loss when the significant risks and rewards of ownership have been transferred to the buyer, and it is probable that the economic benefits associated with the transaction will flow to Indesit Company. Sales are stated net of discounts, allowances, rebates and returns, and do not include the proceeds from the disposal of raw materials and scrap. Revenue from the sale of services are recorded on an accruals basis.

Dividends Dividends are recognised as an income when they have been approved by the relevant shareholders‘ meeting.

Grants Government grants and grants from other bodies, recognised in the form of direct payments or tax benefits, are recorded as deferred income in the balance sheet, among other liabilities, at the time their collection becomes reasonably certain, when completion of all the steps required to obtain them is assured. Such deferred income is recognised in profit or loss, in accordance with the matching principle, when the costs for which such grants were made are incurred. Grants are recognised directly to the income statement at the time the requirements for their recognition are met, when receipt is assured.

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Half-year report as of 30 June 2005

Other income Other income includes all forms of non-financial revenue not covered above and is recorded on the basis described in relation to revenue from good sold and services rendered.

Expenses Cost of sales Cost of sales includes all the costs of manufacturing finished products, comprising raw materials, the purchase of components, the cost of direct and indirect labour, internal and external processing, depreciation, all production-related charges, and the accruals for costs to be incurred in relation to products sold.

Selling, distribution, general and administrative expenses Selling, distribution, general and administrative expenses comprise all the costs incurred to market products and provide services, the costs of distributing products to the Group's warehouses and to customers, general and administrative expenses and related charges, as well as all the other non-financial expenses that are not part of the core business.

Leases and rentals Operating leases and rental charges are expensed on an accruals basis to match the economic benefits deriving from the leased or rented assets. If such economic benefits are less than the related charges, falling under the onerous contract category, the difference between the discounted charges and benefits is recorded as a cost in the income statement. Finance leases generate depreciation charges on the recognised assets and financial charges representing interest on the loan obtained under the lease.

Net financial expenses Net financial expenses include the interest expense accrued on all forms of loan, cash discounts granted to customers, financial income from cash and cash equivalents, and exchange rate gains and losses, as well as the economic effects of measuring the transactions that hedge interest-rate and exchange-rate risks.

Income and expense from associates Income and expense from associates include the effects deriving from application of the equity method and the dividends received from these companies. This caption of the income statement also includes similar effects and dividends from non- consolidated subsidiaries.

Income tax Income tax includes current and deferred tax. Current tax is based on an estimate of the amount that Indesit Company expects to be paid by multiplying the taxable income of each Group company by the tax rate enacted at the balance sheet date in each of the countries concerned. Deferred tax is provided by using the liability method, considering all the temporary differences between carrying amounts of assets and liabilities for taxation purpose and for the purpose of consolidated financial statements. Deferred tax is provided by using the tax rates expected to be enacted in the countries concerned for the tax periods in which the related temporary differences are forecast to reverse or expire. Deferred tax asset is recognised to the extent that is probable that future taxable profits will be sufficient to recover such taxes. Current and deferred tax assets and liabilities are offset when due to the same tax authority, if the periods of reversal are the same and a legal right of offset exists.

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Half-year report as of 30 June 2005

Deferred taxation is recorded in relation to the distributable retained earnings of subsidiaries if there is an intention to distribute such profits.

Non-current assets held for sale Assets held for sale are measured at the lower of their carrying amount at the time their sale was decided or their fair value, net of estimated selling costs. All costs, income and write-downs, if any, are recognised in the income statement and reported separately.

Earnings per share Earnings per share is calculated with reference to the results of the Group and the weighted average number of shares outstanding during the reference period. Treasury shares are excluded from this calculation. Diluted earnings per share is determined by adjusting the basic earnings per share to take account of the conversion of all potential shares with a diluting effect.

CHANGES IN ACCOUNTING POLICIES AND ACCOUNTING ESTIM ATES Apart from the matters described in the FTA Appendix concerning the adoption of international financial reporting standards and in the —basis of preparation“ paragraph above, there have not been any changes in accounting policies between the comparative information as of 30 June 2004 and 31 December 2004 and the information reported as of 30 June 2005. Following the analysis of property, plant and equipment performed as part of the first-time adoption of IFRS, Indesit Company has revised the estimated useful lives of certain categories of asset. In particular, this analysis identified that certain assets classified in the category of plant and machinery have estimated residual useful lives that are longer than those determined by the depreciation rates applied until 31 December 2004. Accordingly, the related depreciation rates have been suitably revised with the effect of reducing the depreciation charged to the income statement for the period ended 30 June 2005. Had this change in accounting estimate not been made, profit before tax and property, plant and equipment as of 30 June 2005 would have been lower by 6.3 million euro, while total net profit and equity at that date would have been lower by 4.2 million euro.

CHANGES IN THE SCOPE OF CONSOLIDATION Indesit Company signed a commercial joint-venture agreement with W LS (W uxi Little Swan Company, China's leading producer of laundry products) in December 2004. In January 2005, following the signature of this agreement and after obtaining the necessary authorisations, a new company called W UXI Indesit Home Appliances Co. Ltd. was formed in which Indesit Company holds a 70% interest (W LS, 30%). This company has therefore been included within the scope of consolidation.

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Half-year report as of 30 June 2005

SEGM ENT REPORTING The three geographical areas are analysed as follows: 1) W estern Europe: Italy, France, Belgium, Netherlands, Great Britain, Germany, Spain, Portugal; 2) Eastern Europe: CIS, Poland, Romania, Bulgaria, Hungary, Czech Republic, Slovak Republic, Greece; 3) Other countries: Turkey, South America, North America, Africa, Australia, Middle East and Far East. Segment sales report the final destination of the products sold and segment results take account of all the charges allocated to the geographical area concerned. The costs allocated to the various geographical areas do not include Corporate, general and administrative expenses or restructuring charges. The following tables present the Group's operating information analysed by geographical area and business segment. Analysis by Geographical Area at 30 June 2005 W estern Eastern Other Eliminations Consolidated Europe Europe Countries Non-group sales 933,9 364,9 94,7 1.393,6 Intersector sales 40,9 148,1 32,5 (221,5) - Total Sales 974,8 513,0 127,3 (221,5) 1.393,6 Segment results 65,2 60,4 8,4 134,0 Unallocated income and expenses (81,0) Operating Profit 53,0 Net financial expenses (11,3) Income and expense from associates (1,5) Income tax (20,9) Loss attributable to minority interests (0,2) Profit attributable to equity holders of the parent 19,0

Analysis by Geographical Area at 30 June 2004 W estern Eastern Other Eliminations Consolidated Europe Europe Countries Non-group sales 978,8 370,3 102,3 1.451,4 Intersector sales 20,9 152,8 36,4 (210,1) - Total Sales 999,7 523,1 138,7 (210,1) 1.451,4 Segment results 74,0 71,5 8,9 154,4 Unallocated income and expenses (67,1) Operating Profit 87,3 Net financial expenses (10,6) Income and expense from associates - Income tax (29,8) Loss attributable to minority interests (0,7) Profit attributable to equity holders of the parent 46,3

(in millions of Euro) Sales by Business Segment 30 June '05 30 June '04 Cooking 374,0 371,3 Cooling 391,0 450,7 Washing 510,8 507,1 Dishwashers 117,9 122,3 Total 1.393,6 1.451,4

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Half-year report as of 30 June 2005

NOTES TO THE CONSOLIDATED INTERIM INCOM E STATEM ENT, BALANCE SHEET AND STATEM ENT OF CASH FLOW S

CONSOLIDATED INTERIM INCOM E STATEM ENT

1. Revenue Revenues are analysed as follows:

(in millions of Euro) 30 June '05 30 June '04 Revenue from the sale of finished products 1.296,1 1 .354,4 Revenue from the provision of services 97,5 9 7,0 Total revenue 1.393,6 1 .451,4

Revenue from the provision of services relate to services provided to customers (transport) and to end consumers (after-sales maintenance) and to the sale of extended warranties.

2. Selling and distribution expenses Selling and distribution expenses comprise all the costs incurred to market products and provide services, as well as the costs of distributing products to the Group's warehouses and to customers. The reduction was mainly due to a reduction in the costs incurred to withdraw defective household appliances from the market, and to lower advertising and promotion expenditure following the significant level of advertising carried out last year.

3. General and administrative expenses General and administrative expenses include all general management and administrative costs, and all expenditure not directly attributable to production or sales units or to research and development. The reduction in general and administrative expenses was mainly due to the decline in payroll costs and services, as shown in the table presented in paragraph 5 below.

4. Other income Other income is analysed as follows:

(in millions of Euro) 30 June '05 30 June '04 Gains on the disposal of fixed assets 0,1 1,0 Lease income 0,6 0,6 Export grants 0,9 1,5 Other 0,2 0,0 Total other income 1,8 3 ,1

5. Operating profit As required by IAS 1, the operating profit is analysed by nature in the following table.

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Half-year report as of 30 June 2005

(in millions of Euro) 30 June '05 30 June '04 Revenue 1.393,6 1.451,4 Change in inventories 76,3 99,3 Purchase of raw materials and consumables (821,9) (825,7) Services (269,6) (287,5) Payroll costs (251,1) (266,8) Depreciation and amortisation (69,1) (72,7) Other costs and income (5,3) (10,7)

Operating Profit 53,0 8 7,3

The number of employees as of 30 June 2005 is 18,056 (19,135).

6. Net financial expenses Net financial expenses as of 30 June 2005 are analysed as follows: (in millions of Euro) 30 June '05 30 June '04 Interest income 2,3 3,3 Interest expense (17,6) (14,8) Exchange fluctuations 6,1 2,3 Commission (2,1) (1,4) Net financial expenses (11,3) (10,6)

Interest income and expense include the interest on bank current accounts, the interest charged to customers and by suppliers, the interest on all forms of short and medium and long-term borrowing, and the economic effects of measuring financial derivatives that hedge interest rate risk. The change in interest expense mainly reflects the financial expense deriving from recognition of the financial liability for the purchase of GDAH, on applying IAS 32 from 1 January 2005. Exchange fluctuations include the effects of applying IAS 29 in relation to companies that operate in hyper-inflationary economies, as well as the economic effects of measuring financial derivatives that hedge exchange rate risk.

7. Income and expense from associates Income and expense from associates and other companies include the write-down of Fabriano Basket by 1.5 million euro.

8. Income tax The caption is analysed in the following table: (in millions of Euro) 30 June '05 30 June '04 Current taxes (41,3) (40,3) Deferred tax assets net 20,5 10,5 Total income tax (20,9) (29,8)

Taxation represents 52.0% (38.8%) of PBT. The increase in the incidence of taxation was principally due to the higher incidence of taxes that are not directly proportional to the level of profits (IRAP), and to the period losses incurred in certain countries of W estern Europe for which, given the limited information available about the estimated taxable income of individual Group companies, it was not deemed appropriate to recognise the related deferred tax assets in the interim financial statements.

29

Half-year report as of 30 June 2005

CONSOLIDATED INTERIM BALANCE SHEET

9. Property, plant and equipment Property, plant and equipment are analysed as follows:

(in millions of Euro) 30 June '05 31 December '04 30 June '04 Land and buildings 2 57,4 2 67,5 2 75,5 Plant and machinery 2 94,2 2 81,1 2 85,7 Industrial and commercial equipment 7 6,1 8 2,6 8 0,6 Assets under construction 8 3,7 5 5,3 2 7,9 Other 6 5,4 6 4,8 4 4,0 Total property, plant and equipment 7 76,9 7 51,3 7 13,7

The change in property, plant and equipment reflects additions of 52.6 million euro, net of disposal of 6.9 million euro, which is broadly consistent with the level of additions and retirements during the period ended 30 June 2004. The residual change in carrying amount mainly reflects translation adjustments. The depreciation charge for the first half of 2005 was 55.9 million euro.

The change in assets under construction mainly relates to the construction of a new warehouse in Lipetzk (Russia).

Property, plant and equipment of the company operating in Turkey, a hyper-inflationary economy, have been revalued in accordance with IAS 29. The carrying amount of these revalued assets as of 1 January 2004 was tested for impairment. As a result of this test, the need to adjust the restated value of these assets by a total of about 6 million euro was identified, being substantially the same as the amount of the hyper-inflation revaluation. Conditions in subsequent periods have not required the reinstatement of the adjusted amount or any further adjustments.

Commitments for the future purchase of tangible fixed assets amount to 10.4 million euro as of 30 June 2005.

10. Goodwill and other intangible fixed assets with an indefinite life Goodwill and other intangible assets with an indefinite life are analysed as follows:

(in millions of Euro) 30 June '05 31 December '04 30 June '04 Goodwill 1 64,9 94,4 99,2 Other intangible assets with an indefinite usefull lif e 1 60,3 153,2 161,1 Total goodwill and other intangible assets with an indefinite usefull life 3 25,2 2 47,6 2 60,2

The increase in this caption mainly relates to the change in goodwill following the purchase of GDAH, a UK company. In view of the contractual nature of the commitment to GE regarding the residual 32% interest in share capital (PUT and CALL Agreement) and the application of IAS 32 from 1 January 2005, goodwill has been increased by 63.3 million euro, as described further in the FTA Appendix. This goodwill is denominated in pounds sterling and, accordingly, the book value as of 30 June 2005 has benefited from the translation adjustment from sterling to euro for the period from 1 January 2005 to 30 June 2005 of 7.2 million euro. On allocating the purchase price of GDAH, 160.3 million euro was attributed to brands with an indefinite life (Hotpoint and Cannon) and 164.9 million euro to goodwill. The value of 30

Half-year report as of 30 June 2005

intangible fixed assets with an indefinite life is periodically subjected to an impairment test. This test did not identify the need to adjust the carrying value of these assets. For the purposes of this test, at the date of acquisition goodwill of 38.0 million euro was attributed to the cash- generating unit (CGU) represented by the UK market and 119.0 million euro was attributed to the Group CGUs that are expected to benefit from the synergies released as a result of the acquisition.

11. Other intangible assets Other intangible fixed assets are analysed as follows:

(in millions of Euro) 30 June '05 31 December '04 30 June '04 Concessions, trademarks and licences 2 3,8 28,0 29,6 Development 3 0,3 28,6 21,6 Patents 2 9,6 36,1 35,3 Other intangible assets 7 ,0 1,2 1,2 Total other intangible assets 9 0,7 9 3,9 8 7,6

The development expenditure capitalised during the first half of 2005 totalled 8.4 million euro (9.0 million euro).

12. Investments in associates Investments in associates are analysed below: (in millions of Euro) 30 June '05 31 December '04 30 June '04 Merloni Progetti 8 ,0 8 ,0 7 ,9 Merloni Progetti Energia S.p.A. 7 ,7 7 ,7 6 ,8 Faber Factor S.p.A. - - 1 0,7 Haier Indesit (QuigDao) Washing Machine Co ltd 7 ,2 6 ,4 6 ,9 Haier Indesit (QuigDao) Electrical Apl. Co ltd 4 ,1 3 ,6 3 ,5 Aermarche - - 9 ,9 Other 0 ,9 0 ,9 0 ,9 Total investment in associates 2 7,9 2 6,6 4 6,6

The net change recorded in relation to Haier Indesit W ashing Machine and Haier Indesit Electrical was due to the effect of translating the financial statements of these two associates.

13. Other investments Other investments comprise the investments in other companies representing less than 20% of their equity capital or voting rights, and other non-current financial assets.

The change mainly relates to the reclassification of treasury shares as a reduction of equity on applying IAS 32 from 1 January 2005, as discussed further in the FTA Appendix.

14. Other non-current financial assets Other non-current financial assets are analysed as follows: (in millions of Euro) 30 June '05 31 December '04 30 June '04 Time deposits 7 7,0 7 0,3 7 0,7 Other assets 1 7,7 2 ,4 2 ,9 Total other non-current financial assets 9 4,7 7 2,7 7 3,7

Time deposits comprise 29.8 million euro to guarantee loans granted to a Group company and 47.2 million euro to guarantee a portion of the facility issued by a banking syndicate as a

31

Half-year report as of 30 June 2005

guarantee for the fulfilment of the payments for the GDAH acquisition and corresponding to the last payable tranche.

Other financial assets include the non-current portion of the carrying amount of derivative financial instruments discussed further below.

15. Inventories Inventories are analysed as follows:

(in millions of Euro) 30 June '05 31 December '04 30 June '04 Raw materials and semi-finished products 89,9 8 3,9 7 6,4 Finished goods 330,0 2 46,5 3 19,1 Total inventories 420,0 3 30,5 3 95,5

The provision for the write down of inventories totals 8.4 million euro and the accrual for the period amounts to 0.2 million euro. The change with respect to 31 December 2004 was mainly due to the effects of seasonality.

16. Trade receivables Trade receivables comprise amounts due from customers as a result of commercial transactions and the provision of services, stated net of the allowance for doubtful accounts. In accordance with IAS 39, the trade receivables sold as part of the securitisation programme have been recognised in the financial statements as of 30 June 2005. In this regard, the balances as of 31 December 2004 and 30 June 2004 are not comparable due to the effect of applying IAS 39 from 1 January 2005. Recognising the receivables sold, trade receivables would have totalled 625.8 million euro as of 31 December 2004 and 630.6 million euro as of 30 June 2004.

17. Current financial assets Current financial assets include assets deriving from the valuation of financial transactions in accordance with IAS 39 (adopted from 1 January 2005). See the paragraph on —financial instruments“ below for more information about these financial transactions. The change since 31 December 2004 reflects the effect deriving from the derecognition of financial assets in accordance with IAS 39 and, in particular, from the adjustment of the securities acquired in connection with the securitisation transaction.

18. Other receivables and current assets Other receivables and current assets are analysed as follows:

(in millions of Euro) 30 June '05 31 December '04 30 June '04 Due from employees 4 ,6 4,1 3,0 Insurance reimbursements 6 ,5 0,7 0,8 Receivables for government grants 1 7,4 16,8 23,4 Due from social security and pension institutions 1 ,2 0,6 2,1 Other receivables 9 ,2 9,1 7,7 Total other receivables and other current assets 3 8,8 31,2 37,1

19. Cash and cash equivalents Cash and cash equivalents include bank and postal deposits, as well as cheques and other amounts on hand. The changes in liquidity during the period are analysed in the consolidated interim statement of cash flows.

20. Equity 32

Half-year report as of 30 June 2005

Share capital comprises ordinary shares and savings shares, as analysed below.

Description Shares at period end Number Euro Ordinary shares 112,978,434 101,680,591 Savings shares 511,282 460,154 Total 113,489,716 102,140,744

The change in share capital during the period was due to the exercise of stock options, involving the purchase of 1,234,500 shares, and to the conversion of 1,991,562 savings shares. The number of shares in the table is stated gross of the treasury shares. Net of treasury shares, there are 102,449,966 ordinary shares outstanding. No stock options were granted during the first half of 2005. The total cost charged to the income statement for the period ended 30 June 2005 was 1.0 million euro. The following table analyses the share capital structure of the parent company, indicating the exercisable stock options and the treasury shares (amounts in Euro). Authorised share Issued and fully- capital (*) paid share capital (*) (**) Share capital following the conversion of savings shares 98.832.569 98.832.569 into ordinary shares in 2001 1st and 2nd stock option plans for employees authorised 5.400.000 2.048.175 on 19 September 1998 and 23 October 2001 respectively

1st stock option plan for directors authorised on 23 1.260.000 1.260.000 October 2001 2nd stock option plan for directors authorised on 6 May 180.000 - 2002 1st stock option plan for the Chairman of the Board of 900.000 Directors authorised on 5 May 2004 Total 106.572.569 102.140.744 (**)

(*) Ordinary and savings shares (**) Share capital as of 30/06/2005 filed with the Companies Register

The cumulative translation adjustment as of 30 June 2005 amounts to 51.6 million euro and reflects the exchange rate differences arising on the translation of foreign currency financial statements. This reserve includes the effect of adjusting, using the period-end exchange rate, the intercompany financial balances deriving from the financial relations between Indesit Company International Business Sa and Closed Joint Stock Company Indesit International, which are treated as a net investment pursuant to IAS 21. Dividend payments during the first half of 2005 totalled 36.7 million euro (36.2 million euro), representing Euro 0.36 per ordinary share and Euro 0.38 per savings share.

The calculations for the basic earnings per share and the diluted earnings per share shown in the consolidated interim income statement are set out in the following table.

33

Half-year report as of 30 June 2005

Calculation of basic EPS 30 June '05 30 June '04 Basic attributable earnings (Euro million) 19,0 46,3 Unit earnings attributed to savings shares (Euro)* 0,20 0,50 Number of savings shares (thousand) 511 2.503 Earnings attributed to savings shares (Euro million) (0,1) (1,2) Basic attributable earnings (Euro million) 18,9 45,0 Basic average number of ordinary shares (thousand) 99.037 97.519 Basic EPS (Euro) 0,19 0,46 * Earnings per savings shares are earnings per ordinary share uplifted by 5%.

Calculation of diluted EPS 30 June '05 30 June '04 Basic attributable earnings (Euro million) 18,9 45,0 Basic average number of ordinary shares (thousand) 99.037 97.519 Average number of shares granted to directors without payment 232 1.218 (thousand) Average number of shares granted to employees without payment 143 760 (thousand) Total 99.411 99.497 Diluted EPS (Euro) 0,19 0,45

21. M inority interests The change in minority interests is mainly due to the application of IAS 32 from 1 January 2005, as described further in the FTA Appendix.

22. M edium to long-term financial payables Medium to long-term financial payables are analysed as follows:

(in millions of Euro) 30 June '05 31 December '04 30 June '04 Bonds 291,4 2 74,8 - Due to banks 90,3 1 06,9 1 81,1 Due on the purchase of GDAH 80,5 - - Due to other financial institutions 15,9 1 4,3 1 1,7 Total medium to long-term financial payables 478,1 3 96,0 1 92,8

The bonds relate to the U.S. Private Placement, denominated in USD. The interest and exchange rate risks relating to the above-mentioned U.S. Private Placement have been hedged by a Cross Currency Swap, which is described in the paragraph on financial instruments below.

Total medium to long-term borrowing is analysed by maturity in the following table. The table reports the nominal amounts in millions of Euro.

Nominal amount Expiry date maturing II half 2006 38,1 2007 59,2 2008 68,7 2009 66,3 2010 6,2 2011 64,2 2012 and over 165,8

34

Half-year report as of 30 June 2005

The non-current portion of the amount due to General Electric on the acquisition of GDAH, 80.5 million euro, is not recognised as of 31 December 2004 since it was recognised on 1 January 2005 following application of IAS 32.

23. Employee benefits Employee benefits reflect the provisions recognised for such post-employment benefits as severance indemnities and pensions.

(in millions of Euro) 30 June '05 31 December '04 30 June '04 Provisions for severance indemnities 62,9 6 1,7 6 0,3 Provisions for UK pensions 48,4 4 6,3 4 7,0 Provisions for pensions in other countries 2,2 1 ,8 1 ,8 Total employee benefits 113,5 1 09,8 1 09,1

These benefits are considered to be —Defined benefit plans“ (pursuant to IAS 19) and are determined using the —projected unit credit“ method, under which the liability at the balance sheet date is determined in proportion to the total estimated liability deriving from an actuarial valuation. The actuarial appraisals are updated annually by independent professionals. The actuarial assumptions adopted for the first half of 2005 are therefore in line with those adopted as of 31 December 2004. The liability for defined benefit plans was determined using the following actuarial assumptions: 2005 2004 Discounting rate 5.09% 5.47% Expected rate of increase in salaries 3.46% 3.47% Expected rate of increase in pensions 2.74% 2.74% Average yield of pension fund assets associated with 7.73% 7.75% the Plan (where applicable)

24. Provisions for risks and charges The provisions for risks and charges are analysed as follows: (in millions of Euro) 30 June '05 31 December '04 30 June '04 Provision for product warranty 24,4 2 4,6 2 4,8 Provision for onerous contracts 5,1 5 ,0 3 ,1 Provision for disputes 9,1 8 ,0 5 ,5 Other provisions 1,5 2 ,0 1 ,7 Total provisions for risks and charges 40,1 3 9,6 3 5,1

The estimates made in relation to outstanding contingencies did not change during the period with respect to those adopted as of 31 December 2004.

25. Other non-current liabilities Other non-current liabilities solely relate to deferred government grants and grants from other bodies. These grants are analysed by country below:

35

Half-year report as of 30 June 2005

(in millions of Euro) 30 June '05 31 December '04 30 June '04 Italy 17,9 2 0,7 22,6 Poland 9,6 - - Other countries 0,5 0 ,2 0,4 Total other non-current liabilities 28,1 2 0,9 23,0

Deferred government grants totalling 3.3 million euro were credited to the income statement during the period.

26. Bank overdraft and other financial payables Bank overdraft and other financial payables mainly comprise amounts due within the current year. In particular, the amount due as of 30 June 2004 included bonds repaid during the second half of 2004 totalling 145.0 million euro.

27. Current provisions for risks and charges Current provisions for risks and charges mainly comprise provisions for first-year product warranties that will be used within 12 months.

28. Other payables Other payables are analysed as follows:

(in millions of Euro) 30 June '05 31 December '04 30 June '04 Due to social security and pension institutions 33,3 3 6,2 3 3,9 Due to employees 35,2 3 5,9 4 4,6 Other payables 12,9 1 1,4 1 1,7 Total other payables 81,4 8 3,6 9 0,1

36

Half-year report as of 30 June 2005

CASH FLOW STATEM ENT The cash flows reported in the statement of cash flows have been determined with reference to the amounts reported in the opening balance sheet prepared as of 1 January 2005, on the adoption of IAS 32 and IAS 39 as described in the FTA Appendix.

29. Investment in property, plant and equipment The cash flow invested in property, plant and equipment reflects routine additions for the replacement of plant. In this context, there were also changes in payables and in advances to suppliers of property, plant and equipment. In particular, the settlement of payables relating to construction, mainly during 2004, of the new warehouse in Lipetzk represented a significant financial commitment during the first half of 2005.

30. Payment of goodwill The change in the goodwill caption during the first half of 2004 of 52.9 million euro related to the payment to General Electric of 8% of General Domestic Appliances Ltd. The cash outflow of 52.9 million euro resulted in the recognition of goodwill amounting to 28.0 million euro and the purchase of a minority interest for 24.9 million euro. Had IAS 32 been applied retrospectively from 1 January 2004, the statement of cash flows would not have reported the above change in goodwill, but just the reduction in borrowing in relation to the purchase of GDAH as a change in the net financial position. The treatment of the acquisition of GDAH in relation to the effects of the first-time adoption of IFRS is described in more detail in the FTA Appendix.

31. Investment in financial assets and other investments The cash flow used for investment in financial assets and other investments during the first half of 2005 mainly related to the purchase of a controlling interest in W UXI, a Chinese company.

32. Proceeds from share capital increases The increase in the share capital of Indesit Company S.p.A. relates to the exercise of stock options by the directors and management of the company.

33. Change in current financial payables The change in current financial payables includes the change in short-term bank borrowing since this represents a technical form of indebtedness.

FINANCIAL INSTRUM ENTS The Group uses derivative financial instruments to manage interest-rate and exchange-rate risk and changes in the prices of certain types of raw materials (commodities). The Group has adopted a number of policies regarding the management of these risks that envisage the arrangement of derivative transactions solely for hedging purposes. To this end, compliance with the requirements for cash flow hedges is checked both initially and, subsequently, at the balance sheet date. The categories of financial instruments used for the management of the above risks mainly comprise forward currency transactions, currency swaps and currency options while, with regard to interest-rate transactions, the instruments comprise interest-rate swaps and interest- rate and currency swaps for the combined management of exchange-rate and interest-rate risk. The above transactions are arranged with leading domestic and international banks and are not subject to credit risk. The transactions open as of 30 June 2005 and their fair values are reported in the table below, which also indicates the change in the amount of the underlyings, where applicable.

37

Half-year report as of 30 June 2005

Fair value of Change in fair Fair value of Change in fair value derivatives as value of INSTRUM ENT derivatives as of of underlyings as of of underlyings as of 30.06.2005 30.06.2005 01.01.2005 01.01.2005 Cash flow hedging transactions Nickel options 0.5 1.5 N/A N/A Currency options 0.4 - N/A N/A IRS on loan (2.6) (2.6) N/A N/A Total (1.7) (1.1) - -

Fair value hedging transactions CCS bonds 13.1 (20.9) (13.5) 19.3 IRS on bonds 2.2 1.4 (2.1) (1.2) Total 15.3 (19.5) (15.6) 18.1

Other hedging transactions Forward (2.5) 1.8 N/A N/A Collar on purchase of GDA (8.2) (24.0) N/A N/A Basis Swap on purchase of GDA (2.3) (0.7) N/A N/A Total (13.0) (22.9)

Grand total 0.6 (43.5) (15.6) 18.1

The nickel options were acquired to hedge possible rises in the price of steel (AISI 304). The currency options were mainly acquired to hedge the risk of exchange fluctuations against sterling. The forward transactions were arranged to hedge the exchange-rate risk associated with currency exposures. In particular, these comprise two forward sell/Gbp and one forward sell/Huf. The IRS contracts were arranged to hedge two loans totalling 31.0 million euro obtained from MCC S.p.A. The Cross Currency Swap was arranged to hedge the interest-rate and exchange-rate risks deriving from commitments in relation to the U.S. Private Placement with a nominal value of 308 million dollars. The IRS on the Euro tranche of the U.S. Private Placement amounting to 18.3 million euro was arranged to hedge the interest-rate risk. The Collar, represented by two purchased options Call Usd/Put Euro (totalling 114.2 million dollars and 103.9 million euro) and two sold options Call Euro/Put Usd (totalling 114.2 million dollars and 99.7 million euro) maturing on 30 June 2006 and 1 October 2007, was arranged to hedge the exchange-rate risk on the amount due for the purchase of GDAH. The Swap was arranged to hedge the interest-rate risk on the deposit of 57.1 million dollars made by Indesit Company UK Holdings Ltd to guarantee payment of the final instalment on the amount due for the purchase of GDAH.

INFORM ATION REQUIRED BY IAS 24 ON THE REM UNERATION OF M ANAGEM ENT AND ON RELATED PARTIES

Remuneration of management In addition to the executive and non-executive directors and the statutory auditors, the managers with strategic responsibility for operations, planning and control include the Commercial

38

Half-year report as of 30 June 2005

General Manager, the Financial Manager, the Industrial Technical Manager and the Supply Chain Manager. The remuneration of the above persons is shown below. Annual compensation for directors, staturory auditors and managers with strategic resposnbility

Short term Long term Stock Options Thousands of Euro benefits benefits Directors 2.310 - 1.720 Statutory Auditors 140 - - Managers 1.985 117 29 Total 4.435 117 1.749

Short-term benefits do not include the variable element of gross annual remuneration.

Related-party transactions The principal related-party relationships, as defined by IAS 24, during the first half of 2005 are reported below. The commercial and financial transactions with these entities were arranged on arms'-length terms.

Associates: Adria Lab S.r.l. M & B Marchi e Brevetti S.r.l. MPE S.p.A. Merloni Progetti S.p.A. Sofarem S.ar.l.

Related parties: Faber Factor S.p.A. (held by Group parent) Faber Factor International S.ar.l. (held by Group parent) Fineldo S.p.A. 4 (Group parent of Indesit Company) MCP Eventi S.r.l. (related to a director of the Group) Merloni Partecipazioni e Servizi S.r.l. (controlled by a director of the Group) Nautica Due S.p.A. (related to several directors of the Group) Centro Energia Teverola S.p.A. (subsidiary of a company associated with the Group) Distretto dell‘elettrodomestico soc. cons. (held by Indesit Company S.p.A.)

Nature of relations with the principal associates and related parties

M&B Marchi e Brevetti M&B Marchi e Brevetti S.p.A., held at 50%, owns the Ariston brand name which is licenced to Indesit Company until 2060 for a fee that covers the brand management costs incurred by M&B Marchi e Brevetti S.p.A.

The Merloni Progetti Group The Merloni Progetti Group (and, in particular, Merloni Progetti S.p.A. and Protecno Sa) obtains contracts for the construction of plant and leases property to Indesit Company. Merloni Progetti S.p.A. was awarded a contract by Indesit Company for the construction of a warehouse in the industrial district of Lipetzk (Russia).

4 Company belonging to Vittorio Merloni 39

Half-year report as of 30 June 2005

The Faber Factor Group The Faber Factor Group (in particular, Faber Factor S.p.A. and Faber Factor International Sarl) provided financial services - mainly factoring services - until 30 June 2005. The financial flows were settled via a current account contract. Until 30 June 2005, the Faber Factor Group, in which Indesit Company has a 10% interest, also acquired trade receivables from the Group. Commencing from 1 July 2005, the financial and service relationship between Faber Factor and Indesit Company has ceased due to the sale by Faber Factor of its factoring business to independent third parties.

The balances and transactions with the above associates and related parties are summarised below. Amounts of less than 50 thousand euro are grouped in the Others caption.

40

Half-year report as of 30 June 2005

Non-current assets

(in millions of Euro) Associates 30 June '05Counterpart Merloni Progetti S.p.A. 17,2 CJSC Indesit International 17,2

Current financial receivables

(in millions of Euro) Related party 30 June '05Counterpart Distretto Dell'Elettrodomestico 0,2 Indesit Company S.p.a. 0,2

Trade receivables (in millions of Euro) Parent company 30 June '05Counterpart Fineldo S.P.A. 0,1 Indesit Company S.p.a. 0,1

(in millions of Euro) Associates 30 June '05Counterpart Sofarem 2 Indesit Company Int. Business S.A. MPE. S.p.A. 0,2 Indesit Company S.p.a. Adria Lab S.r.L. 0,2 Indesit Company S.p.a. Altre 0,1 2,5

(in millions of Euro) Related party 30 June '05Counterpart Faber Factor S.p.A. 0,9 Indesit Company S.p.a. Altre 0,1 1,0

Trade payables (in millions of Euro) Parent company 30 June '05Counterpart Fineldo S.P.A. 0,2 Indesit Company S.p.a. 0,2

(in millions of Euro) Associates 30 June '05Counterpart Merloni Progetti S.P.A. 1,3 Indesit Company S.p.a. MPE Sp.A. 0,9 Indesit Company S.p.a. Adria Lab S.R.L. 0,2 Indesit Company S.p.a. Altre 0,0 2,4

(in millions of Euro) Related party 30 June '05Counterpart Faber Factor S.P.A. 120,9 Indesit Company S.p.a. Faber Factor S.P.A. 3,8 Indesit Company Polska Sp.zo.o. Faber Factor S.P.A. 1,7 Indesit Company France S.A. Faber Factor S.P.A. 1,3 Indesit Company Beyaz Esya Pazarlama A.S. Faber Factor S.P.A. 0,9 CJSC Indesit International Faber Factor S.P.A. 0,4 Indesit Company Portugal Electrod. S.A. Altre 0,5 129,5 41

Half-year report as of 30 June 2005

Revenues (in millions of Euro) Associates 30 June '05Counterpart Sofarem 2,5 Indesit Company International Business S.A. Altre 0,0 2,5

Cost of sales (in millions of Euro) Associates 30 June '05Counterpart Merloni Progetti S.P.A. 1,0Indesit Company S.p.a. MPE Sp.A. 3,8 Indesit Company S.p.a. Merloni Progetti S.P.A. 0,4 Indesit Company S.p.a. Altre 0,2 Indesit Company S.p.a. 5,4

(in millions of Euro) Related party 30 June '05Counterpart Centro Energia Teverola Spa 0,3 Indesit Company S.p.a. Altre 0,8 1,1

General and administrative expenses (in millions of Euro) Related party 30 June '05Counterpart Faber Factor S.P.A. 0,5 Indesit Company S.p.a. M C P Eventi S.R.L. 0,5 Indesit Company S.p.a. Altre 0,3 1,3

Net financial expenses (in millions of Euro) Parent company 30 June '05Counterpart Fineldo S.P.A. (0,2) Indesit Company S.p.a. (0,2)

(in millions of Euro) Related party 30 June '05Counterpart Faber Factor S.P.A. 0,3 Indesit Company S.p.a. 0,3

42

List of investments in companies consolidated on a line-by-line basis Company name Company name Registered Offices Share capital % Held until 31 December 2004 from 1 January 2005 direct indirect Merloni Ariston International Sa Indesit Company Luxembourg Sa Luxembourg EUR 100.289.985 100 - Merloni Electrodomesticos Sa Indesit Electrodomesticos Sa Spain EUR 11.500.000,01 78,95 21,05 Argentron Sa Argentina ARS 22.000.000 71,18 - Merloni Domestic Appliances Ltd UK GBP 90.175.500 19,6 80,4 Merloni Electrodomesticos Sa Indesit Company Portugal Electrodomésticos Sa Portugal EUR 16.825.000 - 99,44 Merloni International Trading Bv Indesit Company Internationa Bv Nederland EUR 272.270 - 100 Merloni International Business Sa Indesit Company International Business Sa Switzerland CHF 250.000 - 100 Indesit Pts Ltd UK GBP 1.000 - 100 Merloni Electromenager Sa Indesit Company France Sa France EUR 17.000.000 - 100 Scholtes Nederland Bv Nederland EUR 79.412 - 100 Fabrica Portugal Sa Portugal EUR 11.250.000 - 96,4 Merloni Elettrodomestici Beyaz Esya SanayIin Vdee sTiti cCaoremt pAasny Beyaz Esya Sanayi ve Ticaret A.S. Turkey TRL 6.992.921.114.000 - 100 Merloni Elettrodomestici Beyaz Esya PazarlIanmdeas Ait sCompany Beyaz Esya Pazarlama A.S. Turkey TRL 17.000.000.000 100 - Merloni Financial Services Sa Indesit Company Financial Services Luxembourg Sa Luxembourg EUR 5.170.000 99,99 0,01 Merloni Hausgerate Gmbh Indesit Company Deutschland GmbH Germany EUR 550.000 - 100 Merloni Reinsurance Company Ltd Indesit Company Ireland Reinsurance Ltd Ireland USD 750.000 - 100 Wrap S.p.A. Italy EUR 27.766.950 89,29 - Zao Refrigerator Plant Stinol Closed Joint Stock Company “Indesit International” CIS RUR 1.664.165.000 96,49 - Merloni Indesit Polska Spzoo Indesit Company Polska Sp.z o.o. Poland PLN 258.876.500 100 - Merloni UK Finance Llp Indesit Company UK Finance Llp UK EUR 95.750.000 99 1 Aei Gala Ltd UK GBP 1.000 - 76 Airdun Limited UK GBP 15.000 - 76 Ariston Group Service Limited UK GBP 100 - 76 Cannon Industries Ltd UK GBP 1.500.000 - 76 Creda Appliances Ltd UK GBP 100 - 76 Creda Domestic Appliances Service Ltd UK GBP 1.000 - 76 Creda Limited UK GBP 5.850.000 - 76 Fixt Limited UK GBP 2 - 76 General Domestic Appliances Holdings Ltd UK GPB 26.000.000 - 76 General Domestic Appliances International Ltd UK GBP 100.000 - 76 Merloni Elettrodomestici UK Ltd Indesit Company UK Ltd UK GBP 5.010.000 - 76 General Domestic Appliances Sales Ltd UK GBP 100 - 76 Gwyn J Evans & Co. Ltd UK GBP 5.000 - 76 Hotpoint Sales Ltd UK GBP 775.000 - 76 Hotpoint Uk Ltd UK GBP 50 - 76 Industrial Design Unit Limited UK GBP 100 - 76 Jackson Appliances Ltd UK GBP 750.000 - 76 Merloni Elettrodomestici UK Holding Ltd Indesit Company Uk Holdings Ltd UK EUR 163.000.000 - 100 Oatley Technical Developments Ltd UK GBP 100 - 76 Rtc International Ltd UK GBP 50.000 - 100 Merloni Indesit Haztartastechnikai kft Indesit Company Magyarország Kft Hungary HUF 10.000.000 100 - Xpelair Ltd UK GBP 825.000 - 76 Wuxi Indesit Home Appliance Co. Ltd China USD 13.600.000 70 Aermarche S.p.A. Italy EUR 25.000.000 70,8

Companies accounted for as equity method Registered Offices Share capital % Held direct indirect Merloni Progetti S.p.A. Italy EUR 10.000.000 33 - Haier Merloni Washing Machine Co.Ltd Haier Indesit (QingDao) Washing Machines Co., Ltd China USD 24.000.000 30 - MPE S.p.A. Italy EUR 10.000.000 33 - Haier Merloni Electrical Appliance Co.Ltd Haier Indesit (QingDao) Electrical Appliance Co., Ltd China USD 12.000.000 15 15

Other investments Registered Offices Share capital % Held direct indirect M&B Marchi e Brevetti Srl Italy EUR 20.000 50 - Sofarem Sarl La Rèunion EUR 382.500 - 20 Merloni Appl. Asia Pacific Pte Ltd Indesit Company Singapore Pte. Ltd. Singapore SGD 100.000 - 100 Merloni Domestic Appliances Norway Ltd Indesit Company Norge Ltd Norway NOK 100.000 - 100 Merloni Indesit Bulgaria Srlu Indesit Company Bulgaria Ltd Bulgaria BGN 7.805.000 100 - Merloni Elettrodomestici Ceska Republika SInrodesit Company Ceská s.r.o Czech Rep. CZK 1.000.000 100 - Indesit Hausgerate Vetriebs. Ges. m.b.h. Indesit Company Österreich Ges. m.b.h. Austria EUR 11.250.000 - 100 Tradeplace B.V. Nederland EUR 30.000 20 Scholtes Ireland Ltd Ireland IEP 5.000 - 100 Adria Lab S.r.l. Italy EUR 150.000 40 Merloni Domestic Appliances Hellas Mepe Indesit Company Domestic Appliances Hellas Mepe Greece EUR 18.000 - 100 Consorzio Consumer Care Italy EUR 5.538 98,12 S.S. Fabriano Basket S.p.A. Italy EUR 120.000 100 ECODOM Italy EUR 69.000 43,48 -

26 October 2005 for the Board of Directors

The Chairman Vittorio Merloni

Half-year report as of 30 June 2005

Attachments

44

Half-year report as of 30 June 2005

Effect of first-time adoption of IFRS on the consolidated income statement and consolidated balance sheet as of 30 June 2004

W ith reference to the comparative information as of 30 June 2004 presented on the first-time adoption of IFRS, Attachments 1, 2 and 3 to this report reconcile such information with the previously-reported balance sheet, income statement, equity and net profit.

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Half-year report as of 30 June 2005

INDESIT COM PANY Attachment 1 Reconciliation of the consolidated balance sheet as of 30 June 2004 (in millions of EURO) 30 June '04

IT GAAP (1) Adj. Reclass. IFRS

Assets Property, plant and equipment 711,0 4,6 (2,0) 713,7 Goodwill and other intangible assets with an - 12,6 247,7 260,2 indefinitite useful life Other intangible assets 215,9 117,5 (245,7) 87,6 Investments in associates 46,9 (0,4) - 46,6 Other investments 36,9 - - 36,9 Deferred tax assets - 17,9 15,7 33,6 Other non current financial assets 72,5 - 1,2 73,7 Total non-current assets 1.083,3 152,1 16,9 1.252,3

Inventories 393,1 (0,7) 3,1 395,5 Trade receivables 513,2 (0,0) 3,4 516,6 Current financial assets 35,7 - - 35,7 Due from tax authorities 88,0 (0,1) (34,8) 53,1 Other receivables and current assets 37,2 (11,6) 11,5 37,1 Cash and cash equivalents 182,4 - - 182,4 Total current assets 1.249,6 (12,4) (16,8) 1.220,3 Total assets 2.332,8 139,7 0,1 2.472,6

Share capital 100,4 - - 100,4 Reserves 127,2 67,8 - 195,0 Retained earnings 237,8 (145,3) - 92,5 Group net profit 47,5 (1,3) 0,0 46,3 Total equity attributable to equity holders 512,9 (78,8) 0,0 434,1 Minority interests 35,5 104,0 - 139,5 Total equity 548,4 25,3 0,0 573,6

Liabilities Medium to Long-term financial payables 185,6 0,1 7,1 192,8 Employee benefits 65,2 40,1 3,8 109,1 Provisions for risks and charges 38,4 (3,3) - 35,1 Deferred tax liabilities 11,4 79,0 - 90,4 Other non-current liabilities - 3,1 19,9 23,0 Total non-current liabilities 300,6 119,0 30,8 450,4 Bank overdraft and other financial payables 495,1 - - 495,1 Current provisions for risks and charges 22,0 - - 22,0 Trade payables 760,4 0,0 7,7 768,1 Due to tax authorities 80,4 (7,1) - 73,3 Other payables 126,0 2,6 (38,4) 90,1 Total current liabilities 1.483,9 (4,6) (30,7) 1.448,6 Total liabilities 1.784,5 114,5 0,0 1.899,0

Total equity and liabilities 2.332,8 139,7 0,1 2.472,6

(1) Reported balances have been grouped together in order to classify the balance sheet in accordance with Italian GAAP. The approach taken to the grouping of balances is described in the "Classification of captions using the balance sheet and income statement formats adopted in accordance with IAS 1 and the balance sheet and income statement captions laid down in arts. 2424 and 2425 of the Italian Civil Code" section of the FTA Appendix.

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Half-year report as of 30 June 2005

INDESIT COM PANY Attachment 2 Reconciliation of the consolidated interim income statement for the period ended 30 June 2004 (in millions of EURO) 30 June '04

IT Adj. Reclass. IFRS GAAP (1)

Revenue 1.490,2 (3,4) (35,4) 1.451,4 Cost of sales (1.405,1) 8,2 365,8 (1.031,1) Selling and distribution expenses - (5,0) (255,2) (260,1) General and administrative expenses - (1,7) (73,0) (74,7) Other income 17,4 (0,0) (14,2) 3,1 Other expenses - (0,0) (1,3) (1,3) Operating Profit 102,5 (1,9) (13,3) 87,3

Net financial expenses (9,0) (1,6) 0,0 (10,6) Income and expense from associates (0,0) - 0,0 - Non-operating expense (13,7) - 13,7 - Non-operating income 0,4 - (0,4) - Profit before tax 80,2 (3,5) 0,0 76,7 Income tax expense (34,3) 4,5 0,0 (29,8) Profit for the period 45,9 1,0 0,0 46,9 Results attributable to minority interests 1,6 (2,3) - (0,7) Profit attributable to equity holders of the parent 47,5 (1,3) 0,0 46,3 (1) Reported balances have been grouped together in order to classify the balance sheet in accordance with Italian GAAP. The approach taken to the grouping of balances is described in the "Classification of captions using the balance sheet and income statement formats adopted in accordance with IAS 1 and the balance sheet and income statement captions laid down in arts. 2424 and 2425 of the Italian Civil Code" section of the FTA Appendix.

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INDESIT COM PANY Attachment 3 Reconciliation of consolidated equity and consolidated profit as of and for the six-month period ended 30 June 2004 (in millions of EURO) Equity Profit Other effects Equity (1)

1 Jan. '04 30 June '04 30 June '04 30 June '04

Group balances under Italian GAAP 481,4 47,5 (16,1) 512,9

Business combination for GDAH A (45,2) 1,6 12,6 (30,9) Adjustment to tangible assets and relevant depreciation and other minor effects of applying B (22,1) 1,9 0,0 (20,2) IAS29 Adjustment to intangible assets and relevant amortization C (5,6) (5,9) 0,0 (11,5) Employee benefit D (18,9) - - (18,9) Measurement of inventories E (1,6) 1,4 - (0,1) Government grants F (3,6) 0,6 - (3,1) Stock options G - (0,5) 0,5 - Minor effects M 1,0 (1,3) (0,0) (0,4) Tax effects N 5,5 0,9 - 6,3

Group balances under IFRS 390,8 46,3 (3,0) 434,1

M inority balances under Italian GAAP 35,9 (1,6) 1,3 35,5

Business combination for GDAH A 130,6 2,3 (28,9) 104,0

M inority balances under IFRS 166,5 0,7 (27,6) 139,5

Total balances under Italian GAAP 517,3 45,9 (14,8) 548,4

Total adjustments on first-time adoption of IFRS 40,0 1,0 (15,8) 25,3

Total balances under IFRS 557,3 46,9 (30,6) 573,6

(1) In addition to the effects on the equity balances reported under Italian GAAP (see the statement of changes in equity), the other effects without impact on the income statement relate to the translation differences arising on the balances reported under IFRS and, with specific reference to IFRS 2 and IAS 39, to the recognition of the fair value of stock options and cash flow hedges as a direct adjustment of equity.

Half-year accounts as of 30 June 2005 of Indesit Company S.p.A. prepared under Italian GAAP Half-year report as of 30 June 2005

ATTACHM ENT 4 œ Balance sheet as of 30 June 2005 of Indesit Company S.p.A.

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Half-year report as of 30 June 2005

ATTACHM ENT 4 œ Balance sheet as of 30 June 2005 of Indesit Company S.p.A.

51

Half-year report as of 30 June 2005

ATTACHM ENT 5 œ Income statement for the period ended 30 June 2005 of Indesit Company S.p.A.

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Half-year report as of 30 June 2005

ATTACHM ENT 6 œ Accounting policies adopted for the preparation of the separate financial statements of Indesit Company S.p.A.

Introduction Pursuant to art. 81 of the Issuers' Regulations issued by CONSOB, the separate balance sheet and income statement of Indesit Company S.p.A. are presented as attachments 4 and 5. This art. 81 also requires issuers that must prepare consolidated financial statements to present financial statements for the parent company —prepared using the accounting policies adopted for the annual financial statements“. Indesit Company S.p.A. has not yet decided which policies to adopt for the preparation of its separate financial statements as of 31 December 2005, partly because of statutory and fiscal uncertainties about the interpretation of international standards in the context of separate financial statements. Accordingly, the financial statements of the parent company have been prepared under Italian GAAP applied on a consistent basis to the comparative financial statements of Indesit Company S.p.A. as of 31 December 2004 and 30 June 2004 and, as allowed by the Issuers' Regulations, they are presented without explanatory notes. The financial schedules and accounts of Indesit Company S.p.A. have been prepared in accordance with the principles required by current statutory regulations, as interpreted and supplemented by the accounting standards issued by the Italian Accounting Profession and by the documents issued by the Italian Accountancy Board (OIC) or, in the absence thereof, by the International Accounting Standards Board (IASB). In order to provide a better understanding of the accounting schedules and accounts presented in attachments 4 and 5, the accounting policies adopted for their preparation are set out below.

Accounting policies The individual caption are valued on a prudent basis in accordance with the going-concern concept and, following the changes made to art. 2423bis of the Italian Civil Code by the reform of company law, having regard for their economic function and the principle of substance over form. The accounting policies adopted are unchanged with respect to those applied in the comparative period of the prior year. Indesit Company S.p.A. has revised the estimated useful lives of certain categories of tangible fixed asset. In particular, this analysis identified that certain assets classified in the category of plant and machinery have estimated residual useful lives that are longer than those determined by the depreciation rates applied until 31 December 2004. Accordingly, the related depreciation rates have been suitably revised with the effect of reducing the depreciation charged to the income statement for the period ended 30 June 2005. Had this change in accounting estimate not been made, profit before taxation and property, plant and equipment as of 30 June 2005 would have been lower by 4.2 million euro, while total net profit and shareholders' equity at that date would have been lower by 2.6 million euro. The principal accounting policies adopted for the preparation of the half-year accounting schedules in accordance with art. 2426 of the Italian Civil Code are set out below:

Intangible fixed assets Intangible fixed assets are recorded at purchase or production cost, including related charges, and amortised on a systematic basis over their residual useful lives; they are written down at period end if their estimated recoverable value incurs permanently impairment in value below amortised cost on a lasting basis. Detailed information on the various types of intangible fixed asset is presented below. − Start-up and expansion costs are amortised over five years. − The costs of developing new products and of the advertising carried out when the name of the company was changed are amortised over five years. − Industrial patents and intellectual property rights, including the cost of developing and 53

Half-year report as of 30 June 2005

extending the company's IT systems, are recorded at purchase or production cost, including related charges. These costs are amortised over their residual useful lives, which is normally considered to be a period of five years. − Licences and trademarks are recorded at purchase cost, including related charges, and are amortised over their residual useful lives, which is normally considered to be a period of five years. − Goodwill is recorded based on the results of specific appraisals. Book value is amortised over 5 years, or 10 years in special cases only, considering the estimated useful life of such goodwill.

Other intangible fixed assets, including loan-arrangement expenses and leasehold improvements, are amortised over the related contract periods.

Tangible fixed assets Tangible fixed assets, stated net of accumulated depreciation, are recorded at purchase or production cost except for those assets, described further below, which were revalued in accordance with Law 72/83 and Law 413/91, and to allocate part of the difference arising on the spin-off of Philco and Star. Cost includes related charges and directly-attributable expenses. Transferred assets (30 June 1981) and those deriving from the merger with ICE Srl are recorded at their appraised value. Ordinary maintenance expenses are charged in full to the income statement. Improvement expenditure is allocated to the fixed assets concerned and depreciated over their residual useful lives. Tangible fixed assets are depreciated systematically each year on a straight-line basis using economic-technical rates that reflect the residual useful lives of each asset. These rates are halved in the year the asset enters into service.

The depreciation rates applied to the various categories of fixed asset fall into the following ranges:

Description RATES

Buildings and temporary constructions 3%-10% Plant and machinery 10%-15.5% Industrial and commercial equipment 20%-25% Other assets: - vehicles and internal transport 20%-25% - furniture and IT and office machines 10%-20%

Fixed assets are written down in the event of permanent impairment, regardless of the depreciation already accumulated; the original values are reinstated if the reasons for such write-downs cease to apply in subsequent periods. Construction in progress and advances to suppliers are recorded at the cost incurred and/or the amount of the advances paid, including directly-related charges.

Financial fixed assets − Equity investments are valued at purchase or subscription cost, including any related, non- financial charges. Such cost is written down to reflect permanent impairment in value deriving from losses incurred that are unlikely to be absorbed by profits earned in the foreseeable future; the original value is reinstated in subsequent periods if the reasons for such write-downs cease to apply. Investments in foreign companies are translated using the exchange rates applying at the

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Half-year report as of 30 June 2005

time of the acquisition or with reference to the book value of the assets transferred. If the translation of foreign currency balances using the closing rates of exchange highlights an impairment in value, the equity investments concerned are written down. − Receivables classified as financial fixed assets are stated at their estimated realisable value. − Securities are recorded at purchase cost; if their market value is consistently below their carrying value, they are written down to align these two values. Own shares are purchased on the basis and with the limitations approved at the shareholders' meeting, as required by Italian law. They are stated at cost, as written down to reflect any permanent impairment in value, and classified as financial fixed assets if they are unlikely to be sold in the near future. As required by the related legislation, the value of own shares is matched by a specific, reserve established within shareholders' equity.

Inventories Inventories are recorded at the lower of purchase or production cost, determined on a LIFO basis and their realisable value estimated with reference to market trends. Purchase cost comprises the amounts paid to suppliers and any directly-related charges. Production costs include the expenses incurred to bring products to their present state and condition at the balance sheet date, including the purchase cost of raw materials and components and production overheads. The calculation of estimated realisable value takes account of selling costs. Obsolete and slow-moving inventories are written down to reflect their likely use or sale.

Receivables Receivables are stated at their estimated realisable value by recording an allowance for doubtful accounts, deducted directly from assets, which takes account of the risk of collection losses specific to each outstanding balance, as well as historical experience and country risk.

Financial assets not held as fixed assets Securities are valued at the lower of purchase cost or their corresponding market value.

Cash and cash equivalents Cash and cash equivalents at period end are stated at their nominal value; any restrictions on the use of liquidity are described in the explanatory notes to the annual financial statements.

Accruals and deferrals Accrued and deferred income and expenses are recorded on accrual basis.

Capital grants and operating grants In accordance with laws enacted subsequent to 1 January 1998, capital grants are released to the income statement as —other revenues and income“ on an accruals basis. Amounts relating to future years are classified as —deferred income“ in the balance sheet. These grants are recorded when their collection by the company becomes certain. Capital grants received under laws enacted prior to 1993 are recorded as other equity reserves, gross of the related taxation, while those received under laws enacted between 1993 and 1997 are classified as other equity reserves, but net of the related deferred taxes which, due to a change in fiscal treatment, are classified in the provision for taxation. Commencing from 1997, the capital grants classifiable as —Start-up grants“ are recorded when the approval decree is issued and are deferred to future years to match the residual value of the financed assets. Any operating grants obtained are recorded as a component of income.

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Half-year report as of 30 June 2005

Provisions for risks and charges The provisions for risks and charges cover known or likely losses or charges, the timing and extent of which cannot be determined at period end. Provisions reflect the best possible estimate of the related liabilities, based on the information available.

Employee severance indemnities Employee severance indemnities, recorded in accordance with both the national collective payroll contract and current legislation (including Decree 47/2000 and subsequent amendments), reflect the Company's liability to all employees at period end, net of any advances paid and the personal tax advance made in accordance with Law 140 dated 28 May 1997.

Payables Payables, classified as liabilities in the balance sheet, are stated at the nominal value, which is deemed to represent their settlement value.

Revenues and costs Revenues from the sale of products are recognised on the transfer of ownership, which generally coincides with the time of shipment, and are stated net of trade discounts, allowances and rebates, as well as sales taxes. Revenues from the provision of services are recognised at the time such services are provided and stated net of the related taxation. Costs are recorded on a prudent basis in accordance with the matching principle.

Dividends Dividends and the related tax credits are recorded in the period that they are declared.

Income taxes for the period Current taxes for the period are determined with reference to a realistic estimate of the tax charge for the period in progress and those open to tax inspections, taking account of any applicable exemptions and tax credits due under current tax law. They are classified in "Due to tax authorities" caption of the balance sheet, net of advances paid and amounts withheld, or in the "Due from tax authorities" caption if there is a net tax credit. Deferred taxes mainly derive from: • the different fiscal treatment of a given component of income with respect to its statutory treatment; • the temporary differences deriving from comparison of the book and fiscal values of each asset, liability or equity caption; • the deduction of costs not charged to the income statement pursuant to art. 109.4 of the Consolidated Income Tax Law; and are determined using the tax rates expected to be in force when timing differences reverse; such provisions are updated in subsequent years to take account of any changes in the tax rates applying to each fiscal year. Both deferred tax assets and deferred tax liabilities are determined in accordance with the related accounting standard issued by the Italian Accounting Profession. In accordance with the concept of prudence, the effects of deferred taxation are considered in relation to forecast profitability. Deferred tax assets that may not be recoverable are written down. Deferred tax assets and liabilities are offset if this is allowed by law; any net positive balance is recorded in the deferred tax assets caption, while any net negative balance is recorded in the —Provisions for taxation“ caption.

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Half-year report as of 30 June 2005

Leased assets The instalments paid under finance leases for operating assets are expensed as a period cost; the commitment to pay future lease instalments is reported in the memorandum accounts. The explanatory notes to the annual financial statements provide the information required by art. 2427.22 of the Italian Civil Code.

Repurchase agreements Assets involved in repurchase agreements (sold with a buyback commitment) are recorded in the balance sheet of the seller. The income and expenses relating to such transactions are recorded on an accruals basis.

Currency transactions Fixed assets denominated in foreign currencies are recorded at the exchange rates applying at the time of purchase. If the translation of foreign currency balances using the closing rate of exchange highlights a permanent impairment in value, the fixed assets concerned are written down. Trade and financial receivables and payables originally denominated in non-Euro currencies, recorded in the balance sheet using the transaction-date exchange rates, are adjusted using the period-end rates of exchange and any translation gains or losses are credited or debited to the income statement. The explanatory notes to the annual financial statements report the value of unrealised and realised exchange gains and losses; any net unrealised exchange gains are deferred by recording a specific reserve. W ith regard to hedging transactions, the positive and/or negative differences between the invoicing rate and hedging rate are recorded as "Financial income and expense", as recommended in CONSOB Communication no. DAC/28731 dated 14.04.2000.

Contracts hedging interest-rate and exchange-rate risk The interest on floating-rate loans linked to IRS is calculated using the rate fixed by the IRS and recorded on an accruals basis. The nominal value of these IRS is recorded in the memorandum accounts. W ith regard to forward contracts hedging commitments to make sales in foreign currency, the differences between the exchange rates used to record such sales and the agreed forward exchange rate are recognised as financial income and expense on an accruals basis. The nominal value of these hedging contracts is recorded in the memorandum accounts.

Commitments, guarantees and contingencies Commitments and guarantees are reported in the memorandum accounts at their contractual value. Contingencies that will or are likely to give rise to a liability are described in the explanatory notes to the annual financial statements and are covered by specific provisions. Contingencies that might give rise to a liability are described in the explanatory notes to the annual financial statements, but no provisions are recorded.

Securitisation (sale of trade receivables) Indesit Company S.p.A. continued the five-year securitisation programme (maturing in 2007) during 2005. This involves the securitisation of a portfolio of trade receivables which is reviewed monthly on a revolving basis. Receivables are sold without recourse and eliminated from the balance sheet on collection of the related payments. In relation to such transfer of receivables, Indesit Company subscribes subordinated bonds issued by Hexagon, a vehicle company that has no contractual relationships with the Group which would require its recognition as a related party. These bonds are recorded as other current financial assets and are valued at the lower of subscription cost or their market value. Indesit Company S.p.A. acts as 57

Half-year report as of 30 June 2005

agent for the collection of the sold receivables and also performs the role of servicer (keeps the accounting records for the transaction and performs the related operational activities) on behalf of Credit Agricole Indosuez.

58