Annual Report at December 31, 2005 Contents Board of Directors, Statutory Auditors and Independent Auditors .......................................................... 3 Information About Parmalat’s Securities...................................................................................................... 6 A Letter from the Board of Directors........................................................................................................... 10 Report on Operations by the Board of Directors ....................................................................................... 11 World Economy............................................................................................................................................ 11 The Global Food Market .............................................................................................................................. 12 The Dairy Market...................................................................................................................................... 13 The Beverage Market............................................................................................................................... 14 The Parmalat Group (Markets, Products, Business Units)..........................................................................14 Guidelines and Objectives........................................................................................................................ 14 Licenses ................................................................................................................................................... 17 Revenues and Profitability........................................................................................................................ 19 Capital Expenditures ................................................................................................................................ 22 Business Units.......................................................................................................................................... 24 Financial Performance ................................................................................................................................. 55 Divestitures .................................................................................................................................................. 61 Tax Aspects ................................................................................................................................................. 62 Human Resources ....................................................................................................................................... 64 Corporate Governance ................................................................................................................................ 67 Events Occurring after December 31, 2005 ................................................................................................ 82 Outlook for 2006........................................................................................................................................... 84 Balance Sheet and Statement of Income .................................................................................................... 85 Parmalat S.p.a.......................................................................................................................................... 85 Parmalat Group ........................................................................................................................................ 88 Motion submitted by the Board of Directors to the Shareholders’ Meeting............................................ 91 Glossary ......................................................................................................................................................... 93 Parmalat S.p.A. – Annual Report at December 31, 2005............................................................................95 Financial Statements at December 31, 2005............................................................................................... 97 Balance Sheet .......................................................................................................................................... 99 Income Statement .................................................................................................................................. 100 Cash Flow Statement ............................................................................................................................. 101 Changes in Shareholders’ Equity........................................................................................................... 102 Notes to the Financial Statements............................................................................................................. 103 Assets and Liabilities Acquired on October 1, 2005 Pursuant to the Court Decision Approving the Proposal of Composition with Creditors ................................................................................................. 110 Notes to the Balance Sheet – Assets..................................................................................................... 115 Notes to the Balance Sheet — Shareholders’ Equity............................................................................. 125 Notes to the Balance Sheet — Liabilities ............................................................................................... 128 Guarantees and Other Memorandum Accounts .................................................................................... 134 Contents 1 Notes to the Income Statement.............................................................................................................. 151 Other Information.................................................................................................................................... 156 Annex – IFRS 1 reconciliations: first-time adoption of the IFRSs .......................................................... 157 Equity Investments Held by Parmalat at December 31, 2005............................................................ 164 Parmalat S.p.a. - Auditor’s Report ............................................................................................................. 169 Parmalat Group – Annual Report at December 31, 2005........................................................................ 171 Consolidated Financial Statements at December 31, 2005 ...................................................................... 173 Consolidated Balance Sheet .................................................................................................................. 175 Consolidated Income Statement ............................................................................................................ 176 Consolidated Cash Flow Statement....................................................................................................... 177 Statement of Changes in Shareholders’ Equity ..................................................................................... 178 Notes to the Consolidated Financial Statements....................................................................................... 179 Scope of Consolidation .......................................................................................................................... 180 Principles of Consolidation ..................................................................................................................... 182 Assets and Liabilities Acquired on October 1, 2005 Pursuant to the Court Decision Approving the Proposal of Composition with Creditors ................................................................................................. 193 Notes to the Balance Sheet — Shareholders’ Equity............................................................................. 208 Notes to the Balance Sheet — Liabilities ............................................................................................... 212 Guarantees and Other Memorandum Accounts .................................................................................... 221 Notes to the Income Statement.............................................................................................................. 244 Other Information.................................................................................................................................... 248 Segment Information .......................................................................................................................... 249 Exchange Rates Used to Translate Financial Statements ................................................................. 251 Investments in Associates of the Parmalat S.p.A. Group................................................................... 252 Annex – IFRS 1 RECONCILIATIONS: FIRST-TIME ADOPTION OF THE IFRSs ................................ 263 Report of the Independent Auditors.......................................................................................................... 271 Report of the Statutory Auditors................................................................................................................ 273 Contents 2 Board of Directors, Statutory Auditors and Independent Auditors Board of Directors Chairman Raffaele Picella Chief Executive Officer Enrico Bondi Directors Piergiorgio