Annual Report at December 31, 2006 Mission The Parmalat Group is an Italian food-industry group with a multinational strategy that seeks to increase the well-being of consumers throughout the world. The ultimate purpose of the Group is to create value for its shareholders while adhering to ethical principles of business conduct, to perform a useful social function by fostering the professional development of its employees and associates, and to serve the communities in which it operates by contributing to their economic and social progress. We intend to establish Parmalat as one of the top players in the global market for functional foods with high value added, which deliver improved nutrition and wellness to consumers, and attain clear leadership in selected product categories and countries with high growth potential for the Group. Milk and dairy products and fruit beverages, foods that play an essential role in everyone’s daily diet, will be key categories for the Group. Countries of Operation direct presence Europe Italy, Portugal, Romania, Russia and Spain Rest of the World Australia, Botswana, Canada, Colombia, Cuba, Ecuador, Mozambique, Nicaragua, South Africa, Swaziland, Venezuela, Zambia presence through licensees Brasil, Chile, China, Mexico, Dominican Republic, United States of America, Hungary, Uruguay Contents BOARD OF DIRECTORS, BOARD OF STATUTORY AUDITORS AND INDEPENDENT AUDITORS ........ 5 INFORMATION ABOUT PARMALAT’S SECURITIES .................................................................................... 8 PERFORMANCE OF PARMALAT’S SHARES........................................................................................................... 8 SHAREHOLDER BASE...................................................................................................................................... 10 CHARACTERISTICS OF THE SECURITIES ........................................................................................................... 10 Shares ...................................................................................................................................................... 10 Warrants ................................................................................................................................................... 11 Global Depositary Receipts...................................................................................................................... 11 THE LETTER FROM THE BOARD OF DIRECTORS .................................................................................... 12 REPORT ON OPERATIONS BY THE BOARD OF DIRECTORS.................................................................. 13 THE GLOBAL DAIRY MARKET .......................................................................................................................... 13 THE GLOBAL FRUIT BEVERAGE MARKET.......................................................................................................... 15 GUIDELINES AND OBJECTIVES ......................................................................................................................... 16 REVENUES AND PROFITABILITY ....................................................................................................................... 19 Capital Expenditures ................................................................................................................................ 22 Business Units.......................................................................................................................................... 25 Licenses ................................................................................................................................................... 54 FINANCIAL PERFORMANCE .............................................................................................................................. 56 Structure of Net Financial Position of the Group and Its Main Companies.............................................. 56 Change in Net Financial Position ............................................................................................................. 57 Government Grants and Subsidized Financing ....................................................................................... 58 Upcoming Commitments and Their Financial Coverage.......................................................................... 58 Risk Management..................................................................................................................................... 58 DIVESTITURES................................................................................................................................................ 59 TAX ISSUES.................................................................................................................................................... 60 HUMAN RESOURCES ...................................................................................................................................... 61 Group Staffing .......................................................................................................................................... 61 Union Relations ........................................................................................................................................ 61 Changes in the Group’s Organization ...................................................................................................... 62 Management and Development of Human Resources ............................................................................ 62 Training..................................................................................................................................................... 63 Corporate Social Responsibility ............................................................................................................... 63 CORPORATE GOVERNANCE ............................................................................................................................ 65 Governance Structure .............................................................................................................................. 65 Shareholders’ Meeting ............................................................................................................................. 65 Share Capital and Shareholders .............................................................................................................. 65 Board of Directors..................................................................................................................................... 67 Committees .............................................................................................................................................. 72 Board of Statutory Auditors ...................................................................................................................... 74 Independent Auditors ............................................................................................................................... 75 Internal Control System............................................................................................................................ 75 Handling of Corporate Information ........................................................................................................... 76 Communications with Shareholders and Institutional Investors............................................................... 77 Information About Compliance with the Recommendations of the Code of Conduct for Listed Companies Published by Borsa Italiana S.p.A. in March 2006 (“the Code”) .............................................................. 77 KEY EVENTS OF 2006 .................................................................................................................................... 83 EVENTS OCCURRING AFTER DECEMBER 31, 2006........................................................................................... 88 OUTLOOK FOR THE BALANCE OF 2007............................................................................................................. 90 BALANCE SHEET AND INCOME STATEMENTS .................................................................................................... 91 Parmalat S.p.A. ........................................................................................................................................ 92 Contents 1 Parmalat Group ........................................................................................................................................ 94 GLOSSARY..................................................................................................................................................... 97 MOTION SUBMITTED BY THE BOARD OF DIRECTORS TO THE SHAREHOLDERS’ MEETING ........... 98 PARMALAT S.P.A. ......................................................................................................................................... 99 FINANCIAL STATEMENTS AT DECEMBER 31, 2006 .......................................................................................... 101 Balance Sheet ........................................................................................................................................ 103 Income Statement .................................................................................................................................. 104 Cash Flow Statement ............................................................................................................................