2005 Annual Report

CONTENTS

Summary and General Information

The Boards of the Group Page 5 The DiaSorin Group Page 6 Products and Technologies Page 7 DiaSorin Group Organizational Framework Page 9 Operating and Financial Highlights Page 10

Report on Operations

Chairman’s Statement Page 13 Operating and Financial Performance by Business Line Page 15 DiaSorin Group Operating and Financial Performance Page 17 DiaSorin S.p.A. Operating and Financial Performance Page 22 Post-Balance Sheet Events and Business Outlook Page 28 Related Party Transactions Page 29 Research & Development Page 30 Other Information Page 38 In Concluding – Motion for the Allocation of Distributable Net Income Page 39

Financial Statements Year ended December 31, 2005 DiaSorin S.p.A.

Balance Sheet Page 42 Income Statement Page 47 Notes Page 49

Consolidated Financial Statements Year ended December 31, 2005 DiaSorin Group

Consolidated Balance Sheet Page 72 Consolidated Income Statement Page 77 Notes Page 79

Other Information

Report of the Independent Auditors Page 103 Report of the Statutory Auditors Page 107

S U M M A R Y R E S U L T S A N D G E N E R A L I N F O R M A T I O N

______ THE BOARDS OF THE GROUP

B o a r d o f D i r e c t o r s Chairman Gian Alberto Saporiti Deputy Chairman Gustavo Denegri Chief Executive Officer Antonio Boniolo Directors Carlo Callieri Carlo Rosa1 Chen Menachem Even Enrico Palandri Ezio Garibaldi Michele Denegri B o a r d o f S t a t u t o r y A u d i t o r s Chairman Giorgio Ferrino Statutory auditors Bruno Marchina Ottavia Alfano Deputy auditors Bernardo Chiavazza Sonia Sacco I n d e p e n d e n t a u d i t o r s Deloitte & Touche S.p.A.

1 General Manager

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Pursuing since the late Sixties initiatives in the radioimmunology diagnostics field, DiaSorin S.p.A. has mastered as leader, whether in Italy or abroad, technological and sector market evolution over the years. As a consequence thereof, DiaSorin S.p.A. now stands at the forefront of applied biotechnology diagnostics across the homeland. The corporate headquarters of the DiaSorin Group are based in Saluggia (Vercelli), from which the more significant Research & Development and Marketing activities are conducted. Also based at Saluggia are the structures dedicated to the development and production of biotechnological componentry. A second production site, the DiaSorin Inc. production site, is located at Stillwater in Minnesota, USA; acquisition of BYK SANGTEC from the Altana Group in 2003 translated into a third production site located in Germany, dedicated to the production of certain LIAISON-technology product lines. The DiaSorin Group boasts commercial branch locations in Europe (Italy, France, the U.K., Belgium/The Netherlands, Spain/Portugal, Germany and Sweden) and, not least, in the Americas (United States, Mexico and Brazil). With effect from January 1, 2006, the DiaSorin Group operates through a commercial branch location in the State of Israel. DiaSorin is represented by distributors in the rest of the world. Commercial trading footprint is seamless at the world level. DiaSorin has a proven vocation for Research & Development and for technological innovation. Indeed, the Firm firmly believes that innovative methods and assays, securing superior clinical and analytical performance, and the capability to provide upper-edge imagery and accurate information to physicians, can be achieved solely through unrelenting technological update and broader biotechnological/biological reagent control.

New assays are developed in the production site at Saluggia and, not least, in the production site at Stillwater, both of which specialize in distinct application sectors (infectious disease/autoimmunity assays at Saluggia, and endocrinology/bone and mineral metabolism at Stillwater) albeit united under rigorous project management in harmonization with ISO and FDA accreditations. Concentrated at the Saluggia research center are activities focused around genetic biotechnological reagents that increasingly call for sophisticated molecular biology approaches and advanced protein chemistry.

______ PRODUCTS AND TECHNOLOGIES

The DiaSorin Group specializes in the development, production and commercialization of immunoreagents for ‘in vitro’ lab diagnostics.

The product array is diversified by pathology/application sector and encompasses assays for the determination of serological parameters in:

• Endocrinology • Oncology • Bone & mineral metabolism • Infectious diseases • Autoimmunity

The assay technologies used reflect the immuno-assay technological evolution tracked as from preliminary commercial testing onset at the end of the Sixties, from RIA (Radio Immuno Assay) to CLIA (ChemiLuminescent Immuno Assay). Mapped in the following table is the technology matrix/product line under which the DiaSorin product offering currently unfolds.

TECNOLOGY PRODUCT LINE

RIA ELISA FIA CLIA

Endocrinology * * Oncology * *

Bone & mineral metabolism

* * * Infectious diseases

* * Autoimmunity * * *

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Customer testing is supported by a comprehensive range of automated and compatible analyzer platforms having the capability to automate analysis in the research and clinical reference lab.

The following table places in evidence the variety of assay platforms made available to customers by DiaSorin to the service of the assay technologies:

TECHNOLOGY

ANALYZER PLATFORMS

RIA ELISA FIA CLIA

Analyzer modules

‘Gamma’ counters

Microplate piper readers and

washers (ETI -SYSTEM)

Luminescent microscope

‘Open’ automated

platforms (1)

RIA-MAT ETI-LAB ETI-MAX

AUTOFLUOR

‘Closed’ automated

platforms (2)

LIAISON

(1) As used herein, an ‘open’ analyzer platform is a platform having the capability to house reagents using the same microparticle

solid phase technology (2) As used herein, a ‘closed’ platform is a platform having the capability to house stand-alone reagents

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THE DIASORIN GROUP ORGANIZATIONAL FRAMEWORK

DiaSorin DiaSorin S.p.AS.p.A..-- ItaliaItaliaCapogruppoCapogruppo

DiaSorin DiaSorin LtdLtd. . –– UKUKFiliale commercialeFiliale commerciale

% di possesso: 100%% di possesso: 100%

DiaSorin DiaSorin IncInc–– USAUSAFiliale produttiva e commercialeFiliale produttiva e commerciale


DiaSorin SA/NV DiaSorin SA/NV –– BelgioBelgioFiliale commercialeFiliale commerciale

% di possesso: 99,99%% di possesso: 99,99%

DiaSorin AB DiaSorin AB –– SveziaSveziaFiliale commercialeFiliale commerciale


DiaSorin SA DiaSorin SA -- FranciaFranciaFiliale commercialeFiliale commerciale


DiaSorin S.A. DiaSorin S.A. C.VC.V..-- MessicoMessicoFiliale commercialeFiliale commerciale


DiaSorin S.A. DiaSorin S.A. –– SpagnaSpagnaFiliale commercialeFiliale commerciale


DiaSorin DiaSorin GmbHGmbH –– GermaniaGermaniaFiliale produttiva e commercialeFiliale produttiva e commerciale


DiaSorin DiaSorin LtdaLtda –– BrasileBrasileFiliale commercialeFiliale commerciale


U.U. KasseKasse –– GermaniaGermaniaFondo pensioneFondo pensione

DiaSorin DiaSorin LtdLtd–– IsraeleIsraeleFiliale commercialeFiliale commerciale


DiaSorin DiaSorin S.p.AS.p.A..-- ItaliaItaliaCapogruppoCapogruppo

DiaSorin DiaSorin LtdLtd. . –– UKUKFiliale commercialeFiliale commerciale


DiaSorin DiaSorin IncInc–– USAUSAFiliale produttiva e commercialeFiliale produttiva e commerciale


DiaSorin SA/NV DiaSorin SA/NV –– BelgioBelgioFiliale commercialeFiliale commerciale


DiaSorin AB DiaSorin AB –– SveziaSveziaFiliale commercialeFiliale commerciale


DiaSorin SA DiaSorin SA -- FranciaFranciaFiliale commercialeFiliale commerciale


DiaSorin S.A. DiaSorin S.A. C.VC.V..-- MessicoMessicoFiliale commercialeFiliale commerciale


DiaSorin S.A. DiaSorin S.A. –– SpagnaSpagnaFiliale commercialeFiliale commerciale


DiaSorin DiaSorin GmbHGmbH –– GermaniaGermaniaFiliale produttiva e commercialeFiliale produttiva e commerciale


DiaSorin DiaSorin LtdaLtda –– BrasileBrasileFiliale commercialeFiliale commerciale


U.U. KasseKasse –– GermaniaGermaniaFondo pensioneFondo pensione

DiaSorin DiaSorin LtdLtd–– IsraeleIsraeleFiliale commercialeFiliale commerciale


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THE DIASORIN GROUP ORGANIZATIONAL FRAMEWORK

All amounts in Euro/’000 2005 2004 Consolidated revenues 156,220 142,524 Gross margin 100,752 74,232 EBITDA 40,617 31,306 EBIT before depreciation and amortization 26,520 17,231 EBIT 22,538 13,250 Profit before tax 13,828 7,085 Net profit attributable to parent company 4,678 3,623 Net financial position (53,243) (62,554) Shareholders’ equity 63,221 55,207 Net capital employed 116,464 117,761 Investment toward property, plant and equipment 12,990 8,887 Research and development 6,817 5,851 Internal financing (net result + depreciation and amortization) 22,989 21,680 Number of employees at year-end 756 698

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______ CHAIRMAN’S STATEMENT

R E P O R T O N O P E R A T I O N S

( p u r s u a n t t o A r t i c l e 2 4 2 8 o f t h e I t a l i a n C i v i l C o d e a n d A r t i c l e 4 0 o f I t a l i a n l e g i s l a t i v e d e c r e e 1 2 7 / 1 9 9 1 )

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______ CHAIRMAN’S STATEMENT

To the Shareholders: In 2005, the DiaSorin Group gained a stronger foothold throughout the global market for in-vitro diagnostics; more pointedly, the DiaSorin Group gained absolute leadership in the diagnostics of bone deficiency linked to Vitamin D. This success rebounded significantly on the Group’s financial headlines: consolidated revenues from the sale of products and services stretched forward to Euro 156.2 million, or 9.6% more than the year before, whilst sales revenue captured by DiaSorin S.p.A., the parent company, capped Euro 96.2 million, of which Euro 36.7 million Group companies, reflecting an 8.5% uplift. Looking at operating profit, the Group ended the year reporting E.B.I.T., before depreciation and amortization, in the amount of Euro 26.5 million, or 53.9% more than the year before. The success delivered in fiscal 2004 staged a replica in 2005, confirming the sound strategy carved out and implemented by Company management. The broader LIAISON analyzer base installed with customers and the efforts waged on a continuing basis by the Research & Development function, with clear focus placed on enhancing the diagnostics menù offered in respect of assay technologies, worked toward compounding consensus expectation: with bolt-on product pipeline, the DiaSorin Group has risen to the needs posed by the market, with a keen eye steered toward the sectors of infectious disease, autoimmunity, endocrinology and bone metabolism, strategic areas of business for future development. Looking at Research & Development, worthy of mention is the progress gained in the development of the NAT (Nucleic Acid Testing) technology. Also gaining momentum in calendar 2005 was the Group’s geographic reach, with bolt-on foothold gained in the Brazilian market and new branch location unveiled in Mexico and Israel, all of which in lockstep with stronger European market footprint: the regained growth reflected by the German market sets the basis for step-change expansion and represents clear indication that Company has the capability to rise to the challenges posed by a turnaround. Over the last twelve months, DiaSorin S.p.A., the parent company, also addressed the need to render its Control environment more effective. As such, seeing inception was the Internal Audit function along with the decision to adopt, Groupwide, a Code of Best Practice, in a strategic intent to create a control environment with clearly defined organization structures operating within a framework of policies and procedures covering every aspect of the business and, not least, to safeguard DiaSorin Group’s assets. Also seeing inception was a project focused around reshaping the Group’s IT and computer system infrastructure, consolidating the various operating units under one common platform. Submitted to you, the Shareholders, for your review and approval are the consolidated financial statements of the DiaSorin Group for the year ended December 31, 2005, which show net income of Euro 4,678 thousand, after: - recording depreciation and amortization in the amount of Euro 18,311 thousand; - setting aside provisions in the amount of Euro 935 thousand and Euro 587 thousand to the

reserve for the write-down of receivables and to the reserves for risks and charges, respectively; and

- incurring exceptional expenses in the amount of Euro 1,415 thousand.

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Also submitted for your approval are the financial statements of DiaSorin S.p.A. for the year ended December 31, 2005, which show net income of Euro 2,561 thousand, after: - recording depreciation and amortization in the amount of Euro 9.440 thousand; and - setting aside provisions in the amount of Euro 750 thousand and Euro 270 thousand to the

reserve for the write-down of receivables and to the reserves for risks and charges, respectively.

Gian Alberto Saporiti

Chairman

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______ OPERATING AND FINANCIAL PERFORMANCE BY BUSINESS LINE

The consolidated revenues from sales and services reported by the DiaSorin Group for 2005 stretched forward to Euro 156.2 million, or 9.6% more than the year before, reflecting a quantum leap from budget forecasting. Also working toward the year-on-year uplift was the sharp currency appreciation waged by the Brazilian real against the European single currency. The breakdown of consolidated revenues by geographic region was substantially unchanged from the prior year: the two key markets, that is, the European market and the North American market, accounted for some 61.2% and 29.5%, respectively, of consolidated revenues. The markets served by indirect distribution accounted for the remaining 9.3%. Sales revenue captured by DiaSorin S.p.A. over the last twelve months came to Euro 96.2 million, or 8.5% more than the year before. Sale revenue from the homeland accounted for slightly more than 40%, whilst the percentage of sales revenue from the rest of the world stepped upward. From a product portfolio standpoint, Group sales reflect increasingly the move from RIA and ELISA technologies toward the LIAISON proprietary technology, which compounded, in the year under review, its percentage within the product portfolio by a further 5 percentage, thereby accounting for 36.1% of consolidated revenues. The year-on-year growth captured by the LIAISON technology is a reflection of the ongoing strategy steered toward broadening the LIAISON menù test offering and the installed analyzer base. Offered at year-end 2005 by the LIAISON menù were 92 analyzers, whilst DiaSorin Group honed the threshold of 1,500 automatic analyzers installed with customers in the year under review. LIAISON technology sales revenue from the homeland tipped Euro 25.8 million, or 18% more than the year before, an achievement of no little importance given the downsized portion of LIAISON-based products distributed indirectly due to a string of supply problems encountered on the global horizon. As a result of the foregoing, the Group captured in other countries exciting market shares in some RIA market segments and, more pointedly, in the bone metabolism and endocrinology segments. As a consequence thereof, significantly mitigated was the downward route followed by the RIA technology, which, in 2005, reflected a 5.2% fallback. Looking at the other ‘open’ technology, ELISA sales in 2005 accounted for 38.1% of the product portfolio, or 1.7% more than the year before. Powering ahead from 52.1% at year-end 2004 to 64.5% at year-end 2005 was Group gross margin. The year-on-year improvement was reflected on Group added value, which moved from Euro 68.5 million at year-end 2004 to Euro 81.5 million at year-end 2005. At the Group level, EBIT, before depreciation/amortization, finance charges and other non-recurring expenses, came to Euro 26.5 million, or 53.9% more than the year before. Looking at the subsidiaries, mention is made to the Brazilian subsidiary. Albeit bearing the brunt of the extraordinary provision for bad recorded in the 2005 income statement due to the fraud suffered, the Brazilian subsidiary reported a year-on-year 52.8% uplift in operating profit, also owing to the sharp local currency appreciation waged against the Euro.

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The financial activities of the Group bear the brunt of net finance charges and foreign exchange losses in the amount of Euro 3.8 million and Euro 1.1 million, respectively. The Group ends the year with a consolidated pre-tax result of Euro 13.8 million, or 95.2 % more than the year before, and net profit in the amount of Euro 4.7 million. DiaSorin S.p.A., the parent company, reports EBIT, before depreciation/amortization, finance charges and non-recurring expenses, in the amount of Euro 14.2 million, or 61.4% more than the year before. The parent company ends the year to December 31, 2005 with a pre-tax result of Euro 7.6 million and net profit in the amount of Euro 2.6 million. Looking at the Group’s capital base, consolidated net financial position at year-end 2005 was Euro 53.2 million negative, reflecting a year-on-year improvement of Euro 9.4 million. When evaluating the evolution of consolidated net financial position, account should be taken of the route followed by the US$/Euro exchange rate over the last twelve months, which affects significantly the portion of indebtedness denominated in U.S. dollars. On a constant currency basis, the parent company showed its mettle and repaid bank borrowings and financial payables to other financers in the amount of Euro 11.2 million and Euro 2.9 million, respectively. Gaining progress throughout the year were receivables ceded by the parent company, which put in place two securitization transactions pursuant to Law 130/1999 in respect of accounts receivable from the Abruzzo and Lazio Region Local Healthcare Units; as a consequence thereof, receivables have been ceded for some Euro 1.8 million. Also gaining progress in the year under review were receivables from the National Health System ceded with recourse to factoring companies.

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Measuring Financial Performance

CONSOLIDATED INCOME STATEMENT

(Accounts in Euro/’000) 2005 2004A. Value of production 165,339 149.344B. Production costs 145,205 139.212

Difference between value of production and production costs (Operating result) 20.134 10,132C. Financial income/(expenses) (4,891) (3.124)E. Extraordinary income/(expenses) (1,415) 77

Income before income taxes 13.828 7,085 22. Income taxes (9,150) (3.462)

Net income attributable to the Group 4.678 3,623 Aggregate revenues for the year moved forward 10.3% from fiscal 2004, particularly as a result of LIAISON product sales, which came to Euro 56,416.7 thousand, or 27.3% more than the year before. More pointedly, underscored are the more significant results reported in the USA (+11.4% from the prior year) and in other commercial locations (+13.6% from the year before), with particular mention to Belgium (+5.2% vis-à-vis plan and +12.6% from the prior year) and France, which, insofar as reflecting a year-on-year uplift of 12.6%, steps beyond the all-time threshold of Euro 10 million. Gaining a sharp year-on-year increase was the Brazilian location (up 35.1%), also as a result of the pleasing impact waged by the BRR/Euro exchange rate. Revenues for the period came to Euro 164,206 thousand and are composed of the following: Accounts in Euro/’000 2005 2004

Revenues from the sale of goods and services 156,220 142,524Increase in fixed assets for internal work 5,288 4,390Other 2,698 2,008Total 164,206 148,922

The differing income statement items that worked towards the result for the period are the following:

Accounts in Euro/’000 2005 2004

Difference between the value of production and production costs 20,134 10,132Financial income/(expense) (4,891) (3,124)Extraordinary income/(expense) (1,415) 77Taxation (9,150) (3,462)Result for the year 4,678 3,623

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______ As mirrored in the table set out below, the operating result ended the year on a positive tone of Euro 20,134 thousand, reflecting a clear improvement from the year before: Accounts in Euro/’000 thousand 2005 2004

Value of production 165,339 149,344Purchasing costs, service costs and other operating expenses (83,821) (80,845)PRODUCT ADDED VALUE 81,518 68,499Cost of labor (personnel expenses) (41,551) (38,803)Provision for risks and charges (587) (968)Depreciation and write-downs (19,246) (18,596)Difference between the value of production and production costs (Operating result)

20,134 10,132

Product added value accounts for 49.6% of consolidated revenues, reflecting a 3.6 % improvement from the prior year. The cost of labor accounts for 25.3% of consolidated revenues (F/Y 2004: 26.1%) and 51% of added value (F/Y 2004: 56.6%). The results captured by financial activities are detailed below: Amounts in thousands of Euro 2005 2004

Other financial income 650 424Interest and other financial charges (4.453) (4.628)FOREX difference (1.088) 1.080Total (4.891) (3.124)

Primarily pushing the year-on-year change were foreign exchange differences arising from or relating to indebtedness denominated in U.S. dollars.

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______ Measuring Operating Performance

CONSOLIDATED BALANCE SHEET Accounts in Euro/’000 December 31, 2005 December 31, 2004 A. DUE FROM STAKEHOLDERS FOR CAPITAL

NOT PAID IN - - B. FIXED ASSETS I. Intangible fixed assets 54,294 59,330 II. Tangible fixed assets 35,250 34,913 III. Financial fixed assets 60 74 C. CURRENT ASSETS I. Inventories 26,650 22,688 II. Receivables 56,049 53,498 III. Financial assets not representing fixed assets 126 - IV. Cash and cash equivalents 6,116 9,161 D. PREPAID EXPENSE AND ACCRUED INCOME 738 501 TOTAL ASSETS 179.283 180,165 A. Shareholders' equity 63,221 55,207 B. Reserves for risks and charges 10,795 11,736 C. Reserve for employee termination indemnities 6,745 6,456 D. Payables 96,201 104,772 E. Accrued expenses and deferred income 2,321 1,994 TOTAL EQUITY AND LIABILITIES 179,283 180,165

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CONSOLIDATED CASH FLOW STATEMENT Accounts in Euro/’000 F/Y 2005 F/Y 2004 A. OPENING CASH AND CASH EQUIVALENTS 9,161 6,063

Profit for the year 4,678 3,623 Depreciation and amortization 18,311 18,056 Provision to (use of) reserves for risks and charges (1,061) (1,250) Net change in reserve for employee termination indemnities 251 (207) CASH FLOW GENERATED BY (USED IN)

OPERATIONS

22,179

20,222 (Increase)/Decrease in current receivables (598) 2,056 (Increase)/Decrease in inventory (2,840) (476) Increase/(Decrease) in supplier payables and other payables 2,622 1,425 (Increase)/Decrease in other working capital items (231) 654

B. CASH FLOW FROM OPERATING ACTIVITIES 21,132 23,881 Investment/Divestment of fixed assets: - Tangible fixed assets (11,073) (9,393) - Intangible fixed assets (499) (438) - Financial fixed assets 15 4

C. CASH FLOW FROM INVESTING ACTIVITIES (11,557) (9,827) Net change in payables to banks/stakeholders/other financers (8,679) 6,041) Net change in interest expense on bank borrowings (1,002) Net change in payables for equity investments acquired (3,000) (3,000) Net change in payables to ASI (514) (913)

D. CASH FLOW FROM FINANCING ACTIVITIES (12,193) (10,956) E. CASH FLOW FOR THE PERIOD (B+C+D) (2,618) 3,098 F. ENDING CASH AND CASH EQUIVALENTS (A+E) 6,543 9,161

(*) Like-for-like 2004 financial data have been reclassified in order to render then immediately comparable with 2005 financial data. As at December 31, 2005, capital employed was Euro 116,464 thousand, shareholders’ equity came to Euro 63,221 thousand and net financial position was Euro (53,243) thousand. Set forth below are the tables of analysis relating to the Group’s capital base and financial structure: Accounts in Euro/’000 December 31, 2005 December 31, 2004

Capital employed 116,464 117,761Shareholders' equity 63,221 55,207Net financial position (53,243) (62,554) Capital employed and shareholders’ equity are composed of the following: Accounts in Euro/’000 December 31, 2005 December 31, 2004

Intangible fixed assets 54,294 59,330Tangible fixed assets 35,250 34,913Financial fixed assets 60 74FIXED ASSETS 89,604 94,317NET WORKING CAPITAL 33,605 29,900Reserve for employee termination indemnities (6,745) (6,456)Net capital employed 116,464 117,761

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______ Accounts in Euro/’000 December 31, 2005 December 31, 2004

Share capital paid in 50,000 50,000Share premium reserve 4,425 4,425Other reserves 4,118 (2,841)Result attributable to Group 4,678 3,623Shareholders' equity 63,221 55,207

Net financial position is composed as follows: Amounts in thousands of Euro December 31, 2005 December 31, 2004

Cash at bank and on hand 6,543 9,161TOTAL FINANCIAL ASSETS 6,543 9,161Current financial payables (1) (16,836) (16,626)Non-current financial payables (2) (42,950) (55,089)TOTAL FINANCIAL LIABILITIES (59,786) (71,715)Net Financial Position (53,243) (62,554)

(1) including current liabilities and payables to banks, other financers and Altana Pharma; (2) including long-term bank borrowings and payables to other financers. Of particular note, seeing repayment by the Group in the year under review was the following:

- Euro 1,700 thousand relating to the Interbanca financing for the Byk Group acquisition; - Euro 4,795 thousand relating to the Interbanca financing tranche denominated in Euro

contracted in relation to the Biofort business transaction part way 2004; - US$ 4,616 thousand (or Euro 3,846 thousand) relating to the Interbanca financing

tranche denominated in U.S. dollars contracted in relation to the Biofort business transaction part way 2004, realizing a foreign exchange loss of Euro 458 thousand;

- US$ 2,238 thousand of the loan contracted by the subsidiary DiaSorin USA; - Euro 3,800 thousand to Altana Pharma for the German and Swedish investees acquired; - US$ 700 thousand (or Euro 514 thousand) for extinguishing debt vis-à-vis ASI.

As if any reminder were needed, the Interbanca financing contracted in relation to the Biofort business transaction is secured by pledge on 85% of the shares representing the share capital of DiaSorin S.p.A., the parent company. Without prior consent from the bank, moreover, no part of the business or business line thereof, property, stocks, securities, equity interests or tangible/intangible fixed assets stated in the accounts for amounts in excess of Euro 2.5 million may be divested or transferred by the company, in any one financial period. And lastly, yet again without prior consent, no medium to long-term financing or loan entailing aggregate financial exposure in excess of Euro 4.0 million may be contracted by the company, in any one financial period. The interest expense on the financing is paid on a six-monthly basis as set out below: 01/01/2005 – 12/31/2006 01/01/2007 – 12/31/2010 Tranche denominated in Euro EURIBOR at 6 months + 1.50 EURIBOR at 6 months + 1.25 Tranche denominated in US$ LIBOR at 6 months + 1.50 LIBOR at 6 months + 1.25 And lastly, attaching to the Interbanca financing are covenants, the ratios of which, as reported in the following table, have been observed by the Group in 2005: Ratio 2005 benchmark value 2005 Group value Net financial charges/EBITDA not in excess of 0.2 0.12 Net financial position/Net equity not in excess of 1.3 0.84 Net financial position/EBITDA not in excess of 2.5 1.35

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Measuring Financial Performance

INCOME STATEMENT Accounts in Euro/’000 2005 2004A. Value of production 101,998 92,268B. Production costs 90,473 87,893

Difference between value of production and production costs (Operating result) 11,525 4.375C. Financial income/(expenses) (3,931) (2,379)E. Extraordinary income/(expense) - 1,247

Income before tax 7.594 3,24322. Income taxes (5,033) (1,995)

Net income for the year 2,561 1,248 Revenues for the period came to Euro 100,445 thousand, reflecting a 9.1% increase from 2004, and are composed of the following: Accounts in Euro/’000 2005 2004

Revenues from the sale of goods and services 96,238 88,721Increase in fixed assets for internal work 443 406Other revenues and income 3,764 2,939Total 100,445 92,066

The differing income statement items that worked towards the result for the period are the following: Accounts in Euro/’000 2005 2004

Difference between the value of production and production costs 11,525 4,375Financial income/(expenses) (3,931) (2,379)Extraordinary income/(expenses) - 1,247Income taxes (5,033) (1,995)Result for the period 2,561 1,248

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______

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The operating result ended the year on a positive tone of Euro 11,525 thousand, reflecting a clear improvement from the year before (F/Y 2004: Euro 4,375 thousand). Primarily pushing through the improvement were production efficiencies and the move by revenues toward products with enhanced profit margin. The operating result is analyzed as follows: Accounts in Euro/0000 2005 2004

Value of production 101,998 92,268Purchasing costs, service costs and other operating expenses (63,091) (61,429)PRODUCT ADDED VALUE 38,907 30,839

Cost of labor (personnel expenses) (16,921) (15,720)Depreciation and write-downs (10,461) (10,744)Difference between the value of production and production costs (Operating result)

11,525 4,375

Product added value accounts for 38.7% of revenues (F/Y 2004: 33.5%). The cost of labor accounts for 16.5% of revenues (F/Y 2004: 17%) and 43.5% of added value (F/Y 2004: 54.9%). The results captured by financial activities are detailed below:

Accounts in Euro/’000 2005 2004Dividends from subsidiary undertakings 899 885Interest and other financial income 727 405Interest and other financial charges (4,413) (4,320)Foreign exchange gains/(losses) (1,144) 651Total (3,931) (2,379)

Dividends from subsidiary undertakings relate to the dividend pay-out declared by the subsidiary DiaSorin G.m.b.H. accounted for in accordance with the accrual basis of accounting. Foreign exchange gains/(losses) relate primarily to foreign exchange gains arising from or relating to the Interbanca financing tranche denominated in U.S. dollars.

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Measuring Operating Performance

BALANCE SHEET

Accounts in Euro/’000

December 31, 2005 December 31, 2005

A. DUE FROM STAKEHOLDERS FOR CAPITAL NOT PAID IN

B. FIXED ASSETS I. Intangible fixed assets 33,466 36,675 II. Tangible fixed assets 12,680 14,613 III. Financial fixed assets 51,956 51,956 C. CURRENT ASSETS I. Inventories 16,938 14,666 II. Receivables 42,394 37,826 III. Financial assets not representing fixed assets 5,127 4,331 IV. Cash and cash equivalents 2,111 4,724 D. PREPAID EXPENSES AND ACCRUED INCOME 405 193 TOTAL ASSETS 165,077 164,984 A. Shareholders' equity 58,558 55,997B. Reserves for risks and charges 1,607 1,297C. Reserve for employee termination indemnities 6,176 5,856D. Payables 98,703 101,792E. Accrued expense and deferred income 33 42TOTAL EQUITY AND LIABILITIES 165,077 164,984

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CASH FLOW STATEMENT

Accounts in Euro/’000 F/Y 2005 F/Y 2004 A. OPENING CASH AND CASH EQUIVALENTS 9,524 8,572

Profit for the year 2,561 1,248 Depreciation and amortization 9,440 9,504 Provision to (use of) reserve for risks and charges 310 766 (Gain) Loss on the realization of fixed assets (128) 73 Net change in reserve for employee termination indemnities 320 205 CASH FLOW GENERATED BY (USED IN)

OPERATIONS

12,503

11,796 (Increase)/Decrease in current receivables (1,660) 3,467 (Increase)/Decrease in inventory (2,272) 69 Increase/(Decrease) in supplier payables and other payables 2,033 (3,458) (Increase)/Decrease in other working capital items (222) (62)

B. CASH FLOW FROM OPERATING ACTIVITIES 10,382 11,812 Investment in fixed assets: - Tangible fixed assets (4,351) (4,300) - Intangible fixed assets (267) (75) Selling price or value of reimbursement of fixed assets 450 220

C. CASH FLOW FROM INVESTING ACTIVITIES (4,168) (4,155) Net change in payables to banks and other financers (3,108) (4,387) Net change in payables for equity investments acquired (1,500) (1,405) Net change in payables to ASI (514) (913)

D. CASH FLOW FROM FUNDING ACTIVITIES (5,122) (6,705)

E. CASH FLOW FOR THE PERIOD (B+C+D) 1,092 952 G. ENDING CASH AND CASH EQUIVALENTS (A+E) 10,616 9,524 As at December 31, 2005, capital employed was Euro 115,790 thousand, shareholders’ equity came to Euro 58,558 thousand and net financial position was Euro (57,232) thousand. Net financial position reflects an improvement on a comparative basis with December 31, 2004, due to repayment for the period of loans and financing outstanding. Set forth below are the tables of analysis relating to the company’s capital base and financial structure: Accounts in Euro/’000 December 31, 2005 December 31, 2004

Capital employed 115,790 119,440Shareholders' equity 58,558 55,997Net financial position (57,232) (63,443)

______ Capital employed and shareholders’ equity are composed of the following: Accounts in Euro/’000 December 31, 2005 December 31, 2004Intangible fixed assets 33,466 36,675Tangible fixed assets 12,680 14,613Financial fixed assets 51,956 51,956FIXED ASSETS 98,102 103,244NET WORKING CAPITAL 23,864 22,052Reserve for employee termination indemnities (6,176) (5,856)Net capital employed 115,790 119,440

Shareholders’ equity is composed as follows: Accounts in Euro/’000 December 31, 2005 December 31, 2004Share capital paid in 50,000 50,000Share premium reserve, shares and other reserves 4,504 4,441Retained earnings 1,493 308Result for the year 2,561 1,248Shareholders' equity 58,558 55,997 Net financial position is composed as follows: Accounts in Euro/’000 December 31, 2005 December 31, 2004

Non-current financial receivables (1) 5,001 4,331Current financial receivables (1) 3,504 469Cash at bank and on hand 2,111 4,724TOTAL FINANCIAL ASSETS 10,616 9,524Current financial payables (2) (29,349) (24,084)Non-current financial payables (3) (38,499) (48,883)TOTAL FINANCIAL LIABILITIES (67,848) (72,967)Net Financial Position (57,232) (63,443)

(1) including financial receivables from subsidiaries. (2) including current bank liabilities and payables to banks, subsidiaries and Altana Pharma. (3) including long-term bank borrowings. Of particular note, seeing repayment by the Company in the year under review was the following:

- Euro 1,700 thousand relating to the Interbanca financing for the Byk Group acquisition; - Euro 4,795 thousand relating to the Interbanca financing tranche denominated in Euro

contracted in relation to the Biofort business transaction part way 2004; - US$ 4,616 thousand (or Euro 3,846 thousand) relating to the Interbanca financing

tranche denominated in U.S. dollars contracted in relation to the Biofort business transaction part way 2004, realizing a foreign exchange loss of Euro 458 thousand;

- Euro 2,300 thousand to Altana Pharma for the German and Swedish investees acquired; - US$ 700 thousand (or Euro 514 thousand) for extinguishing debt vis-à-vis American

Standard.

22

______ In the year to December 31, 2005, Interbanca S.p.A. withdrew from the shareholder structure. As a consequence thereof, the accounts payable thereto have been reclassified from ‘stakeholder financing repayable’ to ‘bank borrowings’. As if any reminder were needed, the Interbanca financing contracted in relation to the Biofort business transaction is secured by pledge on 85% of the shares representing the share capital of DiaSorin S.p.A., the parent company. Without prior consent from the bank, moreover, no part of the business or business line thereof, property, stocks, securities, equity interests or tangible/intangible fixed assets stated in the accounts for amounts in excess of Euro 2.5 million may be divested or transferred by the company, in any one financial period. And lastly, yet again without prior consent, no medium to long-term financing or loan entailing aggregate financial exposure in excess of Euro 4.0 million may be contracted by the company, in any one financial period. The interest expense on the financing is paid on a six-monthly basis as set out below: 01/01/2005 – 12/31/2006 01/01/2007 – 12/31/2010 Tranche denominated in Euro EURIBOR at 6 months + 1.50 EURIBOR at 6 months + 1.25 Tranche denominated in US$ LIBOR at 6 months + 1.50 LIBOR at 6 months + 1.25 And lastly, attaching to the Interbanca financing are covenants, the ratios of which, as reported in the following table, have been observed by the Group in 2005: Ratio 2005 benchmark value 2005 Group value Net financial charges/EBITDA not in excess of 0.2 0.12 Net financial position/Net equity not in excess of 1.3 0.84 Net financial position/EBITDA not in excess of 2.5 1.35

23

______ There are no post-balance sheet significant events to report. Looking ahead to 2006, the Group’s business plan envisages bolt-on sales revenue growth, which, based on consensus expectation, should move beyond Euro 170 million. Such growth, which should take shape seamlessly across the geographic regions, will continue to be powered by LIAISON technology, as a result of bolt-on installed analyzer base and the new assays developed in prior years being brought to the market. Also carried forward will be research focused around enhancing the Group’s direct presence in those geographic regions strategic for future development. As a result of clear focus steered on a continuing basis to proprietary technology pricing policy and, not least, the economies of scale achieved by the manufacturing units, also expected to gain momentum throughout 2006 is Group profitability. Some of the bolt-on profitability generated will be reinvested toward ambitious research and development programs and, not least, toward reshaping the operational framework to rise to the challenges posed by the upward surge in the Group’s volume of business. The capability of the Group to generate cash flow from operating activities will be focused on financing capital investments toward new instrumentation, finance charges and lastly, enhancing net financial position according to amortization schedules.

24

______ Related party transactions put in place with subsidiaries relate principally to transactions of a commercial nature entered into at fair value based on market conditions, as well as a string of services provided by the parent company on a centralized basis and recharged proportionally to each and every subsidiary pursuant to specific contract. Additionally, interest income and interest expense are recognized regularly within the centralized treasury framework. The breakdown of related party transactions by subsidiary is presented in the Notes. The following table sets out the amounts reflecting the related party transactions referred to above for the year ended December 31, 2005: (All amounts in Euro/’000) SUBSIDIARIES

INCOME STATEMENT 2005 2004

- Revenues from the sale of goods and services 38,621 36,087 · Purchasing costs and services provided 11,052 12,071 · Interest income and other income 1,288 1197 · Interest expense and other expense 744 536

(All amounts in Euro/’000) SUBSIDIARIES

BALANCE SHEET December 31, 2005 December 31, 2004

Assets · Current commercial receivables 8,124 5,843

· Current financial receivables 3,378 469

· Receivables from financial activities 5,900 5,216 Liabilities · Current commercial payables 1,915 1,991 · Current financial payables 16,345 11,108 · Other payables 1,606 3,256

(All amounts in Euro/’000) December 31, 2005 December 31, 2004

Interbanca 2002 financing for Byk Group acquisition 3,400 5,100 Interbanca 2004 financing

43,535

49,099 TOTAL 46,935 54,199

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______ 1. Significant events during 2005

In 2005, DiaSorin ploughed capital expenditure totaling Euro 6.8 million (charged wholly against the income statement) toward Research & Development in the Group’s three production sites [Saluggia (Italy), Stillwater (U.S.A.) and Dietzenbach (Germany)], 73% of which was ploughed into the Saluggia production site, at which 42 of the 65 researchers are engaged at December 31, 2005. R&D activities were focused around six fundamental trains of thought: a) Developing new LIAISON kits b) Developing new biotechnological reagents c) Enhancing certain documental, methodological and technical aspects attaching to

production processes and catalogue products (programmed quality assurance) d) Researching the Nucleic Acid Testing (NAT) sector for future development potential e) Enhancing certain hardware and software aspects attaching to the LIAISON and ETI-

MAX analyzer platforms f) Developing new LIAISON 2 analyzer platform

a) Looking at the development of new LIAISON kits, the Saluggia production site developed

and made available for sale over the last twelve months the following new products: In the infectious disease sector: - LIAISON testing for Varicella-Zoster Virus (VZV) IgG antibodies - LIAISON testing for Varicella-Zoster Virus (VZV) IgM antibodies - LIAISON testing for Borrelia (liquor) IgG antibodies - New version of LIAISON Testing for the determination of avidity of IgG antibodies

to Toxoplasmosis

In the autoimmunity sector: - LIAISON testing for ENA screening Product development at the Stillwater and Dietzenbach production sites, which engage in the endocrinology/metabolism sector, rendered available the following new assays: - New LIAISON kit for the measurement of ACTH - New LIAISON kit for the measurement of Testosterone - New LIAISON kit for the measurement of Oestradiol

Put in place over the last twelve months, also as a result of the crisis experienced by Nichols Diagnostics (NID) through which DiaSorin S.p.A. distributed, primarily in Italy, a variety of LIAISON-compatible specialty products in the endocrinology/metabolism sector, was a string of impellent projects focused around seeking a solution to the critical situation created by the NID product non-availability. All this also translated into the need to give this priority preference over certain programs in progress, suspending or slowing other projects steered toward developing new biotechnological reagents and/or enriching the infections disease sector catalog.

26

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As a consequence thereof, scheduled to be made available in first-quarter 2006 are new kits superseding NID analog products in the endocrinology/metabolism specialty sector: - LIAISON testing for the determination of hGH - LIAISON testing for the direct determination of Renin - LIAISON testing for the determination of Insulin - LIAISON testing for the determination of Calcitonin Also envisaged as part of that program toward end 2006/early 2007 are the following new products: - LIAISON testing for the determination of DHEAS - LIAISON testing for the determination of Osteocalcin - LIAISON testing for the determination of Aldosterone

b) Looking at reagents, 2005 bears witness to a slowdown in the development of new reagents

and research into new process technologies, to the benefit of other priorities emerging in relation to the critical situation referred to above in relation to NID products and, not least, in relation to critical issues or sale and the procurement of ‘critical’ semi-finished goods and basic materials arising as a result of the significant uplift in selling volumes. Worthy of mention at least are a couple of examples requiring particular commitment on seeking out the relevant solution:

- The first relates to the supply of the Cyromegalovirus antigen, purchased from a

Canadian supplier finding it extremely hard to deliver batches reflecting a standard of quality in line with our production requirements. Here, other than calling for the need to protect the quality of finished product and understanding the adversities experienced by the supplier, this called for “safety net” measures aimed at seeking out, within a relatively short period of time, a reagent having the same characteristics as the reagent produced internally.

- The second relates to the supply, by a German firm, of certain reagents, which, although not specific for testing, enable generation of a ChemiLuminescent signal measured by LIAISON (known as Starters 1 and 2). Here too, the increase in scale required by our production volumes coincided with a clear deterioration in the qualitative characteristics of the reagent purchased from the supplier of prestigious renown. All this called for laborious product-compliance control and selection. Given the particularly critical issues attaching to the reagent, which is used in all LIAISON kits, seeing onset was a program focused around internal production starting from Saluggia where the more critical reagent (Starter 1) will be produced in small scale while the production process is studied, optimized and validated pending relocation to the Dietzenbach production site with dedicated, all-new production lines scheduled to come on steam by end 2006.

c) Some R&D activities were steered toward processing market information inflows relating

to kits brought to market in prior years, analyzing non-compliance product customer complaints, and modifying certain products in order to ensure compliance with FDA requirements authorizing the relevant sale thereof in the American market. All of this has been managed and documented under ‘quality programs’ as envisaged by the prevailing

27

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system of quality assurance, The more significant projects encompassed therein unfolded into enhancing the methodology and analytic performance of some LIAISON products, such as IgM Toxoplasmosis, total Anti HAV and IgM, HBsAg and IgG Rubella.

d) Looking at the development of the NAT new technology, carried forward at Bicocca

University in Milan was research into fine-tuning the OCEAN technology (One Cut Event AmplificatioN), with clear focus steered toward application in the genetic pathology sector and, not least in the virology sector, in bolt-on synergy with the market already served by the DiaSorin ELISA and LIAISON infectious disease product catalog. More pointedly, put in place was an OCEAN original combination with simultaneous pre-amplification through Polimerase Chain Reaction (PCR) in view of the imminent expiration date (2007) of certain patents that until now inhibited the related use thereof under reasonable license terms and conditions. Without prejudice to patent in-depth review, something so essential given the particularly complex issue, it is firmly believed that the combination of the two technologies enables assay development regardless of unrelated intellectual properties having the capability to measure, in terms of quantum, the presence of pathogen polynucleotide sampling subjected to DNA extraction. Related confirmation thereof might be accompanied by identification of one or more analyzer platforms having the capability to manage automatically the key steps of the method: in this way, offered to the microbiological lab, already a LIAISON typical customer, could be a valid alternative to the ‘Real Time PCR’ method currently adopted by those laboratories, more than often under a ‘home brew testing’ logic, that is, using methods not necessarily protected by quality warranties resulting from the EC branding affixed by the producer of the reagents needed to carrying out the assay testing. Submitted for filing in Italy part way December 2005 was ‘provisional’ patent application, to which further warranties and extensions will follow over the next twelve months.

e) Looking at LIAISON analyzer enhancement, the more important issues for the year include the following:

A. Release of a new LIAISON analyzer, i.e., the LIAISON-LAS, which can be linked to

a robotized system having the capability to distribute automatically the analysis samples to the differing analyzers, whether manufactured by the one same producer or otherwise, thereby enhancing lab automation throughput and flexibility. LIAISON–LAS will enable DiaSorin to compete in market segments characterized by peer analysis volumes, whether in collaboration with synergic competitors in terms of product menú offering or otherwise.

B. Research into an all-new 2.2x software version designed toward building up the

precision features and level of guarantee offered by the analyzer in terms of reliability throughout critical operating protocols

C. Activated for the ETI MAX 3000 instrument was research into a new 1.7 software

version. The scope and purpose of the new release is to mitigate the sizeable drift on certain commercialized products that complete the microplate autoimmunity and infectious disease menú

28

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f) Downstream to the agreement sealed with STRATEC Biomedical Systems AG, Germany,

already producing the current LIAISON analyzer, seeing onset were multi-pronged projects relating to the new version, provisionally known as LIAISON 2, which sees DiaSorin creative-thinking directly engaged for the first time in system requisites, software and hardware design, system integration and validation. The project, the scope and purpose of which is to make available the new platform for 2008, once the LIAISON units brought to the market have reached, and more likely than not, tower the 2,000 mark, will be focused clearly around protecting, as far as possible, the compatibility of the kits already available with the two platforms, which will continue to coexist for the longer period. At Saluggia, the internal structure dedicated to the LACOE (Lab Automation Center of Excellence) project has been reinforced significantly over the last twelve months, and will continue to be reinforced in the year ahead in view of the surge in prototype and module testing envisaged as from second-half 2006 to end 2007.

2. Research program for 2006

Focused around yet again the three production sites boasting development capability (Saluggia, Stillwater and Dietzenbach), the research program for 2006 unfolds into the following fundamental trains of thought:

A. Product maintenance/enhancement, with a keen eye steered toward: i.Problems of scale

ii.New competitive environments driven through by competitive new-entries iii.Stricter release and control criteria

B. LIAISON menu enrichment through:

i.Nichols catalog product replacement ii.New products

C. Research into new biotechnological processes for attaining bioreagents (all-new

complex antigen structures; third-generation monoclonal antibodies) having particular characteristics surpassing certain methodological restrictions posed by the LIAISON system

D. LIAISON analyzer second version development E. Activation of an industrial development structure dedicated to the new NAT product

line The research program envisages availability, for 2006, of the following new products: Train-of-thought A.: - Enhanced LIAISON testing for the determination of Vitamin D - Enhanced LIAISON testing for the determination of CMV IgG avidity

29

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- LIAISON testing for the determination of IgM antibodies against Borrelia (more sensitive version for serum/plasma with possible determination on liquor for the German market )

- Critical reagent used in LIAISON testing for antibodies against Herpes Simplex I-II to be replaced an analog recombinant antigen more easily produced, already available in the DiaSorin S.p.A. GMMO bank (Genetically Modified Micro-Organisms).

- Enhanced LIAISON testing specificity for the determination of HBsAg. - Enhanced LIAISON testing ease-of-use for the determination of total antibodies and

Hepatitis A Virus (HAV) IgM antibodies. Train-of-thought B: By the end of first-quarter 2006: - LIAISON testing for the determination of hGH - LIAISON testing for the direct determination of Renin - LIAISON testing for the determination of Insulin - LIAISON testing for the determination of Calcitonine - LIAISON testing for the determination of total antibodies against Borrelia (U.S. market

version) - LIAISON testing for the determination of IgG, IgM and IgA antibodies against

Cardiolipin Conversely, scheduled to end 2006/early 2007 are the following new products : - LIAISON testing for the determination of DHEAS - LIAISON testing for the determination of Osteocalcine - LIAISON testing for the determination of Aldosterone - LIAISON testing for the determination of TK (Kinase Thymidine) - LIAISON testing for the determination of Vitamin D 1-25 OH - LIAISON testing for the determination of antibodies against Herpes Simplex 2 (U.S.

market version) - LIAISON testing for the determination of ‘Bone Specific Alkalin Phosphatase’ marker - LIAISON testing for the determination of IGF-1 (Insulin Growth Factor 1) Also seeing onset will be projects for the development of: - LIAISON testing for the determination of IgG, IgA and IgM antibodies against β2-

glycoprotein - LIAISON testing for the determination of CCP (emerging marker for the diagnosis of

Rheumarthritis) Train-of-thought C.: New bioreagent development will be steered primarily toward the priorities identified in the Two-Year Product Development Plan 2007 and 2008, which calls for the development of LIAISON/LIAISON 2 applications in that most of the componentry, already trialed for previous RIA and ELISA technologies, will not be made available as in the past, given the innovation surrounding those applications. As such, seeing development ex novo will be the necessary bioreagents, most of which will have to be engineered to reflect the specific requirements posed by the LIAISON system, which, after years of experience, are by now foreseeable. Only some of the technologies needed to develop those components are available

30

______

in-house. As a consequence thereof, some projects of research will be assigned necessarily to independent researchers, primarily international. The projects of research assigned will be steered towards assessing, on ‘pilot’ applications, the innovative approach pathways such as , for example, those of high-affinity recombinant antibodies (in collaboration with MORPHOSIS, Munich) or those of the chimerical multi-antigenic building blocks needed in assembling in a few synthetic or recombinant molecular species the complexity of the reagents present in natural antigenic preparations, frequently the cause for reproduction adversities and high replenishment costs. Scheduled to be prepared in this way will be everything needed to develop the complex applications such as new-generation Chlamydia, Mycoplasma, HIV, HCV and HBsAg testing. As discussed earlier, efforts will be steered also toward programs focused around compounding the firm’s capability to produce internally reagents currently procured from those independent suppliers finding it hard to meet the volume requirements arising from the quantum leap taken LIAISON technology product sales. Train-of-thought D: In 2006, LIAISON 2 programmed development costs will account for more than 30 % of the Group’s aggregate R&D budget. On a basis consistent with the project’s general timeline, the goal and objective to be targeted unfolds into completion, by end 2006, of breadboard wet testing (instrument’s prototype set of separate components), using the current LIAISON reagents, pending prototype completion (available in early 2007). Train-of-thought E: Scheduled for 2006 are two major initiatives in the NAT sector:

a. The first initiative relates to the research work to be conducted at the research unit at Bicocca, Milan University of Study, as part of the project known as GENECORE, financed under the Fund for Base Research Investments (“FIRB”) made available by MUIR, in collaboration with the CNR Institute of Clinic Physiology Investments in Pisa, the San Raffaele Hospital in Milan and the Milan Institute of Biomedical Technology, which will contribute toward financing research expenditure in the amount of Euro 1,647,000 over a 3-year span.

b. The second initiative is geared toward realizing at Saluggia a new cluster of product development and industrialization of applications in the molecular virology sector, thereby targeting the goal and objective focused around making the first commercial products available by and before first-half 2007. The products identified as priority products, also by virtue of the pathology/customer sharp synergy with the LIAISON catalog already available, unfold into the DNA quantum determination of Cytomegalovirus (CMV) and the Epstein Barr virus (EBV) with PCR-OCEAN combined technology. In parallel, Carried forward in parallel will be selection of an adequate instrumental platform having the capability to accept the operating protocols required by those methods, following in the wake of which will be drafting of a distribution agreement with the related producer thereof at the European level. As a result of the initiative, certain lab structures will be reshaped in order to accommodate new activity entries. Also prepared and put in place will be the technical procedures needed to govern and document appropriately the related engineering and industrialization stages.

31

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3. Regulatory Affairs – Quality Assurance Calendar 2005 saw preliminary authorization being attained for the sale of LIAISON products for the infectious disease segment in the U.S. market. Following EBV testing, envisaged in first-quarter 2006 are Toxoplasmosis, CMV, Treponema and Rubella kit filings, thereby enabling almost a full-line offering in the infectious serology sector. Stepping forward briskly were LIAISON product filings for the Chine market, preparing and putting in place all matters needed for commercialization start-up in this promising market. Looking at Quality Assurance, also reflecting a favorable outcome in 2005 were inspections conducted by Certimedica (No Non Compliance was placed in evidence by the inspection conducted in July 2005) and by the G-MED Board (No Non Compliance was placed in evidence by the inspection conducted in September 2005). No inspections have been conducted by FDA on any Group production site whatever. In terms of product and process enhancement, the more significant initiatives included:

• redefining the engineering procedure, with a keen eye steered toward substantially enhancing and rendering the procedure more in line with the activities performed and compounding compliance with applicable laws and regulations:

• completing risk analysis of the LIAISON TOXO M production process; • drafting the clinical validation procedure in such a way as to take into account all

inputs as needed for, and essential to, all-comprehensive clinical validation; • putting in place diverse Corporate procedures enabling control of the activities

conducted outside the sphere of Saluggia. Looking ahead to 2006, key goals and objective relate to the following: - compliance with regulation 13485:2003 by DiaSorin GmbH quality assurance system

and related accreditation award; - ISO 9001:2000 certification for DiaSorin Spain and DiaSorin Mexico; - FDA filing attained for the marketing and sale within the U.S. market of LIAISON

EA G, RUBELLA G, ds DNA, Treponema Screening and ETI MAX 3000, and the related application of Hepatitis microplate kits thereon;

- filing attained in CHINA for the marketing and sale within the Chinese market of LIAISON Testosterone, Progesterone, Oestradiol, Prolactin LH, FSH, HCG, Anti Thyroglobulin, Thyroglobulin, Anti TPO, HBsAg, Anti-HBs, Anti-HBc, Anti-HBe, HBeAg and Toxo IgM;

- broadening the sphere of DiaSorin S.p.A. accreditation to NAT Annex IIB products; - enhancing procedures relating to product batches release in order to streamline the

approval process for non-critical products with, however, an alert system thereby picking up immediately signals requiring investigation;

revisiting the risk analysis procedure so as to reflect Regulation 14971 requirements, as recently amended.

One element of particular significance in enhancing the documental system of DiaSorin S.p.A. will be represented by new software implemented for documentation operational management,

32

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which should translate into ‘leaner’ data and information streams as yet primarily managed, at the time of writing, in hard-copy format.

33

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Human Resources

As at December 31, 2005, the DiaSorin Group employed 756 people, as analyzed below:

2005 2004 Belgium 17 16 Brazil 24 22 France 30 28 Germany 93 88 Italy 357 335 United Kingdom 9 11 Spain 22 25 Sweden 10 11 USA 184 162 Mexico 10 - Total 756 698

As at December 31, 2005, DiaSorin S.p.A. employed 357 people employed, as analyzed below: 2005 2004Managers 11 12Clerks 263 238Workers 83 85Total 357 335 Stock Option Schemes The Board of Directors launched part way 2004 a stock option scheme involving 17 managers from the Group companies designated in incentive programs. Personal Data Protection

As required by Law 196 (the Italian Privacy Act) enacted on June 30, 2003 n. 196, the Company has appointed, as communicated formally, the relevant Privacy Officers. Additionally, the Company has obtained, as notified in advance, prior consent from employees regarding the treatment of personal data.

34

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To the Shareholders: While inviting you, the Shareholders, to approve the financial statements of DiaSorin S.p.A as at December 31, 2005, we recommend that distributable net income for the year, Euro 2,561,298.54, be allocated as follows: - Euro 128,064.93 .or 5% of net income, to the legal reserve; - Euro 2,433,233.61, or residual net income, to retained earnings.

Gian Alberto Saporiti

Chairman

35

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43

Sub-total Total Sub-total Total

A. DUE FROM SHAREHOLDERS FORCAPITAL NOT PAID IN - -

B. FIXED ASSETS

I. INTANGIBLE FIXED ASSETS 1. Incorporation and subsequent expenses - - 3. Industrial patent and intellectual property rights 251 3.271 4. Concessions, licenses, trademarks and similar rights 6.994.485 7.604.926 5. Goodwill 26.455.469 28.827.953 7. Other 15.948 239.183

Total Intangible fixed assets (B.I) 33.466.153 36.675.333

II. TANGIBLE FIXED ASSETS 1. Land and buildings 3.129.879 3.378.161 2. Plant and machinery 2.233.558 2.250.164 3. Production and commercial equipment 7.094.673 8.510.194 4. Other 183.193 252.8485. Tangibles in course of construction and 38.495 221.150

payments on accountTotal Tangible fixed assets (B.II) 12.679.798 14.612.517

III. FINANCIAL FIXED ASSETS 1. Investments:

a. Subsidiaries 51.954.908 51.954.889b. Associated companies 1.000 1.000

Total Financial Fixed Assets (B.III) 51.955.908 51.955.889

TOTAL FIXED ASSETS (B) 98.101.859 103.243.739

C. CURRENT ASSETS

I. INVENTORIES 1. Raw materials, ancillary materials and consumables 4.178.116 3.800.870 2. Work-in-progress

and semi-finished goods 7.781.155 6.167.698 3. Contract work-in-progress - - 4. Finished goods and goods for resale 4.978.245 4.697.076

Total Inventories (C.I.) 16.937.516 14.665.644

ASSETS

_____ BALANCE SHEET

As of December 31, 2005 As of December 31, 2004

44


II. RECEIVABLES 1. Trade

a. amounts falling due within next accounting period 22.717.584 24.782.973Total Trade receivables (C.II.1) 22.717.584 24.782.973

2. Subsidiariesa. commercial amounts falling due within next accounting period 8.124.300 5.842.886b. financial amounts falling due within next accounting period 3.378.306 469.115c. financial amounts falling due after next accounting period 899.142 885.470

Total Receivables from subsidiaries (C.II.2) 12.401.748 7.197.471

4-bis Tax creditsa. amounts falling due within next accounting period 408.821 302.793

Total Tax credits (C.II.4-bis) 408.821 302.793

4-ter Deferred tax assetsa. amounts falling due within next accounting period 1.353.728 1.345.678b. amounts falling due after next accounting period 4.172.385 3.906.088

Total Deferred tax assets (C.II.4-ter) 5.526.113 5.251.766

5. Othera. amounts falling due within next accounting period 1.339.548 291.463b. amounts falling due after next accounting period - -

Total Other receivables (C.II.5) 1.339.548 291.463

Total Receivables (C.II) 42.393.814 37.826.466

III. FINANCIAL ASSETS NOT REPRESENTINGFIXED ASSETS

6. Marketable securitiesa. amounts falling due within next accounting period 126.298 -

Total Financial assets not representing fixed assets (C.III.6) 126.298 -

7. Subsidiariesa. amounts falling due within next accounting period 5.001.248 4.331.527

Total Financial assets not representing fixed assets (C.III.7) 5.001.248 4.331.527

Total Financial assets not representing fixed assets (C.III) 5.127.546 4.331.527

IV. CASH AT BANK AND ON HAND 1. Bank and post-office deposits 2.103.613 4.717.862 3. Cash and valuables on hand 7.208 6.341

Total Cash at bank and on hand (C.IV) 2.110.821 4.724.203

TOTAL CURRENT ASSETS (C) 66.569.697 61.547.840

D. PREPAID EXPENSES AND ACCRUED INCOME 1. Accrued income 59.080 41.817 2. Prepaid expenses 345.952 150.705

TOTAL PREPAID EXPENSES AND ACCRUED INCOME (D) 405.032 192.522

TOTAL ASSETS (A + B + C + D) 165.076.588 164.984.101

ASSETS As of December 31, 2005 As of December 31, 2004

45


A. SHAREHOLDERS' EQUITY

I. Share capital 50.000.000 50.000.000II. Share premium reserve 4.424.598 4.424.598

IV. Legal reserve 78.597 16.219VII. Other reserves - -

VIII. Retained earnings (accumulated deficit) 1.493.349 308.163IX. Net income (loss) for the year 2.561.299 1.247.564

TOTAL SHAREHOLDERS' EQUITY (A) 58.557.843 55.996.544

B. RESERVES FOR RISKS AND CHARGES

3. Other 1.606.739 1.297.071

TOTAL RESERVE FOR RISKS AND CHARGES (B) 1.606.739 1.297.071

C. RESERVE FOR EMPLOYEE TERMINATIONINDEMNITIES 6.175.810 5.855.800

D. PAYABLES

3. Stakeholder financinga. amounts falling due within next accounting period - 9.883.182b. amounts falling due after next accounting period - 44.315.926

Total Stakeholder financing (D.3) - 54.199.108

4. Banksa. amounts falling due within next accounting period 10.703.892 280.420b. amounts falling due after next accounting period 38.499.377 2.267.820

Total Bank borrowings (D.4) 49.203.269 2.548.240

7. Suppliersa. amounts falling due within next accounting period 16.694.583 15.258.583

Total Supplier payables (D.7) 16.694.583 15.258.583

9. Subsidiariesa. commercial amounts falling due within next accounting pe 1.915.512 1.991.170b. financial amounts falling due within next accounting perio 16.344.926 11.108.369c. other amounts falling due within next accounting period 1.606.166 1.627.887d. other amounts falling due after next accounting period - 1.627.887

Total Payables to subsidiaries (D.9) 19.866.604 16.355.313

12. Taxesa. amounts falling due within next accounting period 5.653.535 3.704.881

Total Taxes payable (D.12) 5.653.535 3.704.881

13. Provident and social security institutionsa. amounts falling due within next accounting period 703.985 659.598

Total Payables to provident and social securityinstitutions (D.13) 703.985 659.598

14. Othera. amounts fallling due within next accounting period 6.581.561 6.765.909b. amounts falling due after next accounting period - 2.300.000

Total Other payables (D.14) 6.581.561 9.065.909

TOTAL PAYABLES (D) 98.703.537 101.791.632

E. ACCRUED EXPENSES AND DEFERRED INCOME 1. Accrued expenses 32.659 43.054

TOTAL ACCRUED EXPENSES AND DEFERRED INCOME (E) 32.659 43.054

TOTAL EQUITY AND LIABILITIES (A + B + C + D + E) 165.076.588 164.984.101

_____ B A L A N C E S H E E T

EQUITY AND LIABILITIES As of December 31, 2004As of December 31, 2005

46


A. VALUE OF PRODUCTION 1. Revenues from the sale of goods and services 96.237.907 88.721.467 2. Change in work-in-progress, semi-finished goods and

finished goods 1.553.666 201.308 3. Change in contract work-in-progress - - 4. Increase in fixed assets for internal work 443.067 406.391 5. Other revenues and income:

b. Other 3.763.739 2.938.907

TOTAL VALUE OF PRODUCTION (A) 101.998.379 92.268.073

B. PRODUCTION COSTS 6. Raw materials, ancillary materials, consumables and

goods for resale 37.995.311 36.533.641

7. Service costs 21.105.081 19.973.780

8. Expenses relating to the use of third party assets 3.041.757 2.855.295

9. Personnel:a. salaries and wages 11.984.920 11.121.814b. social contributions 3.905.569 3.662.541c. employee termination indemnities 925.096 839.713e. other personnel expenses 105.405 95.894

Total Personnel expenses (B.9) 16.920.990 15.719.962

10. Depreciation and write-downs:a. Amortization of intangible fixed assets 3.402.212 3.630.970b. Depreciation of tangible fixed assets 5.985.641 5.873.292c. Write-down of intangible and tangible fixed assets 52.571d. Write-down of receivables classified under current assets and of liquid funds 750.000 539.425

Total Depreciation and write-downs (B.10) 10.190.424 10.043.687

11. Change in raw materials,ancillary materials, consumablesand goods for resale (718.206) 271.166

12. Provision for risks 270.000 700.000 14. Other operating expenses 1.667.490 1.795.277

TOTAL PRODUCTION COSTS (B) 90.472.847 87.892.808

DIFFERENCE BETWEEN THE VALUE OF PRODUCTIONAND PRODUCTION COSTS (A - B) 11.525.532 4.375.265


_____ INCOME STATEMENT

47


C. FINANCIAL INCOME AND EXPENSES

15. Income from investments1. Dividends from subsidiary undertakings 899.142 885.470

Total Dividends from subsidiary undertakings (C.15) 899.142 885.470

16. Other financial incomed. Income other than that listed above:1. Interest and commissions from subsidiaries 389.165 311.9074. Interest and commissions from other and other income 337.730 92.804

726.895 404.711

17. interest and other financial charges:d. Interest expense and other financial charges other than that listed above:1. From subsidiaries 744.353 536.2912. From parent company - - 4. From other enterprises 3.668.297 3.784.415

Total Interest and other financial charges (C.17) 4.412.650 4.320.706

17-bis Foreign exchange gains/(losses) (1.143.971) 651.125

TOTAL FINANCIAL INCOME AND EXPENSES (3.930.584) (2.379.400)(C15 + C16 - C17 + C17bis)

E. EXTRAORDINARY INCOME AND EXPENSES

20. Extraordinary income:c. other - 1.310.743

Total Extraordinary income (E.20) - 1.310.743

21. Extraordinary expenses:c. other 223 63.799

Total Extraordinary expenses (E.21) 223 63.799

TOTALEXTRAORDINARY ITEMS (E.20 - E.21) (223) 1.246.944

PRE-TAX RESULT(A - B +/- C +/- D +/- E) 7.594.725 3.242.809

22. Advance, deferred and current income taxa. current income tax 5.307.772 2.006.768c. advance income tax (274.346) (11.523)

Total Income tax 5.033.426 1.995.245

26. Net income (loss) for the year 2.561.299 1.247.564

As of December 31, 2005

Total Income from investments (C.15)


48

NOTES TO THE FINANCIAL STATEMENTS FOR 2005 Information about core business, significant post-balance sheet events and related party transactions can be found earlier in the Report on Operations. FORM AND CONTENT OF THE FINANCIAL STATEMENTS The financial statements for 2005 have been drawn up in accordance with the Italian Civil Code and are represented by the balance sheet, the statement of income and these Notes, all which prepared in accordance with the formats required by the Italian Civil Code and the civil law amendments introduced by Italian legislative decree 6/2003. The Notes serve to illustrate, analyze and explain the data included in the financial statements and contain that information which is required by Article 2427 of the Italian Civil Code, by Italian legislative decree 127/1991 and by other applicable laws. Furthermore, other information required to present a true and fair view of the state of affairs and financial condition of the Group is included, even though not specifically requested by law. ACCOUNTING POLICIES AND BASIS OF PREPARATION The accounting policies followed in the preparation of the financial statements are consistent with those recommended by the Italian Accounting Profession (Consigli Nazionali Dottori Commercialisti e dei Ragionieri) or, in the absence thereof, those issued by the International Accounting Standards Board (“IASB”), and are unchanged from the previous year. Of particular note, it is hereby confirmed that all transactions put in place by the company agree with the underlying accounting entries, and that going concern, prudence and accrual are the fundamental accounting assumptions followed in the financial statements. As unchanged from the previous year, the more significant accounting policies and measurement bases adopted when drawing up the accounts are set out below: INTABGIBLE FIXED ASSETS Intangible fixed assets acquired from third parties are stated at purchase price. Contributed assets are stated at their respective contribution value, based on independent expert reports. The amortizable amount of an intangible asset is allocated on a systematic basis over the contractual term or period of legal right and, in all cases, on a basis consistent with the period of presumed future benefit and useful life expectancy. In the case of a permanent impairment in value, regardless of the amortization already provided, the asset is written down accordingly. If, in subsequent periods, the motives for the write-down cease to apply, the original value is reinstated. The amortization rates applied are detailed in the Note relating to the relevant items on the asset side of the balance sheet.

49

With the agreement of the Board of Statutory Auditors, incorporation and subsequent expenses and goodwill are deferred. TANGIBLE FIXED ASSETS Items of property, plant and equipment are stated at historic acquisition cost. Cost includes accessory expenses, as well as the portion of direct and indirect costs that can be reasonably attributed to the assets. Contributed assets are stated in the financial statements at the value attributed thereto on the basis of the value determined by independent expert reports. Ordinary maintenance expenditure is charged against the income statement in the period in which it is incurred. Subsequent expenditure on property, plant and equipment is recognized as an asset if, and only if, the expenditure improves the condition of the asset beyond its originally assessed standard of performance or extends the useful life of the related asset. An item of property, plant and equipment is eliminated from the balance sheet on disposal, or scrapped when the asset is withdrawn permanently from use and no future economic benefits are expected from its disposal. The gross carrying value of an item of property, plant and equipment is allocated on a systematic basis over the useful life of the asset during which depreciation is provided, on a systematic basis, each period at constant rates determined according to the asset’s expected utility to the enterprise and residual life expectancy. Accordingly, the net book values tend to express the amount recoverable in future periods through cash flows of an ordinary nature. The depreciation rates applied are detailed in the Note relating to tangible fixed assets In the case of a permanent impairment in value, regardless of the depreciation already provided, the asset is written down accordingly. If, in subsequent periods, the motives for the write-down cease to apply, the original value is reinstated. For assets acquired in the financial period, the annual depreciation is taken at half the regular rate owing to minor period of utilization. Depreciation starts at the moment in which the relevant asset is put into service. FINANCIAL FIXED ASSETS For investments held for the longer term, the value stated in the financial statements is determined on the basis of the purchase of underwriting cost, or the value attributed to the contributed assets. This cost is write-down to reflect any permanent impairment in value, when the investments have sustained losses and profit is forecast for the immediate future which might absorb the losses incurred. The original value is reinstated in future periods, when the reasons for the write-downs cease to apply.

50

RAW MATERIALS, SEMI-FINISHED GOODS, FINISHED GOODS AND WORK-IN-PROGRESS IN INVENTORY Raw materials, semi-finished goods, work-in-progress, finished goods and goods for resale are stated at the lower of purchase or production cost and presumed realizable value based on market conditions. The costs of purchase of inventories comprise the purchase price paid to suppliers and accessory expenses incurred in bringing the inventories to their present location. Trade discounts, rebates and other similar items are deducted in determining the costs of purchase. The costs of conversion of inventories comprise costs directly related to the units of production. They also include a systematic allocation of fixed and variable production overheads that are incurred in converting materials into finished goods (fixed production overheads). The allocation of fixed production overheads to the costs of conversion is based on the normal capacity of the production facilities. The cost of raw materials, goods for resale and finished goods in inventory is assigned by using the last-in, first-out (LIFO) formula; the cost of semi-finished goods and work-in-progress in inventory is assigned by using the weighted average cost formula. Inventories are stated in the financial accounts net of the reserve for the write-down of inventories, in order to take into account obsolete or slow-moving inventories, if any. RECEIVABLES AND PAYABLES Receivables are stated at their presumed realizable value. Payables are stated at their nominal value. ACCRUALS AND PREPAYMENTS Accruals and prepayments include the portion of revenues and expenses covering two or more periods, in accordance with the accrual basis of accounting. RESERVES FOR RISKS AND CHARGES Reserves for risks and charges are provided to cover certain or probable losses or liabilities for the Company for which the exact value and effective date are not determinable at the year end. The reserves represent the best estimate possible based on the information currently available. RESERVE FOR EMPLOYEE TERMINATION INDEMNITIES The reserve for employee termination indemnities is provided to cover the full liability due to employees in conformity with current legislation, national labor contracts and additional indemnities agreed at the company level, net of indemnities advanced. REVENUE AND EXPENSE These are recognized in the financial statements in accordance with the principle of prudence and the accrual basis of accounting. Revenue relating to the sale of products or services is recognized at the moment that title passes or when services are rendered.

51

Research and development costs are considered to be items of expense and, as a consequence, are charged wholly against income as incurred. All commercial transactions entered into with parent companies, subsidiary undertakings or fellow companies are conducted at fair value based on normal market conditions. DIVIDENDS Dividends are dealt with through the income statement in the period in accordance with the accrual basis of accounting. Deferred tax is provided in respect of dividends recognized. LEASED ASSETS As required by applicable laws and regulations, assets held under lease are capitalized in the balance sheet and the corresponding capital cost is shown as an obligation to the lessor. INCOME TAX Provision is made in the income statement for income tax currently payable, with the corresponding balance sheet entry being tax payables based on a reasonable assessment of the income tax liability expected to be paid, taking into account unused tax losses, if any. Deferred tax assets and liabilities are determined in respect of temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base. The tax base of an asset or liability is the amount attributed to that asset or liability for tax purposes. In accordance with the principle of prudence, deferred tax assets are recognized if, and only if, it is reasonably certain that sufficient taxable profit will be available in the foreseeable future against which the related deferred tax assets can be utilized. No deferred tax is provided in respect of reserves in suspension of taxation if the conditions giving rise to their taxation are not expected to arise. TRANSLATION CRITERIA FOR BALANCES DENOMINATED IN FOREIGN CURRENCY Receivables and payables, other than monetary assets and liabilities, denominated in a foreign currency not adhering to the Eurozone are converted into Euro at the rate of exchange applying at year-end. The net gain or net loss resulting from translation at year-end rates of exchange of receivables and payables denominated in foreign currency, is dealt with through the income statement account line ‘foreign exchange gains/(losses)’. The net gain, if any, resulting from translation at year-end rates of exchange of items denominated in foreign currency works toward formation of the result for the year and, on approval of the financial statements, is recognized, to the extent not reduced by exchange rate movements after year-end, under a restricted equity reserve. DERIVATIVE FINANCIAL INSTRUMENTS Derivative financial instruments are recorded at inception in the memorandum accounts at their notional contract amount. In accordance with the requirements of Italian laws and regulations, and taking into account the Pronouncements issued by the Italian Regulatory Commission for Companies and the Stock

52

Exchange (‘Consob’), International Accounting Standard IAS 39 has been applied in respect of the classification of financial instruments as “hedging instruments” or “non-hedging instruments”. The transactions put in place by the company are classified as “non-hedging transactions” insofar as not eligible for hedge accounting and, as a consequence, are valued at fair value at the balance sheet date, and the differential, whether negative or positive compared to the contractual value, is taken to the income statement for the period.

53

BALANCE SHEET B - FIXED ASSETS B.I - INTANGIBLE FIXED ASSETS € 33,466,153 These are composed as follows:

INCORPOR. AND SUBSEQUENT

EXPENSES

INDUSTRIAL PATENT AND INTELLECTUAL PROPERTY

RIGHTS

GOODWILL OTHER TOTAL

TRADEMARKS

As of December 31, 2004:

- Historic Cost 24.089 349.984 645.948 11.212.024 34.037.732 2.008.150 48.277.927

- Write-downs - (4.595) (858) - - - (5.453)

- Amortization (24.089) (342.118) (629.436) (3.622.752) (5.209.779) (1.768.967) (11.597.141)

- Net value 0 3.271 15.654 7.589.272 28.827.953 239.183 36.675.333

MOVEMENT FOR THE YEAR

- Additions - 52.571 - 214.332 - - 266.903

- Divestment (historic cost) - - - - - - -

- Divestment (accumulated amortization) - - - - - - -

- Write-downs - (3.020) (8.005) (795.468) (2.372.484) (223.235) (3.402.212)

- Amortization - (52.571) - - - - (52.571)

- Reclassification (historic cost) - - (21.300) - - (21.300)

- Reclassification (accumulated amortiz.) - - - - -

As of December 31, 2005:

- Historic Cost 24.089 402.555 645.948 11.405.056 34.037.732 2.008.150 48.523.530

- Write-downs - (57.166) (858) - - - (58.024)- Amortization (24.089) (345.138) (637.441) (4.418.220) (7.582.263) (1.992.202) (14.999.353)- Net value - 251 7.649 6.986.836 26.455.469 15.948 33.466.153

CONCESSIONS, LICENCES, TRADEMARKS AND SIMILAR RIGHTS

SOFTWARE, LICENCES AND

SIMILAR RIGHTS

B.I.3 Industrial patent and intellectual property rights € 251 These relate primarily to expenses incurred in respect of new patent filings in progress. Amortization for year was Euro 3,020. Write-downs in the amount of Euro 52,571 were recorded in the year under review in order to reflect certain idle industrial patents as yet not fully appreciated. B.I.4 Concessions, licenses, trademarks and similar rights € 6,994,485 Encompassed herein are licenses relating to distribution rights acquired by the company from the subsidiaries DiaSorin AB (Sweden) and Diasorin Deutschland GmbH (Germany) part way 2003, the related value of which is amortized over 15 years. Amortization for the year was Euro 803,473. B.I.5 Goodwill € 26,455,469 This is represented by the net book value of goodwill arising in 2003 in respect of the incorporated undertaking Byk Diagnostica S.r.l. (Euro 1,704,308), and by the net book value of goodwill arising in 2003 from the merger of DiaSorin S.p.A. with and into Biofort S.p.A. (Euro 24,751,161). Of particular note, the goodwill, tax deductible, relating to Byk Diagnostica S.r.l. is amortized over 10 years as from second-half 2001, whilst the goodwill arising from the merger of DiaSorin S.p.A. with and into Biofort Diagnostica S.r.l. is amortized over 15 years. The differing amortization periods are justified by the diverse period of expected future benefit attaching to the items to which these related. Amortization for the year was Euro 2,372,484. B.I.7 Other intangible fixed assets € 15,948 These related the capitalized costs incurred in respect of product application software purchased for in-house use. The movement for the year reflects amortization in the amount of Euro 223,235.

54

B.II TANGIBLE FIXED ASSETS € 12,679,798 The balance on this account is detailed in the table below, placing in evidence the related movement for the year:

LAND AND BUILDINGS

PLANT AND MACHINERY

PRODUCTION AND COMMERCIAL EQUIPMENT

OTHER TANGIBLE

FIXED ASSETS

TANGIBLES IN COURSE OF

CONSTR. & PAY. ON ACCT

TOTAL

AS OF DECEMBER 31, 2004- Historic cost 5.673.054 6.749.508 27.121.074 1.353.031 221.150 41.117.817- Depreciation (2.294.893) (4.393.333) (18.610.880) (1.100.183) - (26.399.289)- Write-downs - (106.011) - - (106.011)- Net value 3.378.161 2.250.164 8.510.194 252.848 221.150 14.612.517

MOVEMENT FOR THE YEAR- Divestment (historic cost) - (67.435) (980.011) (27.865) (221.150) (1.296.461)- Divestments (f.do ammort.) - 60.692 891.359 25.422 - 977.473- Additions/Capitalization 67.445 719.554 3.504.134 42.262 17.215 4.350.610- Reclassificaiton (historic cost) (490) 510 - 21.280 21.300- Reclassification (accumulated deprec.) - - -- Depreciation (315.727) (728.927) (4.831.513) (109.474) - (5.985.641)- Write-downs - - - -

AS OF DECEMBER 31, 2005- Historic cost 5.740.499 7.401.137 29.645.707 1.367.428 38.495 44.193.266- Depreciation (2.610.620) (5.061.568) (22.551.034) (1.184.235) - (31.407.457)- Write-downs - (106.011) - - - (106.011)- Net value 3.129.879 2.233.558 7.094.673 183.193 38.495 12.679.798 There are no liens whatever attaching to the tangible fixed assets. Taking into account the remaining possibilities of utilizing the assets, the following economic/technical depreciation rates have been applied in the year under review:

Buildings - Industrial Buildings 5.5% Plant and Machinery - General plant 10% - Specific plant 12% - Machinery 12% Equipment - Equipment 40% - Equipment on free loan 25% Other tangible fixed assets - Office machinery, furniture and fixtures 12% - Electronic office machinery 20% - Motor vehicles 20% to 25%

55

B.III FINANCIAL FIXED ASSETS € 51,955,908 Over the last twelve months, this balance moved forward Euro 18 due to the Israeli branch being opened.

Registered office Currency Share capital Par value per share or share

unit

% owner-ship

Number of shares or stake

held

Historic cost As of December 31, 2005

Net equity reported in latest approved

set of accounts

Subsidiaries as of December 31, 2005

DIASORIN SA BRUSSELSBelgium EUR 1.674.000 6.696 99,99% 250 1.145.001 1.145.001 2.410.018

DIASORIN LTDA SAN PAOLO Brasil BRR 10.011.893 1 99,99% 10.011.892 2.588.027 2.588.027 5.968.254

DIASORIN S.A. ANTONY France EUR 960.000 15 99,99% 62.494 1.717.500 1.717.500 1.994.760

DIASORIN SA MADRID Spain EUR 1.453.687 6 99,99% 241.878 572.500 5.330.802 4.549.471

DIASORIN Ltd WOKINGHAM Great Britain GBP 500 1 100,00% 500 572.500 572.500 244.465

DIASORIN Inc. STILLWATER USA USD 1 0 100,00% 100 6.297.500 30.914.849 19.919.455

DIASORIN MEXICO SA de CV MEXICO CITY Mexico MXP 100.000 1 99,99% 50.000 12.512 12.512 78.082

DIASORIN DEUTSCHLAND GMBH DIETZENBACH Germany EUR 275.000 1 100,00% 1 4.855.032 4.855.032 4.174.142

DIASORIN AB Bromma Sweden SEK 5.000.000 1 100,00% 1 4.818.667 4.818.667 6.481.968

DIASORIN Ltd Rosh Haayin Israel ILS 100 1 100,00% 100 18 18 18

TOTAL 22.579.257 51.954.908

Other investments CONSORZIO SOBEDIA Saluggia

Italy EUR 5.000 20 1 1.000 1.000

TOTAL 22.580.257 51.955.908 Insofar as not deemed to be permanent in nature, investees reporting losses for the year have not been written down. As if any reminder were needed, the U.S. investee was written back part way 2003 in the amount of Euro 24,617 thousand in order to reflect the greater thereof, based on independent expert reports. C – CURRENT ASSETS C.I - INVENTORIES € 16,937,516 These are composed as follows: - Raw materials Euro 4,178,116 - Semi-finished products Euro 7,781,155 - Finished products Euro 4,978,245

The cost of raw materials, goods for resale and finished products is assigned by using the LIFO formula. The valuation of inventory at current cost would not have been significantly different from the LIFO valuation. Inventories are stated net of the reserve for the write-down of inventories amounting to Euro 1,535,921.

56

C.II RECEIVABLES € 42,393,814

As of December 31, 2005 As of December 31, 2004C.II.1 Tradea –amounts falling due within next accounting period 22.717.584 24.782.973C.II.2 Parent companya –amounts falling due within next accounting period 12.401.748 7.197.471C.II.4-bis Tax creditsa –amounts falling due within next accounting period 408.821 302.793C.II.4-ter Deferred tax assetsa –amounts falling due within next accounting period 1.353.728 1.345.678b –amounts falling due after next accounting period 4.172.385 3.906.088C.II.5 Othera –amounts falling due within next accounting period 1.339.548 291.463Total 42.393.814 37.826.466 Set forth below is the breakdown of accounts receivable denominated in foreign currency and expressed at the rate of exchange prevailing at December 31, 2005:

Currency Euro Currency Euro

U.S. dollar 1.809.904 1.506.851 4.355.090 3.337.167


The breakdown of receivables is analyzed below by geographic region: Receivables Italy EU countries, excluding Italy Rest of Europe Rest of the world TotalTrade 16.807.822 1.725.808 234.416 3.949.538 22.717.584Subsidiaries 6.567.405 5.834.343 12.401.748Associated companies 0Parent company 0Taxes 408.821 408.821Tax prepayments 5.526.113 5.526.113Other 1.339.548 1.339.548Total 24.082.304 8.293.213 234.416 9.783.881 42.393.814 C.II.1 Trade receivables € 22,717,584 The allowance for doubtful accounts amounts to Euro 3,549,780 including therein use for the period in the amount of Euro 828,509 and provision thereto in the amount of Euro 750,000. The company has put in place factoring transactions involving receivables ceded with recourse. Receivables ceded over the last twelve months came to Euro 29,315 thousand. C.II.2 Receivables from subsidiaries € 12,401,748 a. amounts due within next accounting period – commercial receivables € 8,124,300

These relate to goods supplied and services provided to other Group companies. The detail thereof is set forth below:

57

As of December 31, 2005DiaSorin INC. (United States) 1.596.146 DiaSorin S.A.. (Spain) 564.789 DiaSorin LTDA (Brazil) 2.692.007 DiaSorin S.A.. (France) 1.061.469 DiaSorin SA.NV. (Belgium) 91.885 DiaSorin LTD (Great Britain) 816.536 DiaSorin Deutschland (Germany) 1.010.046 DiaSorin AB (Sweden) 230.461 DiaSorin SA. De CV. (M exico) 35.089 DiaSorin LTD (Israel) 25.872 Total 8.124.300

b. amounts due after next accounting period – financial receivables € 3,378,306 These relate to Group centralized treasury management in respect of:

Al 31/12/2005DiaSorin S.A.. (Spain) 1.564.210 DiaSorin S.A.. (France) 332.166 DiaSorin SA. De CV. (M exico) 1.180.600 DiaSorin LTD (Israel) 301.330 Total 3.378.306

c. amounts due within next accounting period – other receivables € 899,142 These relate to accounts receivable from DiaSorin Deutschland GmbH (Germany) by way of distributions of profits (dividend payout).

C.II.4-bis Receivable/recoverable from taxation authorities € 408,821 These relate primarily to tax credits arising from or relating to tax withholdings paid and tax prepayments.

C.II.4-ter Deferred tax assets € 5,526,113 The deferred tax credit has been determined applying the tax rates expected to apply at the moment in which the related tax benefits will be used. Deferred tax assets provided in the year amounts to Euro 1,384,050 and relates to the amortization of goodwill written down in prior periods, entertainment expenses solely in respect of the period from 2006 to 2011, and FOREX differences not deductible/taxable unless realized. Deferred tax assets have been provided on the basis of the business plans currently available from which emerge the existence of future taxable profits not inferior to the differences that will be reversed. Deferred tax assets have been used in the amount of Euro 750,076, relating primarily to goodwill amortization pertaining to the period (Euro 626,636). Of particular note, encompassed within the amount under review are deferred tax assets resulting from temporary differences arising from the changed tax deductibility of goodwill amortization, now amortized over 18 years with effect from fiscal 2005. Analyzed below are the deferred tax assets recognized in the financial statements:

58


Temporary differences"Ires" corporation tax effect (33% tax

rate)

"Irap" regional tax effect (4.25%

tax rate)Total

tax effectPrepaid tax . Write-down of intangible fixed assets to reflect impairment loss other than temporary 10.128.511 3.342.409 430.462 3.772.871 . Reserves for risks and charges 1.535.921 506.854 65.277 572.131 . Entertainment expenses 358.068 118.162 15.218 133.380 . Unrealized foreign exchange gains/(losses), Net 1.820.078 600.626 - 600.626 . Fees to Directors 130.000 42.900 - 42.900 . Other costs deductible in future periods 1.085.114 358.087 46.117 404.204Total 15.057.692 4.969.038 557.074 5.526.112 Deferred tax assets have not been provided on temporary differences reversing beyond 2011 or for which the reversal period is unknown, the related amount of which equates Euro 2,806 thousand. C.II.5 Other receivables € 1,339,548 These are analyzed as follows:

As of December 31, 2005 As of December 31, 2004Advances toward supplies 242.925 189.646Advances to employees 69.744 57.675Due from third parties in respect of receivables ceded 991.758 - Guarantee deposits and other 35.121 44.142Total 1.339.548 291.463 Encompassed within Other receivables are accounts receivable, in the amount of Euro 940 thousand, from FIRA S.p.A. (Finanziaria Regionale della Regione Abruzzo) as a result of ASL trade receivables from the Abruzzo Region being ceded thereto. Albeit seeing formal execution in December 2005, the receivables ceded will be collected part way 2006. C.III – FINANCIAL ASSETS NOT REPRESENTING FIXED ASSETS € 5,127,546 C.III.6 Marketable securities € 126,298 These relate to the fair value measurement of derivative contracts entered into during the year in respect of cash surpluses denominated in U.S. dollars vis-à-vis Euro-denominated cash requirements. On December 15, 2005, the company put in place a transaction involving the sale of U.S. dollars (US$ 10 million, or Euro 8,326 thousand) and, at the same time, entered into two currency option contracts, with due-date December 15, 2006, the benchmark values of which are summarized below: - purchase of call US$/put Euro, strike 1.221 Plain Vanilla; nominal value 8,190,008.19; - sale of put US$/call Euro, strike 1.221 Plain Vanilla; nominal value 8,190,008.19.

C.III.7 Subsidiaries € 5,001,248 These relate to the residual portion of the call financing provided to the U.S. subsidiary, for an amount totaling US$ 5,900,000.

C.IV CASH AT BANK AND ON HAND € 2,110,821

The balance on this line is represented exclusively by bank and post-office A/Cs, including therein the Group centralized treasury management account. Cash and valuables on hand amount to Euro 7,208.

59

D. – PREPAID EXPENSES AND ACCRUED INCOME € 405,032

These relate primarily to insurance and lease/hire rental prepaid expenses.

60

A. SHAREHOLDERS’ EQUITY € 58,557,843 The movement for the year on shareholders’ equity is set out below:

CHANGE IN Share Share Legal Profit Profit PatrimonioSHAREHOLDERS' EQUITY capital premium reserve (loss) (loss) netto

reserve carried forward for the year d’esercizioAs of December 31, 2004 50.000.000 4.424.598 16.219 308.163 1.247.564 55.996.544Allocated to the legal reserve 62.378 (62.378) -Allocated to retained earnings 1.185.186 (1.185.186) -Profit for the year 2.561.299 2.561.299As of December 31, 2005 50.000.000 4.424.598 78.597 1.493.349 2.561.299 58.557.843 Share capital as at December 31, 2005, fully subscribed and paid up, is represented by 50 million shares with a par value of Euro 1.00 each. Analyzed below is the composition of shareholders’ equity as at December 31, 2005:

As of December 31, 2005 Distributable StatusDistributable

portionEquity reserves . Share capital 50.000.000 ---- ---- . Share premium reserve 4.424.598 A,B 100%Reserve formed out of earnings . Legal reserve 78.597 ---- ---- . Retained earnings (accumulated deficit) 1.493.349 A,B,C 100% . Profit (loss) for the year 2.561.299 A,B,C 95% A: for share capital increase B: for financing losses C: for distributions of profits (dividends) to stakeholders B. RESERVES FOR RISKS AND CHARGES € 1,606,739 B.3 Other € 1,606,739 Other reserves are composed of the following: Reserve for Agents’ Indemnities This amounts to Euro 436,739 and represents the liability, if any, due to Company agents on contract termination for reason or cause attributable to the Company. Reserve for litigation This amounts to Euro 970,000 and relates to potential disputes commercial or fiscal in nature. Reserve for warranty risk This amounts to Euro 200,000 and has been formed to cover, based on past experience, the liability arising in future periods from product warranties attaching to sales recorded in prior years.

61

C. RESERVE FOR EMPLOYEE TERMINATION INDEMNITIES € 6,175,810

The movement for the period is set out in the table below:

As of December 31, 2004 Euro 5.855.800Increases:- provision for the period " 925.096Decreases:- use for the period " (605.086)As of December 31, 2005 Euro 6.175.810 D. PAYABLES € 98,703,537 The year-end balance on payables is set forth in the table below:


D.3 Stakeholder financing repayablea - amounts falling due within next accounting period - 9.883.182b - amounts falling due after next accounting period - 44.315.926D.4 Banksa - amounts falling due within next accounting period 10.703.892 280.420b - amounts falling due after next accounting period 38.499.377 2.267.820D.7 Suppliersa - amounts falling due within next accounting period 16.694.583 15.258.583D.9 Subsidiaries

a - commercial amounts falling due within next accounting period 1.915.512 1.991.170b - financial amounts falling due within next accounting period 16.344.926 11.108.369c - other amounts falling due within next accounting period 1.606.166 1.627.887d - other amounts due falling after next accounting period - 1.627.887D.12 Taxesa - amounts falling due within next accounting period 5.653.535 3.704.881D.13 Payables to Provident and social security institutionsa - amounts falling due within next accounting period 703.985 659.598D.14 Other a - amounts falling due within next accounting period 6.581.561 6.765.909b – amounts falling due after next accounting period - 2.300.000Total 98.703.537 101.791.632 As a result of Interbanca S.p.A. withdrawing from the stakeholder structure part way March 2005, the balance on stakeholder financing repayable has been reclassified at December 2005 to bank borrowings. The breakdown of payables by geographical area is set out in the table below: Payables Italy

EU countries, excluding Italy Rest of Europe Rest of the world Total

Banks 49.203.269 49.203.269Suppliers 9.207.735 4.201.634 202.883 3.082.331 16.694.583Subsidiaries 10.185.355 9.681.249 19.866.604Taxation authorities 5.653.535 5.653.535Social and provident institutions 703.985 703.985Other 6.581.561 0 6.581.561Total 71.350.085 14.386.989 202.883 12.763.580 98.703.537

62

D.4 Due to banks € 49,203,269 Bank borrowings are detailed in the table below: Lending institution December 31,

2004Repayments for

the periodFOREX

difference December 31,

2005Interbanca 2004 denominated in US$ 20,330,598 (3,846,658) 3,077,749 19,561,689Interbanca 2004 denominated in Euro 28,768,510 (4,794,750) - 23,973,760Interbanca 2002 for Byk Group acquisition 5,100,000 (1,700,000) - 3,400,000CRT Unicredit for 2000 Flood damage 2,548,240 (280,420) 2,267,820Total 56,747,348 (10,621,828) 3,077,749 49,203,269

As if any reminder were needed, the Interbanca financing contracted in relation to the Biofort business transaction is secured by pledge on 85% of the shares representing the share capital of DiaSorin S.p.A., the parent company. Without prior consent from the bank, moreover, no part of the business or business line thereof, property, stocks, securities, equity interests or tangible/intangible fixed assets stated in the accounts for amounts in excess of Euro 2.5 million may be divested or transferred by the company, in any one financial period. And lastly, yet again without prior consent, no medium to long-term financing or loan entailing aggregate financial exposure in excess of Euro 4.0 million may be contracted by the company, in any one financial period. The interest expense on the financing is paid on a six-monthly basis as set out below: 01/01/2005 – 12/31/2006 01/01/2007 – 12/31/2010 Tranche denominated in Euro EURIBOR at 6 months + 1.50 EURIBOR at 6 months + 1.25 Tranche denominated in US$ LIBOR at 6 months + 1.50 LIBOR at 6 months + 1.25 And lastly, attaching to the Interbanca financing are covenants, the ratios of which, as reported in the following table, have been observed by the Group in 2005: D.7 Due to suppliers € 1,694,583 Financial ratios 2005

Benchmark value2005

Group valueNet financial charges/EBITDA less than 0.2 0,12Net financial position/Net equity less than 1.3 0,84Net financial position/EBITDA less than 2.5 1,35 Supplier payables, all of which falling due within next accounting period, are commercial in nature. Supplier payables denominated in currency other than the Euro are analyzed below at historic exchange rate:

Currency Euro Currency EuroU.S. dollar 1.290.961 1.117.044 1.553.045 1.140.184Swedish crown 1.291.092 136.799 1.050.081 116.410Pound sterling 28.420 41.529 5.369 7.616Canadian dollar - - 1.362 829Israelian shekel 33.000 5.899 - -

As of December 31, 2004As of December 31, 2005

63

D.9 Due to subsidiaries € 19,866,604 a. amounts due within next accounting period – commercial € 1,915,512 These relate to goods supplied and services provided by subsidiaries. Accounts payable to subsidiaries are analyzed as follows:

As of December 31, 2005DiaSorin INC. (United States) 351.159 DiaSorin S.A.. (Spain) 100.000 DiaSorin S.A.. (France) 115.505 DiaSorin SA.NV. (Belgium) 7.883 DiaSorin Deutschland (Germany) 1.189.236 DiaSorin AB (Sweden) 148.019 DiaSorin LTD (Israel) 3.710 Total 1.915.512 b. amounts due within next accounting period – financial payables € 16,344,926

These relate to Group centralized treasury management, as analyzed in the table below:

As of December 31, 2005DiaSorin INC. (United States) 9.325.694 DiaSorin SA.NV. (Belgium) 833.615 DiaSorin Deutschland (Germany) 298.927 DiaSorin AB (Sweden) 5.878.967 DiaSorin LTD (Great Britain) 7.723 Total 16.344.926 c. due within next accounting period – other payables € 1,606,166

These relate to the portion falling due in 2005 of accounts payable to DiaSorin Deutschland GmbH (Euro 1,073,600) and DiaSorin AB (Euro 532,566) in respect of distribution rights and production licenses purchased. D.12 Taxes payable € 5,653,535 These relate primarily to VAT payable on sales in suspension of taxation (Euro 2,032,165) and taxes pertaining to the period (Euro 5,194,766), less tax prepayments (Euro 2,044,680). D.13 Amounts due to Provident and Social Security Institutions € 703,985 These are composed as follows:

As of December 31, 2005 2004INPS 604.787 544.980ASSIDIM/FONCHIM/FASI/FASCHIM/INAIL 66.613 83.098ENASARCO 32.585 31.520Total 703.985 659.598

64

65

D.14 Other payables € 6,581,561 These are composed as follows:

As of December 31, 2005 As of December 31, 2004Due to Altana Pharma 2.300.000 4.600.000Due to ASI - 513.912Due to employees 3.947.779 3.305.197Due to taxation authorities for VAT Germany 132.343 184.971Due to Farmafactoring 22.967 271.204Other amounts due 178.472 190.625Total 6.581.561 9.065.909 Amounts due to Altana Pharma relate to:

- in the amount of Euro 1,500,000 to the account payable in relation to the equity interest acquired at end 2002, repaid in the year under review in the amount of Euro 1,500 thousand;

- in the amount of Euro 800,000 to the financial payable acquired part way 2003 from DiaSorin Deutschland GmbH.

Both accounts payable will be settled in the year ahead.

E. ACCRUED EXPENSES AND DEFERRED INCOME € 32,659 These are represented primarily by accrued interest expense.

MEMORANDUM ACCOUNTS

The memorandum accounts disclose commitments and guarantees provided by the Company to third parties, and are composed of the following:

1.701.644 1.302.8103.887.920 8.190.059

35.736.848 27.072.992

- Assets belonging to the Company with Third Parties 25.806.707 23.909.975- Goods belonging to the Company with Third Parties 3.893 2.195 - Contractual commitments 9.124.634 2.287.276 - Third party merchandize 21.054 16.616 - Collection orders in circulation 780.560 856.930Total 41.326.412 36.565.861

Other memorandum accountsComposed as follows :

As of December 31, 2005 As of December 31, 2004Guarantees given to unrelated partiesEndorsements for guarantees received

“Guarantees given to third parties” relate to Italian Market public tenders.

The balance on the line “Endorsements for guarantees received” relates primarily to guarantees provided by INTERBANCA (equating Euro 3,000,000 and Euro 800,000) correlated to endorsement credit made available by way of financial support in the acquisition of the diagnostics business line of the Altana Pharma Group. The endorsement credit will be extinguished in the year ahead. Encompassed within “Other memorandum accounts” is the value of instruments and tools on free loan at customers. Also included therein are contract commitments relating to US$ 10,000,000 repurchased forward, as part of the U.S. currency forward contract agreed part way December, with maturity date December 2006. The accounting practice followed for assets held under lease conforms with the civil law practice ruling in Italy and involves accounting for lease installments already paid in the income statement. Adopting the finance method would have involved accounting for the interest on the principal financed and for the depreciation of the items purchased under lease, in line with the remaining possibility of utilizing the assets themselves, as well as reporting the remaining liability in the balance sheet. The effects of such a recalculation are not material on net income as of December 31, 2005 and shareholders’ equity for the year then ended.

66

INCOME STATEMENT A. VALUE OF PRODUCTION € 101,998,379 The value of production is composed of the following: A.1 Revenues from sales and services € 96,237,907 Set forth below is the breakdown of revenues from sales and services by geographic region: Accounts in Euro/''000 Italy Rest of the world Total

2005 2005 200539.180 57.058 96.238

A.4 Increase in fixed assets for internal work € 443,067 The balance on this line is represented by costs capitalized in respect of assets restored beyond their originally assessed standard of performance and the spare parts used in the process thereof. A.5.b Other revenues and income € 3,763,739 The balance on this line is composed of the following:

2005 2004Service costs recharged to subsidiary undertakings 2.125.371 2.173.992Royalty income 127.015 53.361Gain on fixed asset disposals 190.275 96.534Legal expenses recharged to customers following legal action 40.970 48.625Costs recharged to unrelated enterprises 392.743 - Contract penalty income 414.992 114.454Other revenues and income 472.373 451.941Total 3.763.739 2.938.907 Service costs recharged to subsidiaries relate to Group corporate management centralized service costs recharged, on a basis proportionate to the services used by the relevant subsidiaries. Costs recharged to unrelated enterprises are represented, in the amount of Euro 184,882, by costs recharged to FIN2001 (Group assignor in the Biofort 2004 transaction) arising from or relating to the optional adjustment to the tax returns of the Brazilian branch, which amounted to Brazilian Real 929,626.70. As required by the agreement dated June 13, 2003 sealed with seller FIN2001, the liability, less franchise amounting to Euro 100,000.00, was recharged to the stakeholders of the assignor (FIN 2001 S.A.), guarantor in the fiscal period subject to assessment in respect of DiaSorin S.p.A. and its subsidiaries. And lastly, encompassed within contract penalty income is compensation envisaged by contract resulting from disruption in the supply of those commercialized products that account for a significant share of DiaSorin sales revenue.

67

B. PRODUCTION COSTS € 90,472,847 These are composed of the following: B.6 Raw materials, ancillary materials, consumable and goods for resale € 37,995,311 These include costs for purchases from subsidiaries in the amount of Euro 8,505,676. B.7 Service costs € 21,105,081 These are composed of the following:

2005 2004Healthcare 31.922 43.997Industrial expenses 2.955.369 2.981.209Outsourced services 2.640.490 2.356.784Selling expenses 7.933.603 7.128.641Overhead 1.990.615 1.793.953Expert consultancy 2.905.604 1.977.354Intercompany services 2.544.119 3.518.515Bank charges and expenses 103.359 173.327Total 21.105.081 19.973.780 Intercompany service costs include recharged service costs relating to services provided by the Swedish and German subsidiaries pursuant to service agreements. Consultancy service costs relate, in the amount of Euro 972 thousand, to consultancy provided in respect of the LIAISON 2 project, as examined and discussed earlier in the Report on Operations. B.8 Expenses relating to the use of third party assets € 3,041,757 These relate to property rental expenses and related accessory charges, industrial patent royalty expense and lease/hire rentals attaching to equipment, motor vehicles and other. B.9 Personnel expenses € 16,920,990 Average headcount for 2005 was the following: Managers: 11 – Clerks: 233.6 – Workers: 84.9 giving an average headcount of 330.5 employees. B.10 Depreciation and write-downs € 10,190,424 The information by the sub-headings required is presented in the statement of income. B.12 Provisions for risks € 270,000 These relate to provisions set aside to cover contingent tax and commercial litigation. B.14 Other operating expenses € 1,667,490 These relate to membership fees, losses on fixed asset disposals, entertainment expenses, advertising slots, books, newspapers, journals, taxes and duties (other than income taxes) and out-of-period expenses.

68

C. FINANCIAL INCOME (EXPENSES) € (3,930,584) C.15 Income from investments € 899,142 This relates to dividends paid by the investee DiaSorin G.m.b.H. accounted for on accrual basis. C.16 Other financial income € 726,895 C.16.d.1 From subsidiaries € 389,165 This relates, in the amount of Euro 301,886, to financing outstanding with the subsidiary DiaSorin Inc. and, in the amount of Euro 87,279, to centralized treasury management vis-à-vis other subsidiaries. C.16.d.4 Other € 337,730 The balance on this line is composed of the following:

2005 2004Interest income-Banks 202.000 69.456Other income 135.730 23.348Total 337.730 92.804 Encompassed within other income is the net gain arising from the fair value measurement of derivative contracts, as discussed earlier. C.17 Interest and other financial charges € 4,412,650 C.17.d.1 From subsidiaries € 744,353 This relates to interest expense accrued at market rates on financial payables to operational subsidiaries, arising from centralized treasury management, as examined and discussed earlier. C.17.d.4 Other € 3.668.297 This is composed of the following:

2005 2004Interest expense-Banks 2.362.905 2.387.094Factoring commission expense 1.067.124 974.900Financial guarantee commision expense 55.815 148.476Interest expense-Other 182.453 273.945Total 3.668.297 3.784.415 The balance on “interest expense-banks” includes Euro 2,251 thousand relating to interest expense on loans provided by Interbanca. C.17.bis Foreign exchange gains/(losses) € ( 1,143,971) These relate to the net foreign exchange gain, of a financial and commercial nature, whether realized on credit or debit transactions concluded in the year under review or unrealized on credit or debit transactions outstanding valued at year-end rates of exchange. More pointedly, the realized net foreign exchange gain for the period amounts to Euro 721 thousand, whilst the unrealized portion is represented by a foreign exchange loss of Euro 1,865 thousand.

69

E. EXTRAORDINARY INCOME (EXPENSES) € (223) E.21 Extraordinary expenses € (223) These relate to the equity investment loss in Sobedia Consortia.

E.22 Income taxes € 5,033,426 Income taxes for fiscal 2005 are detailed in the table below:

2005 2004Income tax currently payable 5.307.772 2.006.768

of which "Irap" regional tax 1.367.551 981.564Advances (274.346) (11.523)Income tax, Net 5.033.426 1.995.245 Advance income tax is shown on a net basis, that is, less advance income tax provided in prior years and used (Euro 750 thousand). Set forth in the table below is reconciliation of income tax expense as per financial statements to theoretical income tax expenses:

Taxable base TaxPre-tax result as per financial statements 7,594,725Theoretical tax expense 2,506,259Upward temporary differences 5,045,915 Downward temporary differences (3,140,909)Permanent differences 2,440,333Taxable base 11,940,064‘Ires’ corporation tax as per financial statements 3,940,221‘Irap’ regional tax as per financial statements 1,367,551Total 5,307,772

F/Y 2005

In order to ensure a better understanding of the reconciliation of income tax expense as per financial statements to theoretical tax expenses, no account has been taken of ‘Irap’ regional tax insofar as the related taxable base thereof differs from the taxable base applicable to the pre-tax result. As such, theoretical tax expense has been determined applying the currently prevailing tax rate only (33% ‘Irap’ regional tax rate in 2004) al to the pre-tax result. Having regard to the reconciliation reported above, it may be noted that the permanent differences include the tax effect on costs not deductible relating to amortization of the goodwill arising from the Biofort merger, Euro 2,062,610.

70

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Accounts in Euro/'000


A. DUE FROM STAKEHOLDERS FOR CAPITALNOT PAID IN - -

B. FIXED ASSETS

I. INTANGIBLE FIXED ASSETS 1. Incorporation and subsequent expenses 87 234 3. Industrial patent and intellectual property rights 3 4. Concessions, licenses, trademarks and similar rights 7.860 8.407 5. Goodwill 29.041 31.6266. Consolidation differences 16.752 18.1527. Intangibles in progress and payments on account 123 18. Other 431 907

Total Intangible fixed assets (B.I) 54.294 59.330

II. TANGIBLE FIXED ASSETS 1. Land and buildings 10.411 10.428 2. Plant and machinery 2.839 2.911 3. Production and commercial equipment 21.061 20.676 4. Other 724 6575. Tangibles in course of construction and payments on account 215 241

Total Tangible fixed assets (B.II) 35.250 34.913

III. FINANCIAL FIXED ASSETS 1. Investments:

a. subsidiaries 26 39b. associated companiesc. other 1 1

2. Receivablesd. Other 33 34

Total Financial fixed assets (B.III) 60 74

TOTAL FIXED ASSETS (B) 89.604 94.317

C. CURRENT ASSETS

I. INVENTORIES 1. Raw materials, ancillary materials and consumables 6.089 5.714 2. Work -n-progress

and semi-finished goods 10.298 8.294 3. Contract work-in-progress - - 4. Finished goods and goods for resale 10.230 8.639 5. Advances 33 41

Total Inventories (C.I.) 26.650 22.688

As of December 31, 2005ASSETS As of December 31, 2005

72



II. RECEIVABLES 1. Trade

a. Amounts due within next accounting period 43.504 43.223Total Trade receivables (C.II.1) 43.504 43.223

2. Subsidiariesa. Amounts due within next accounting period 325 -

Total Receivables from subsidiaries (C.II.2) 325 -

4-bis Receivable/Recoverable from taxation authoritiesa. Amounts due within next accounting period 621 635

Total Receivable/Recoverable from taxation authorities (C.II.4 bis) 621 635

4-ter Deferred tax assetsa. Amounts due within next accounting perioda. Amounts due after next accounting period 9.267 8.384

Total Deferred tax assets (C.II.4 ter) 9.267 8.384

5. Othera. Amounts due within next accounting period 2.332 1.256

Total Other receivables (C.II.5) 2.332 1.256

Total Receivables (C.II) 56.049 53.498

III. FINANCIAL ASSETS NOT REPRESENTINGFIXED ASSETS

5. Marketable securitiesa. Amounts due within next accounting period 126 -

Total Financial assets not representing fixed assets (C.III.6) 126 -

Total Financial assets not representing fixed assets (C.III) 126 -

IV. CASH AND CASH EQUIVALENTS 1. Bank and post-office deposits 6.104 9.149 3. Cash and valuables on hand 12 12

Total Cash and cash equivalents (C.IV) 6.116 9.161

TOTAL CURRENT ASSETS (C) 88.941 85.347

D. PREPAID EXPENSE AND ACCRUED INCOME

1. Accrued income 55 80 2. Prepaid expense 683 421

TOTAL PREPAID EXPENSE AND ACCRUED INCOME (D) 738 501

TOTAL ASSETS (A + B + C + D) 179.283 180.165

ASSETS As of December 31, 2004As of December 31, 2005

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A. SHAREHOLDERS' EQUITY

I. Share capital 50.000 50.000II. Share premium reserve 4.425 4.425IV. Legal reserve 79 16V. Consolidation reserve 867 867

VIII. Cumulative translation adjustment 308 (3.028)IX. Retained earnings (accumulated deficit) 2.864 (696)X. Profit (loss) for the year 4.678 3.623

SHAREHOLDERS' EQUITY BEFORE MINORITY INTERESTS 63.221 55.207

Minority interests - -

SHAREHOLDERS' EQUITY AFTER MINORITY INTERESTS (A) 63.221 55.207

B. RESERVES FOR RISKS AND CHARGES1. Reserves for severance indemnities and similar obligations 7.782 8.5482. Taxation reserves, including reserve for deferred taxation 586 1.727

3. Other 2.427 1.461

TOTAL RESERVES FOR RISKS AND CHARGES (B) 10.795 11.736

C. RESERVE FOR EMPLOYEE TERMINATIONINDEMNITIES 6.745 6.456

D. PAYABLES

3. Stakeholder financing repayablea. Amounts due within next accounting period - 9.883b. Amounts due after next accounting period - 44.316

Total Stakeholder financing repayable (D.3) - 54.199

4. Banksa. Amounts due within next accounting period 11.024 455b. Amounts due after next accounting period 40.159 5.450

Total Due to banks (D.4) 51.183 5.905

5. Other financersa. Amounts due within next accounting period 2.012 1.746b. Amounts due after next accounting period 2.791 1.750

Total Due to other financers (D.5) 4.803 3.496

6. Advances 52 74Total Advances (D.6) 52 74

7. Suppliersa. Amounts due within next accounting period 20.159 18.257

Total Supplier payables (D.7) 20.159 18.257

EQUITY AND LIABILITIES As of December 31, 2004 As of December 31, 2005

74



12. Taxesa. Amounts due within next accounting period 6.951 6.949

Total Taxes payable (D.12) 6.951 6.949

13. Provident and social security institutionsa. Amounts due within next accounting period 1.098 1.089

Total Due to provident and social securityinstitutions (D.13) 1.098 1.089

14. Othera. Amounts due within next accounting period 11.955 4.657b. Amounts due after next accounting period - 10.146

Total Other payables (D.13) 11.955 14.803

TOTAL PAYABLES (D) 96.201 104.772

E. ACCRUED EXPENSE AND DEFERRED INCOME

2. Accrued expense and deferred income 2.321 1.994

TOTAL ACCRUED EXPENSE AND DEFERRED INCOME (E) 2.321 1.994

TOTAL EQUITY AND LIABILITIES (A + B + C + D + E) 179.283 180.165

LIABILITIES As of December 31, 2004 As of December 31, 2005

75



Guarantees provided to other enterprises 1.702 1.303 Endorsements for guarantees received 4.419 8.190 Other memorandum accounts 40.582 29.866

Total 46.703 39.359


As of December 31, 2005MEMORANDUM ACCOUNTS

76



A. VALUE OF PRODUCTION 1. Revenues from the sale of goods and services 156.220 142.524 2. Change in work-in-progress, semi-finished goods and

finished goods 1.133 422 4. Increase in fixed assets for internal work 5.288 4.390 5. Other revenues and income:

b. Other 2.698 2.008

TOTAL VALUE OF PRODUCTION (A) 165.339 149.344

B. PRODUCTION COSTS 6. Raw materials, ancillary materials, consumables and

goods for resale 44.411 44.492 7. Service costs 30.995 28.365 8. Expenses relating to the use of third party assets 6.077 4.622 9. Personnel

a. Salaries and wages 31.625 29.801 b. Social contributions 7.293 6.875 c. Employee termination indemnities 1.236 1.211 d. Severance and similar charges 1.078 612 e. Other personnel expenses 319 304

Total Personnel expenses (B.9) 41.551 38.803

10. Depreciation and write-downs:a. Amortization of intangible fixed assets 5.658 5.815 b. Depreciation of tangible fixed assets 12.600 12.241 c. Write-down of intangible and tangible fixed assets 53 - d. Write-down of receivables included in current assets and of liquid funds 935 540

Total Depreciation and write-downs (B.10) 19.246 18.596

11. Change in raw materials,ancillary materials, consumablesand goods for resale (910) 532

12. Provision for risks and charges 305 761 13. Other provisions 282 207 14. Other operating expenses 3.248 2.834

TOTAL PRODUCTION COSTS (B) 145.205 139.212

DIFFERENCE BETWEEN THE VALUE OF PRODUCTIONAND PRODUCTION COSTS (A - B) 20.134 10.132

F/Y 2005F/Y 2005

_____ C O N S O L I D A T E D I N C O M E S T A T E M E N T

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C. FINANCIAL INCOME AND EXPENSES

16. Other financial incomea. From receivables classified under fixed assets - Other - 1 d. Income other than that listed above4. Interest and commission from other and other income 650 423

Total Other financial income (C.16) 650 424

17. Interest and other financial chargesa. Subsidiaries (55) (56) c. Parent companyd. Interest and financial charges other than that listed above4. Other (4.398) (4.572)

Total Interest and other financial charges (C.17) (4.453) (4.628)

17-bis Foreign exchange gains/(losses) (1.088) 1.080

TOTAL FINANCIAL INCOME AND EXPENSES (4.891) (3.124) (C15 + C16 - C17+C17-bis)

E. EXTRAORDINARY INCOME AND EXPENSES

20. Extraordinary income:a. Gains on disposals 196 c. Other extraordinary income

Total Extraordinary income (E.20) - 196

21. Extraordinary expenses:b. Taxes relative to prior periods (55) c. Other extraordinary expenses (1.415) (64)

Total Extraordinary expenses (E.21) (1.415) (119)

TOTAL EXTRAORDINARY ITEMS (E.20 - E.21) (1.415) 77

PROFIT BEFORE TAX 13.828 7.085 (A - B +/- C +/- D +/- E)

22. Advance, deferred and current income tax 9.150 3.462

NET PROFIT FOR THE YEAR 4.678 3.623

23 Minority interests - -

GROUP NET PROFIT FOR THE YEAR 4.678 3.623

F/Y 2004F/Y 2005

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR 2005 Information about the business activity pursued by the Group and significant post-balance sheet events can be found in the Report on Operations. Of particular note, in order to conform with civil law amendments introduced by Italian legislative decree 6/2003 relating to the presentation format required for consolidated balance sheets and consolidated income statements and, moreover, to ensure year-on-year consistent comparison, the like-for-like balances reported the year before have been duly reclassified.

FORM AND CONTENT OF THE FINANCIAL STATEMENTS The consolidated financial statements for 2005 have been prepared in accordance with Italian legislative decree 127/1991 and are represented by the consolidated balance sheet, the consolidated statement of income and these Notes to the consolidated financial statements. The Notes serve to illustrate, analyze and explain the data included in the consolidated financial statements and contain that information which is required by Article 38 of Italian legislative decree 127/1991 and by other applicable laws. Furthermore, other information required for presenting a true and fair view of the state of affairs and financial condition of the Group is included, even though not specifically requested by law. The consolidated financial statements comprise the accounts of DiaSorin S.p.A., the parent company, and of all Italian and foreign subsidiaries that constitute the DiaSorin Group, in which DiaSorin S.p.A. holds more than 50% of voting capital at December 31, 2005. Those accounts are included in the consolidation on a line-by-line basis pursuant to Article 26 of the aforementioned Italian legislative decree 127/91. Non-operational subsidiaries, or subsidiaries not meaningful at the Group level, are accounted for under the cost method. Set out below is the list of companies included in the consolidation on a line-by-line basis: Company Location % ownershipDiaSorin S.p.A. Italy Parent companyDiaSorin Inc. U.S.A. 100,00%DiaSorin S.A./N.V. Belgium 99,99%DiaSorin S.A. Spain 99,99%DiaSorin Ltd. Great Britain 100,00%DiaSorin Ltda Brazil 99,99%DiaSorin S.A. France 99,99%DiaSorin Deutschland GmbH Germany 100,00%DiaSorin AB Sweden 100,00%DiaSorin SA de CV Mexico 99,99% Included in the scope of consolidation for 2005 was the Mexican subsidiary, whilst accounted for under the cost method, insofar as not yet operational, was Diasorin L.t.d., held wholly, with registered office in Israel. The consolidated financial statements have been prepared from the statutory financial statements approved or prepared by the Boards of Directors for approval by the shareholders of the individual

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consolidated companies, adjusted, where applicable, to conform with Group accounting policies, and to eliminate tax-driven adjustments. The Group’s accounting policies conform with the requirements contemplated by applicable laws and regulation, interpreted and integrated by the accounting principles pronounced by the Italian Accounting Profession (Consiglio Nazionale dei Dottori Commercialisti e dei Ragionieri) and, in the absence thereof, and not in conflict thereto, the international accounting standards issued by the International Accounting Standards Board (I.A.S.B.) Italy. The statement reconciling net income and net equity as per the financial statements of DiaSorin S.p.A. as at December 31, 2005 to consolidated net income and consolidated net equity for the year then ended is presented in the Note relating to consolidated net equity. Set out as an attachment hereto are summary schedules reporting the aggregate and consolidated data taken from the financial statements used for the consolidation. PRINCIPLES OF CONSOLIDATION AND TRANSLATION CRITERIA FOR ACCOUNTS DENOMINATED IN FOREIGN CURRENCY The principles of consolidation applied in the preparation of the consolidated financial statements are set out below: The assets, liabilities, revenues and expenses of the companies consolidated on a line-by-line

basis are included in the consolidated financial statements after eliminating the carrying value of the investments against the related shareholders’ equity at the consolidated balance sheet date. The differences arising on elimination of the investments against the related shareholders’ equity of the subsidiaries are allocated, if possible, to the assets and liabilities of the undertaking being consolidated. The residual value, if positive, is capitalized as an asset under “consolidation difference” and amortized over fifteen years or, if negative, recorded as a component of consolidated equity under “consolidation reserve”.

Intercompany receivables, payables, revenues and expenses arising on transactions between consolidated companies that have not been realized with third parties are eliminated.

Intercompany profits and losses arising on transactions between companies included in the consolidation are eliminated.

The balance sheets of foreign subsidiaries denominated in currencies other than the Euro, the functional currency for the consolidated financial statements, are converted into Euro applying the exchange rates in effect at year-end. The income statements of foreign subsidiaries are converted applying the applicable average exchange rate for the year. Exchange differences resulting from the translation of opening shareholders’ equity at current exchange rates and the exchange rates used at the end of the prior year, as well as differences between net income expressed at average exchange rate and that expressed at year-end exchange rate, are reflected appropriately in consolidated shareholders’ equity. The exchange rates applied for fiscal 2005 to convert into Euro the financial statements denominated in foreign currency are set out below:

Currency Exchange rate at

12/31/2005Exchange rate at

12/31//2004U.S. dollar 1,1797 1,3621Pound sterling 0,6853 0,705Brazilian real 2,7432 3,6729Swedish crown 9,3885 9,0206Israelian shekel 5,4692 -

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ACCOUNTING POLICIES AND BASIS OF PREPARATION The accounting policies, which are unchanged from the previous year, are the following: INTANGIBLE FIXED ASSETS

Intangible fixed assets acquired from third parties are stated at purchase price. Contributed assets are stated at their respective contribution value, based on independent expert reports. The amortizable amount of an intangible asset is allocated on a systematic basis over the contractual term or period of legal right and, in all cases, on a basis consistent with the period of presumed future benefit and useful life expectancy within the Group. The depreciation rates applied are detailed in the Note relating to intangible fixed assets The goodwill stated in the individual financial statements included in the consolidation is amortized over a period ranging from 10 years to 15 years, whilst the consolidation differences is amortized over 15 years, based on in-house valuations and analysis, development plans and programmed return on operations. In the case of a permanent impairment in value, regardless of the amortization already provided, the asset is written down accordingly. If, in subsequent periods, the reasons for the write-down cease to apply, the original value is reinstated. TANGIBLE FIXED ASSETS Tangible fixed assets are stated at historic acquisition cost. Cost includes accessory expenses, as well as the portion of direct and indirect costs that can be reasonably attributed to the assets. Contributed assets are stated in the consolidated financial statements at the value attributed thereto on the basis of the value determined by independent expert reports. Ordinary maintenance expenditure is charged against the consolidated income statement in the period in which it is incurred. Subsequent expenditure on property, plant and equipment is recognized as an asset if, and only, the expenditure improves the condition of the asset beyond its originally assessed standard of performance or extends the useful life of the related asset.

An item of property, plant and equipment is eliminated from the consolidated balance sheet on disposal, or scrapped when the asset is permanently withdrawn from use and no future economic benefits are expected from its disposal. The gross carrying value of an item of property, plant and equipment is allocated on a systematic basis over the useful life of the asset during which depreciation is provided, on a systematic basis, each period at constant rates determined according to the asset’s expected utility to the enterprise and residual life expectancy. Accordingly, the net book values tend to express the amount recoverable in future periods through cash flows of an ordinary nature. The depreciation rates applied are detailed in the Note relating to tangible fixed assets

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In the case of a permanent impairment in value, regardless of the depreciation already provided, the asset is written down accordingly. If, in subsequent periods, the motives for the write-down cease to apply, the original value is reinstated. For assets acquired in the financial period, the annual depreciation is taken at half the regular rate owing to minor period of utilization. Assets as yet to enter into service are not depreciated. Certain Group companies use assets financed under leasing arrangements (finance leases, which are accounted for in accordance with the finance method required by international accounting standards.

FINANCIAL FIXED ASSETS Equity investments not included in the consolidation on a line-by-line basis are carried at cost, as written down to reflect any permanent impairment in value. If, in subsequent periods, the reasons for the write-down cease to apply, the original value is reinstated. RAW MATERIALS, SEMI-FINISHED GOODS, FINISHED GOODS AND WORK-IN-PROGRESS IN INVENTORY Raw materials, semi-finished goods, work-in-progress, finished goods and goods for resale are stated at the lower of purchase or production cost and presumed realizable value based on market conditions. The costs of purchase of inventories comprise the purchase price paid to suppliers and accessory expenses incurred in bringing the inventories to their present location. Trade discounts, rebates and other similar items are deducted in determining the costs of purchase. The costs of conversion of inventories comprise costs directly related to the units of production. They also include a systematic allocation of fixed and variable production overheads that are incurred in converting materials into finished goods (fixed production overheads). The allocation of fixed production overheads to the costs of conversion is based on the normal capacity of the production facilities. The cost of raw materials, goods for resale and finished goods in inventory is assigned primarily by using the last-in, first-out (LIFO) formula; the cost of semi-finished goods and work-in-progress in inventory is assigned by using the weighted average cost formula. Inventories are stated in the consolidated accounts net of the reserve for the write-down of inventories, in order to take into account obsolete or slow-moving inventories, if any. RECEIVABLES AND PAYABLES Receivables are stated at their presumed realizable value. Payables are stated at their nominal value. ACCRUALS AND PREPAYMENTS

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Accruals and prepayments include the portion of revenues and expenses covering two or more periods, in accordance with the accrual basis of accounting. RESERVES FOR RISKS AND CHARGES Reserves for risks and charges are provided to cover certain or probable losses or liabilities for the Group. The reserves represent the best estimate possible based on the information currently available. RESERVE FOR EMPLOYEE TERMINATION INDEMNITIES The reserve for employee termination indemnities is provided to cover the full liability due to employees in conformity with current legislation, national labor contracts and additional indemnities agreed at the company level, net of indemnities advanced. REVENUE AND EXPENSE These are recognized in the consolidated financial statements in accordance with the principle of prudence and the accrual basis of accounting. Revenue relating to the sale of products or services is recognized at the moment that title passes or when services are rendered. Research and development costs are considered to be items of expense and, as a consequence, are charged wholly against income as incurred. INCOME AND DEFERRED TAXES Income taxes currently payable are determined on the basis of estimated taxable income pursuant to the tax laws and tax rates enacted in the countries in which the Group companies operate. The consolidated financial statements include provision for deferred income taxes relating to certain temporary differences between the carrying amount of an asset or liability in the consolidated balance sheet and its tax base. The tax base of an asset or liability is the amount attributed to that asset or liability for tax purposes. In accordance with the principle of prudence, deferred tax assets are recognized if, and only if, it is reasonably certain that sufficient taxable profit will be available in the foreseeable future against which the related deferred tax assets can be utilized. No deferred tax is provided in respect of reserves in suspension of taxation if the conditions giving rise to their taxation are not expected to arise. In addition, deferred tax liabilities or deferred tax assets relating to the more significant consolidation adjustments are determined. Deferred tax assets and deferred tax liabilities are set off if they relate to the same enterprise. The related balance resulting therefrom, if an asset, is taken to “Other receivables” among current assets or, if a liability, to the “Reserve for deferred taxation”.

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TRANSLATION CRITERIA FOR BALANCES DENOMINATED IN FOREIGN CURRENCY Receivables and payables denominated in a foreign currency not adhering to the Eurozone are converted into Euro at the rate of exchange applying at year-end.; the foreign exchange gains or losses resulting from the translation at year-end exchange rates of receivables and payables denominated in foreign currency are dealt with through the consolidated income statement under “financial income” or “financial expenses”, respectively. DERIVATIVE FINANCIAL INSTRUMENTS Derivative financial instruments are recorded at inception in the memorandum accounts at their notional contract value. In accordance with the requirements of Italian laws and regulations, and taking into account the Pronouncements issued by the Italian Regulatory Commission for Companies and the Stock Exchange. (“Consob”), International Accounting Standard IAS 39 has been applied in respect of the classification of financial instruments as “hedging instruments” or “non-hedging instruments”. The transactions put in place by the Group are classified as “non-hedging transactions” insofar as not eligible for hedging accounting and, as a consequence, are valued at fair value at the consolidated balance sheet date, and the differential, whether negative or positive compared to the contractual value, is taken to the consolidated income statement for the period.

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CONSOLIDATED BALANCE SHEET B – FIXED ASSETS Set out as an attachment hereto are statements reporting the movement for the period on intangible, tangible and financial fixed assets. B.I – INTANGIBLE FIXED ASSETS € 54,294 thousand The movement for the period on intangible fixed assets is set out as an attachment hereto under Appendix No. 1. B.I.1 – Incorporation and subsequent expenses € 87 thousand These relate primarily to expenses associated with the formation of the Group subsidiaries and are depreciated over 5 years. B.I.4 – Concessions, licenses and similar rights € 7,860 thousand These relate to distribution and production rights purchased the year before. Concessions and licenses are amortized over the term of the underlying contract. Trademarks are depreciated over 5 years. B.I.5 – Goodwill € 29,041 thousand The goodwill recognized in the consolidated financial statements stems primarily from the merger transactions put in place in Italy (net book value of the relevant goodwill as at December 31, 2005 was Euro 26,455 thousand) and in Germany (net book value of the relevant goodwill as at December 31, 2005 was Euro 2,551 thousand). The goodwill recognized in the financial statements of the parent company is represented by the net book value of the goodwill relating to the incorporated enterprise Byk Diagnostica S.r.l. (Euro 1,704 thousand), and by the net book value of the goodwill arising from the merger of DiaSorin S.p.A. with and into Biofort S.p.A. (Euro 24,751 thousand). Of particular note, the goodwill relating to Byk Diagnostica S.r.l. is amortized over 10 years with effect from second-half 2001 and is, moreover, tax deductible, whilst the items of goodwill arising from the merger between Biofort S.p.A. and DiaSorin S.p.A. and between the German investees are amortized over 15 years. The differing amortization periods are justified by the diverse useful life expectancy attaching to the products to which these relate. The goodwill value and related amortization period attaching thereto are supported by Group results and by future development programs. B.I.6 – Consolidation difference € 16,752 thousand This equates the greater value between the cost of acquisition recorded by the parent company vis-à-vis the respective net equity of the investees at their acquisition date. As thus determined, the amount is amortized over a period of 15 years, on a basis consistent with the expected duration and development of the Group products and activities, and applying the same criteria as that followed for goodwill. B.I.7 – Intangibles in progress and payments on account € 123 thousand These relate primarily to software projects currently in progress. B.I.8 – Other intangible fixed assets € 431 thousand These relate primarily to software and are amortized over 5 years.

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B.II – TANGIBLE FIXED ASSETS € 35,250 thousand The movement for the year is set out as an attachment hereto under Appendix No. 2. Taking into account the remaining possibilities of utilizing the assets, the following economic/technical depreciation rates have been applied in the year: Buildings - Industrial Buildings 5.5% Plant and Machinery - General plant 10% - Specific plant 12% - Machinery 12% Equipment - Equipment 40% - Equipment on free loan 25% Other tangible fixed assets - Office machinery, furniture and fittings 12% - Electronic office machinery 20% - Motor vehicles 20% to 25% Additions for the year relate primarily to commercial instrumentation and equipment. B.III – FINANCIAL FIXED ASSETS € 60 thousand B.III 1) a) – Investments in subsidiaries € 26 thousand These relate to investments in the ‘Ukasse’ German pension fund, which is not included in the consolidation on a line-by-line basis insofar as immaterial. B.III 2) d) – Third party receivables € 33 thousand These relate to guarantee deposits.

C – CURRENT ASSETS C.I – INVENTORIES € 26,650 thousand These are stated net of the reserve for the write-down of inventories, which amounts to Euro 2,497 thousand. The inventory breakdown is set out as an attachment to the consolidated financial statements.

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C.II – RECEIVABLES € 56,049 thousand Receivables are comprised of the following:


Trade receivables 43.504 43.223Receivables from subsidiaries 325 -Receivable/recoverable from taxation authorities 621 635Deferred tax assets 9.267 8.384Other receivables 2.332 1.256Total 56.049 53.498 C.II.1 – Trade receivables € 43,504 thousand Trade receivables, net, relate, in the amount of Euro 36,563 thousand, to the domestic markets of the companies included in the consolidation. Of particular note, amounts receivable from homeland government agencies amount to Euro 20,158 thousand. The breakdown of receivables by geographic region is set out in the table below:


Italy 16.808 21.107Europe 13.318 9.650U.S., Canada and South America 9.127 7.509Other 4.251 4.957Total 43.504 43.223 C.II.4-bis Receivable/recoverable from taxation authorities € 621 thousand These relate primarily to tax withholdings paid and tax prepayments.

C.II.4-ter Deferred tax assets € 9,267 thousand The deferred tax asset has been determined applying the tax rates expected to apply at the moment in which the related tax benefits will be used. Analyzed below are the deferred tax assets recognized in the consolidated financial statements:

Temporary differences Total tax effectAdvance taxation . Write-down of intangible fixed assets to reflect permanent impairment in value 10.538 3.925 . Reserves for risks and charges 3.911 1.457 . Entertainment expenses 358 133 . Unrealized foreign exchange gains/(losses) 1.820 601 . Elimination of intercompany profits 8.209 2.709 . Other expenses deductible in future periods 1.185 442Total 26.021 9.267

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C.II.5 Other receivables € 2,332 thousand

These are analyzed as follows:


Advances to suppliers 256 190Advances to employees 168 172Indirect taxes, Net, recoverable 449 364Due from third parties in relation to receivables ceded 992 - Guarantee deposits and other 467 530Total 2.332 1.256 C.III – FINANCIAL ASSETS NOT REPRESENTING FIXED ASSETS € 126 thousand C.III.6 Marketable securities € 126 thousand These relate to the fair value measurement of derivative contracts entered into during the year in respect of cash surpluses denominated in U.S. dollars vis-à-vis Euro-denominated cash requirements. On December 15, 2005, the company put in place a transaction involving the sale of U.S. dollars (US$ 10 million, or Euro 8,326 thousand) and, at the same time, entered into two currency option contracts, with due-date December 15, 2006, the benchmark values of which are summarized below: - purchase of call US$/put Euro, strike 1.221 Plain Vanilla; nominal value 8,190,008.19;

- sale of put US$/call Euro, strike 1.221 Plain Vanilla; nominal value 8,190,008.19. D. – PREPAID EXPENSES AND ACCRUED INCOME € 738 thousand These relate primarily to insurance and lease/hire rental prepaid expense.

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A. – SHAREHOLDERS’ EQUITY € 63,221 thousand Share capital € 50,000 thousand Share capital as at December 31, 2005, fully subscribed and paid up, is represented by 50 million bearer shares with a par value of Euro 1 each. Consolidation reserve € 867 thousand The consolidation reserve reflects the negative differences arising on elimination of the carrying value of the equity investments against the related shareholders’ equity. Cumulative translation adjustment € 308 thousand This reserve reflects the cumulative translation adjustment of the respective net equity of the companies included in the consolidation on a line-by-line basis arising as a result of the conversion at year-end exchange rates of the financial statements denominated in a currency other than the Euro. The movement on shareholders’ equity for the year is set out in the table below: c Share Share Legal Consolidation Cumulative Retained Net income Shareholders'SHAREHOLDERS' EQUITY capital premium reserve reserve translation earnings (loss) equity

reserve adjustment(accumulated fordeficit) the year

As of December 31, 2004 50.000 4.425 16 867 (3.028) (696) (680) 55.207Allocation to legal reserve 63 (16)Allocation to retained earnings 3.560 696Cumulative translation adjustment 3.336 3.336Profit for the year 4.678 4.678As of December 31, 2005 50.000 4.425 79 867 308 2.864 4.678 63.221 Reconciliation of net income and shareholders’ equity as per DiaSorin S.p.A. financial statements as at December 31, 2005 to consolidated net income and consolidated shareholders’ equity for the year then ended (all amounts in thousands of Euro):

F/Y 2005 net profit

F/Y 2005 net equity

F/Y 2004 net profit

F/Y 2004 net equity

F/Y 2003 net equity

As per financial statements of DiaSorin S.p.A. 2.561 58.558 1.248 55.997 54.749Effect of combining results of consolidated companies and difference between the carrying amount of consolidated companies and related net equity 3.805 8.943 4.707 2.688 2.482Effect of eliminating unrealized intragroup profits, net of related tax effect (789) (3.381) (569) (2.593) (2.024)Effect of adjustments recorded to conform with Group accounting policy (translation criteria) - - (878) - 878Effect of eliminating intragroup dividends (899) (899) (885) (885) (1.951)

As per consolidated financial statements of the DiaSorin Group 4.678 63.221 3.623 55.207 52.584 B. – RESERVES FOR RISKS AND CHARGES € 10,795 thousand

B.1 – Reserves for severance indemnities and similar obligations € 7,782 thousand These are represented by employee severance indemnities accrued pursuant to payroll agreements or law and relate primarily to the German and Swedish subsidiaries. B.2 – Taxation reserves, including reserve for deferred taxation € 586 thousand These are represented by deferred tax liabilities, net of deferred tax assets, where offsettable, emerging at the individual consolidated companies.

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B.3 – Other € 2.427 thousand Other reserves include amounts set aside to cover the tax assessment conducted in respect of the Brazilian subsidiary (Euro 679 thousand) and Euro 1,607 thousand referred to the parent company, relating to: Reserve for Agents’ Indemnities This amounts to Euro 437 thousand and represents the liability, if any, due to Company agents on contract termination for reason or cause attributable to the Company. Reserve for litigation This amounts to Euro 970 thousand and relates to litigation outstanding commercial or fiscal in nature. Reserve for warranty risk This amounts to Euro 200 thousand and has been formed to cover, based on past experience, the liability arising in future periods from product warranties attaching to sales recorded in prior years. C – RESERVE FOR EMPLOYEE TERMINATION INDEMNITIES € 6,745 thousand

This relates primarily to the parent company. The movement for the period is set out in the table below:

2005 2004Opening balance 6.456 6.663Provision 1.230 1.211Use/Other (941) (1.418)As of December 31, 2005 6.745 6.456

D. – PAYABLES € 96,201 thousand

The year-end balance on payables is set forth in the table below:

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Stakeholder financing repayalea. amounts due within next accounting period - 9.883b. amounts due after next accounting period - 44.316Bank borrowingsa. amounts due within next accounting period 11.024 455b. amounts due after next accounting period 40.159 5.450Payables to other financersa. amounts due within next accounting period 2.012 1.746b. amounts due after next accounting period 2.791 1.750Advancesa. amounts due within next accounting period 52 74Supplier payablesa. amounts due within next accounting period 20.159 18.257Taxes payablesa. amounts due within next accounting period 6.951 6.949Payables to provident and social security institutionsa. amounts due within next accounting period 1.098 1.089Other payablesa. amounts due within next accounting period 11.955 4.657b. amounts due after next accounting period - 10.146Total 96.201 104.772 As a result of Interbanca S.p.A. withdrawing from the stakeholder structure part way March 2005, the balance on stakeholder financing repayable has been reclassified at December 31, 2005 to bank borrowings. D.4 – Due to banks € 51,183 thousand These relate to the parent company and to the U.S. subsidiary, as detailed in the table below:

Currency Current portion Non-current portion

Total

Interbanca 2004 loan denominated in US$ $ 4.616 18.461 23.077or € 3.913 15.649 19.562

Interbanca 2004 loan denominated in Euro Euro 4.795 19.179 23.974Interbanca 2002 loan relating to Byk Group acquisition Euro 1.700 1.700 3.400Well Fargo Bank (LU.S. loan) $ 377 1.958 2.335

or € 319 1.660 1.979CRT Unicredit relating to 2000 Flood Damage loan Euro 297 1.971 2.268Total 11.024 40.159 51.183 Seeing repayment by the Group in the year under review was the following:

- Euro 1,700 thousand relating to the Interbanca financing for the Byk Group acquisition;

- Euro 4,795 thousand relating to the Interbanca financing tranche denominated in Euro contracted in relation to the Biofort business transaction part way 2004;

- US$ 4,616 thousand (or Euro 3,846 thousand) relating to the Interbanca financing tranche denominated in U.S. dollars contracted in relation to the Biofort business transaction part way 2004, realizing a foreign exchange loss of Euro 458 thousand;

- US$ 2,238 thousand of the Well Fargo loan contracted by the subsidiary DiaSorin USA;

- Euro 3,800 thousand to Altana Pharma for the German and Swedish investees acquired;

- US$ 700 thousand (or Euro 514 thousand) for extinguishing debt vis-à-vis American Standard.

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As if any reminder were needed, the Interbanca financing contracted in relation to the Biofort business transaction is secured by pledge on 85% of the shares representing the share capital of DiaSorin S.p.A., the parent company. Without prior consent from the bank, moreover, no part of the business or business line thereof, property, stocks, securities, equity interests or tangible/intangible fixed assets stated in the accounts for amounts in excess of Euro 2.5 million may be divested or transferred by the company, in any one financial period. And lastly, yet again without prior consent, no medium to long-term financing or loan entailing aggregate financial exposure in excess of Euro 4.0 million may be contracted by the company, in any one financial period. The interest expense on the financing is paid on a six-monthly basis as set out below:

01/01/2005 – 12/31/2006 01/01/2007 – 12/31/2010 Tranche denominated in Euro EURIBOR at 6 months + 1.50 EURIBOR at 6 months + 1.25 Tranche denominated in US$ LIBOR at 6 months + 1.50 LIBOR at 6 months + 1.25

And lastly, attaching to the Interbanca financing are covenants, the ratios of which, as reported in the following table, have been observed by the Group in 2005: Financial ratios 2005

Benchmark value2005

Group valueNet financial charges/EBITDA less than 0.2 0,12Net financial position/Net equity less than 1.3 0,84Net financial position/EBITDA less than 2.5 1,35 Attaching to the Well Fargo loan are covenants at the local levels, the ratios of which have been observed by the subsidiary DiaSorin Inc. D.5 – Due to other financers € 4,803 thousand These relate to leasing arrangements (finance leases) accounted for in accordance with the finance method required by international accounting standards. Accounts payable to other financers are analyzed below by due-date (in years):

2006 2007 2008 Beyond Total DiaSorin S.A. (Spain) 943 451 368 1,762 DiaSorin S.A./N.V. (Belgium) 616 406 208 1,230 DiaSorin S.A. (France) 297 443 451 1,191 DiaSorin S.p.A. (Italy) 156 124 124 216 620 Total 2,012 1,424 1,151 216 1,762 D.12 – Due to taxation authorities € 6,951 thousand This balance is detailed in the table below:


VAT payable 2.326 2.610Tax witholdings payable 960 664Income tax 3.665 3.675Total 6.951 6.949 D.13 – Due to Provident and Social Security Institutions € 1,098 thousand This balance represents payables due at the end of the year to these institutions for both the companies and the employee share relating to the December salaries and wages, as required by applicable laws and regulations.

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D.14 – Other payables € 11,955 thousand These are detailed in the table below:


Due to Altana Pharma 3.800 7.600Due to American Standard - 514Due to employees 7.203 5.571Other 952 1.117Total 11.955 14.802 Amounts due to Altana Pharma relate to: - in the amount of Euro 3,000 thousand to the account payable in relation to the equity

interest acquired at end 2002; - in the amount of Euro 800 thousand to the financial payable acquired by the parent

company from DiaSorin Deutschland GmbH. Both accounts payable will be settled in the year ahead. D. – ACCRUED EXPENSES AND DEFERRED INCOME € 2,321 thousand

These are presented wholly by accrued expenses, primarily accrued insurance expense and accrued interest expense.

MEMORANDUM ACCOUNTS The memorandum accounts disclose commitments and guarantees provided by the Firm to third parties and are composed of the following:

Guarantees provided to other enterprises 1.702 1.303Endorsements for guarantees received 4.419 8.190Other memorandum accounts 40.582 29.866

- Assets belonging to the Group with Third Parties 25.807 23.909- Goods belonging to the Group with Third Parties 4 2- Contractual commitments 9.166 2.304- Leasing installments falling due 4.803 2.777- Goods belonging to third parties deposited with the Group 21 17

#NOME? 781 857Total 46.703 39.359


“Guarantees given to third parties” relate to Italian Market public tenders. The balance on line “Endorsements for guarantees received” relates primarily to: - two guarantees provided by INTERBANCA (equating Euro 800,000 and Euro 3,000,000)

correlated to endorsement credit made available by way of financial support in the acquisition of the diagnostics business line of the Altana Pharma Group. The endorsement credit will be extinguished in the year ahead.

Encompassed within “Other memorandum accounts” is the value of instruments and tools on free loan at customers. Also included therein are contract commitments relating to US$ 10,000 thousand repurchased forward, as part of the U.S. currency forward contract agreed part way December, with maturity date December 2006. The gains/losses resulting from the fair value measurement of the derivative instrument are accounted for under financial income/(expenses) in the consolidated income statement.

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CONSOLIDATED INCOME STATEMENT A. VALUE OF PRODUCTION € 165,339 thousand A.1 Revenues from sales and services € 156,220 thousand Set forth below is the breakdown of revenues from sales and services by geographic region:

2005 2004Revenues from Europe 95.678 87.607Revenues from Europe, of which Italy 39.180 36.270Revenues from the Americas (United States, Canada and Brazil) 46.075 41.388Revenues from rest of the world 14.467 13.529Total 156.220 142.524

Set forth below is the breakdown of revenues from sales and services by type of product:

2005 2004Diagnostics kits using radioactive techniques 26.169 27.600Diagnostics kits using techniques other than radioactive techniques 59.564 58.564Diagnostics kits specific to LIAISON instruments 56.417 44.325Diagnostics instruments and other minor items 14.070 12.035Total 156.220 142.524 A.4 Increase in fixed assets for internal work € 5,288 thousand The balance on this line is represented by costs capitalized in respect of asset restored beyond their originally assessed standard of performance and the spare parts used in the process thereof. A.5.b Other revenues and income € 2,698 thousand These are detailed in the table below:

2005 2004Recovery of freighting costs 653 562Gain on fixed asset disposals 282 436Royalties 125 41Out-of-period income 595 405Costs recharged to unrelated enterprises 393 - Contract penalty income 415 114Other revenues and income 235 450Total 2.698 2.008 Costs recharged to unrelated enterprises are represented, in the amount of Euro 184,882, by costs recharged to FIN2001 (Group assignor of the Biofort 2004 transaction) arising from or relating to the optional adjustment to the tax returns of the Brazilian branch, which amounted to Brazilian Real 929,626.70. As required by the agreement dated June 13, 2003 sealed with seller FIN2001, the liability, less franchise amounting to Euro 100,000.00, was recharged to the stakeholders of the assignor (FIN 2001 S.A.), guarantor in the fiscal period subject to assessment in respect of DiaSorin S.p.A. and its subsidiaries.

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And lastly, encompassed within contract penalty income is compensation envisaged by contract resulting from disruption in the supply of those commercialized products that account for a significant share of DiaSorin sales revenue.

B. PRODUCTION COSTS € 145,205 thousand B.6 Raw materials, ancillary materials, consumable and goods for resale € 44,411 thousand These are represented by: B.7 Service costs € 30,995 thousand These are represented primarily by:

2005 2004Freighting costs 5.742 4.575Commission expense on sales 4.075 3.325Maintenance expenditure 1.213 1.283Consultancy expenses 2.526 2.405Consultancy expenses - special projects 1.041 1.596Travel expenses 4.950 3.858Technical support expenses 2.303 2.263General and administration expenses 5.862 5.324IT and computer system service costs 732 566Insurance costs 610 659Other costs 1.941 2.511Total 30.995 28.365 B.8 Expenses relating to the use of third party assets € 6,077 thousand These are represented by:

2005 2004Royalty expense 3.157 1.925Motor vehicle and equipment rentals 1.930 1.712Leasehold property rentals 475 554Other 515 431Total 6.077 4.622 B.9 Personnel expenses € 41,551 thousand The breakdown of this balance is presented in the consolidated income statement. Average headcount for 2005 came to 727 full-time equivalents, as reported below by employee category: - managers 35 - clerks 558 - workers 134

B.10 Depreciation and write-downs € 19,246 thousand The balance on this line is detailed in the Appendixes 1 and 2. B.12 Provisions for risks and € 305 thousand These relate to provisions set aside to cover contingent tax and commercial litigation.

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B.14 Other operating expenses € 3,248 thousand These are represented by:

2005 2004Entertainment and advertising expenses 377 295Taxes and duties (other than income taxes) 1.048 658Out-of-period expenses 916 778Loss on fixed asset disposals 158 223Contractual penalty expense 267 442Other 482 438Total 3.248 2.834 C. FINANCIAL INCOME (EXPENSES) € (4,891) thousand C.16.d – Other € 650 thousand This is represented primarily bank interest income. C.17 – Interest and other financial charges € 4,453 thousand C.17.a – From subsidiaries € 55 thousand This relates to interest expense from the subsidiary UKASSE. C.17.d – Other € 4,398 thousand This relates, in the amount of Euro 2,938 thousand, to bank interest expense on financing and, in the amount of Euro 1,067 thousand, to financing commission expense attaching to the receivables ceded to factoring companies by DiaSorin S.p.A. Also encompassed therein is interest expense in the amount of Euro 393 thousand attaching to finance leases accounted for under the finance method required by international accounting standards. C.17-bis- Foreign exchange gains/(losses) € (1,088) thousand These relate to the net foreign exchange gain, of a financial and commercial nature, whether realized on credit or debit transactions concluded in the year under review or unrealized on credit or debit transactions outstanding valued at year-end rates of exchange. E. EXTRAORDINARY INCOME (EXPENSES) € (1,415) thousand E.21 c – Other extraordinary expenses € 1,415 thousand These relate to inexistent trade receivables resulting from a fraud suffered by the Brazilian subsidiary, As yet in progress are appropriate investigations and legal actions in connection thereto. 22 – Income taxes € 9,150 thousand These are represented by income tax currently payable, Euro 10,006 thousand, and prepaid taxes, Euro 856 thousand.

Set forth below is the statement reconciling income tax expense as per consolidated financial statements to theoretical income tax, as determined according to the theoretical tax rates currently prevailing in Italy.

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F/Y 2005Theoretical tax 4.563 . Tax losses used . Tax effect of permanent differences 2.127 . Deferred tax assets not provided 388

. Tax effect resulting from foreign tax rates differing from Italian theoretical tax rates 212 . Other differences 493Income tax recorded in the financial statements 7.783"Irap" regional tax recorded in the financial statements 1.367Total Advance, deferred and current income tax 9.150 In order to ensure a better understanding of the reconciliation of income tax expense as per financial statements to theoretical tax expenses, no account has been taken of ‘Irap’ regional tax insofar as the related taxable base thereof differs from the taxable base applicable to the pre-tax result. As such, theoretical tax expense has been determined applying the currently prevailing tax rate only (33% ‘Irap’ regional tax rate in 2004) al to the pre-tax result. Having regard to the reconciliation reported above, it may be noted that the permanent differences include the tax effect on costs not deductible relating to amortization of the goodwill arising from the Biofort merger (as examined and discussed earlier), Euro 3,458 thousand.

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APPENDICES TO THE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS These appendices contain information in addition to that disclosed in the Notes, of which they form an integral part. This information is contained in the following appendices:

1. Statement of changes in intangible fixed assets for the year ended December 31, 2005.

2. Statement of changes in tangible fixed assets for the year ended December 31, 2005.

3. Summary consolidation schedules

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Appendix 1. Statement of changes in intangible assets in the year ended December 31, 2005

INCORPORATION AND SUBSEQUENT

EXPENSES

INDUSTRIAL PATENTS AND INTELLECTUAL PROPERTY RIGHTS

CONCESSIONS, LICENSES,

TRADEMARKS AND SIMILAR

RIGHTS

GOODWILL CONSOLIDATION DIFFERENCE

INCOMPLETE INT. ASSETS & ADVANCES

OTHER INTANGIBLE

FIXED ASSETS

OPENING BALANCE AT 01/01/05Gross value 769 673 16.712 70.594 20.899 6 3.315Write-downs /Revaluation - (290) (1.700) (25.065) - 0 (118)FOREX difference - - - - - - - Reclassificaitons - - - - - - - Delta - - - - - - - Amortization (535) (380) (6.605) (13.903) (2.747) (5) (2.290)Net value 234 3 8.407 31.626 18.152 1 907MOVEMENT FOR THE YEARINCREASE DUE TO:Intangibles fully amortized - - 0 - - - - Additions - - 419 - - 122 9Other (mergers/acquisitions) - - - - - - Reclassifications - - (26) - - - - FOREX difference (67) - (80) 2 - - (21)MOVEMENT FOR THE YEARDECREASE DUE TO:Divestment/Disposals - - - - - - - Write-down /Decrease - - (21) - - - - Amortization (165) (3) (1.044) (2.587) (1.396) - (464)Reclassifications - - - - (4) - - FOREX difference 85 - 205 - - - - ENDING BALANCE AT 12/31/2005Gross value 769 673 17.131 70.594 20.899 128 3.324Write-down - (290) (1.721) (25.065) - - (118)Other (mergers/acquisitions) - - - - - - - Reclassifications - - (26) - (4) - - FOREX difference 18 - 125 2 - - (21)Amortization (700) (383) (7.649) (16.490) (4.143) (5) (2.754)Net value 87 0 7.860 29.041 16.752 123 431

Appendix 2. Statement of changes in tangible fixed assets for the year ended December 31, 2005

Opening balance at 01/012005Gross value 14.953 9.377 61.461 2.354 242 88.387Write-down /Revaluation 3.979 101 1.818 307 - 6.205Reclassification - 2 (67) (6) - (71)FOREX difference (1.141) (39) (1.040) (66) (1) (2.287)Depreciation (7.363) (6.530) (41.496) (1.932) - (57.321)Net value 10.428 2.911 20.676 657 241 34.913MOVEMENT FOR THE PERIODINCREASE DUE TO:Annual depreciation - 61 2.207 50 - 2.318Additions 180 739 10.341 269 168 11.697Reclassifications - - 149 47 21 217FOREX difference 688 25 2.946 113 6 3.778MOVEMENT FOR THE PERIODDECREASE DUE TO:Divestment/Disposals - (67) (2.632) (57) (221) (2.977)Write-downs/Revaluation - - - - - - Depreciation (741) (820) (10.770) (269) - (12.600)Reclassifications - - (157) (25) - (182)FOREX difference (144) (10) (1.699) (61) - (1.914)Ending balance at 12/31/2005Gross value 15.133 10.049 69.170 2.566 189 97.107Write-down /Revaluation 3.979 101 1.818 307 - 6.205Reclassification - 2 (75) 16 21 (36)FOREX difference (597) (24) 207 (14) 5 (423)Depreciation (8.104) (7.289) (50.059) (2.151) - (67.603)Net value 10.411 2.839 21.061 724 215 35.250

OTHER TANGIBLE

FIXED ASSETSTOTAL

TANGIBLES IN COURSE OF CONSTRUCTION AND

PAYMENTS ON ACCOUNT

PRODUCTION AND COMMERCIAL

EQUIPMENT

LAND AND BUILDINGS

PLANT AND MACHINERY

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Appendix 3 – Summary consolidation schedules

ASSETS

Diasorin Spain

Diasorin Belgium

Diasorin Mexico

Diasorin Brazil

Diasorin U.K.

Diasorin France

Diasorin USA

Diasorin Germany

Diasorin Sweden

Diasorin Italy

Total Elimination and

adjustment

Consolidated

(Accounts in Euro/'000)

B. FIXED ASSETS

I. Intangible fixed assets - - - 183 34 59 649 3.151 - 33.466 37.542 16.752 54.294II. Tangible fixed assets 1.898 1.627 613 3.706 507 1.686 7.430 6.012 213 12.680 36.373 (1.123) 35.250III. Financial fixed asseta - 1 - - 71 25 - 26 541 56.956 57.620 (57.560) 60

TOTAL FIXED ASSETS (B) 1.898 1.628 613 3.889 612 1.770 8.079 9.189 754 103.102 131.534 (41.931) 89.603

C. CURRENT ASSETS

I. Inventories 352 581 158 899 247 808 6.713 3.279 98 16.938 30.073 (3.423) 26.650II. Receivables 6.178 2.935 340 3.578 554 2.217 16.201 4.935 6.404 41.794 85.136 (29.088) 56.048III. Financial assets not representing - -

fixed assets - - - - - - - - - - - -IV. Cash and cash equivalents 292 364 50 556 112 203 1.089 600 141 2.836 6.243 6.243

TOTAL CURRENT ASSETS (C) 6.822 3.880 548 5.033 913 3.228 24.003 8.814 6.643 61.568 121.452 (32.511) 88.941

D. PREPAID EXPENSE AND ACCRUED INCO

--

M 21 25 13 3 53 75 54 34 55 405 738 738

TOTAL ASSETS (A + B + C + D) 8.741 5.533 1.174 8.925 1.578 5.073 32.136 18.037 7.452 165.075 253.725 (74.442) 179.283

EQUITY AND LIABILITIES

Diasorin Spain

Diasorin Belgium

Diasorin Mexico

Diasorin Brazil

Diasorin U.K.

Diasorin France

Diasorin USA

Diasorin Germany

Diasorin Sweden

Diasorin Italy

Total aggregate

(Accounts in Euro/'000)A. SHAREHOLDERS' EQUITY

I. Share capital 1.454 1.674 8 2.733 1 960 - 275 551 50.000 57.656II. Share premium reserve 2.787 - - - - 1.567 4.354 - - 4.425 13.

IV. Legal reserve 183 32 - - - 46 - - 126 78 465V. Consolidation reserve - - - - - - - - - - -

VI. Statutory reserve 845 - - - - - - - - -VII. Other reserves - 25 - (297) 482 107 - 4.119 - - 4.436

VIII. Cumulative translation adjustment - - (10) 1.026 16 - 1.307 - (134) - 2.205IX. Retained earnings (accumulated deficit) 497 791 7 646 (229) (1.549) 9.275 (72) 3.338 1.494 14.198X. Net income (loss) for the year (692) 567 (126) 363 29 (376) 5.114 728 201 2.561 8.369

TOTAL SHAREHOLDERS' EQUITY (A) 5.074 3.089 (121) 4.471 299 755 20.050 5.050 4.082 58.558 101.308

B. RESERVES FOR RISKS AND CHARGES - 52 - 679 (27) 147 304 6.027 2.280 1.607 11.069

C. RESERVE FOR EMPLOYEE TERMINATIONINDEMNITIES - - - 150 - 179 - 241 200 6.176 6.946

D. PAYABLES 3.636 2.390 1.295 3.625 1.167 3.981 11.386 5.446 456 98.703 132.085

E. ACCRUED EXPENSES AND DEFERRED INCOME 32 3 - - 139 12 396 1.273 433 33 2.321

TOTAL EQUITY AND LIABILITIES (A + B + C + D + E) 8.742 5.534 1.174 8.925 1.578 5.074 32.136 18.037 7.451 165.077 253.729

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845

INCOME STATEMENT

Diasorin Spain

Diasorin Belgium

Diasorin Mexico

Diasorin Brazil

Diasorin U.K.

Diasorin France

Diasorin USA

Diasorin Germany

Diasorin Sweden

DiaSorin Italy

Total aggregate

Elimination and

adjustment(Accounts in Euro/'000)

A. VALUE OF THE PRODUCTION 8.541 9.023 516 10.706 3.214 10.377 47.858 24.244 2.376 101.998 218.853 (53.514)

B. PRODUCTION COSTS 9.098 8.069 699 8.664 3.226 10.552 38.928 22.912 2.867 90.472 195.487 (50.282)

(557) 954 (183) 2.042 (12) (175) 8.930 1.332 (491) 11.526 23.366 (3.232)

C. FINANCIAL INCOME/(EXPENSE) (135) (59) 52 665 41 (172) (751) (94) 541 (3.931) (3.844) (1.047)

E. EXTRAORDINARY INCOME/(EXPENSE) - - 5 (1.760) - (3) - (30) 195 - (1.593) 178

PRE-TAX RESULT (A - B +/- C +/- D +/- E) (692) 895 (126) 947 29 (350) 8.179 1.208 245 7.595 17.929 (4.101)

22 INCOME TAX - 328 - 584 - 26 3.065 480 44 5.033 9.560 (410)

NET PROFIT (LOSS) FOR THE YEAR (692) 567 (126) 363 29 (376) 5.114 728 201 2.561 8.369 (3.691)

DIFFERENCE BETWEEN THE VALUE OF THE PRODUCTION AND PRODUCTION COSTS

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2005 Annual Report

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