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Financial Year 2006

Financial and Legal Aspects

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Contents

Gvelot Group

Companies in the Gvelot Group p. 2

Organisation chart p. 3

Gvelot SA Management p. 4

Agenda for the Ordinary General Meeting p. 5Overview of the 2006 financial year p. 7

Accounts 2006

Management report of the Board of Directors p. 9

Consolidated accounts at 31 December 2006 p. 17

- Auditors Report p. 47

Company accounts at 31 December 2006 p. 49

- Auditors Reports p. 68Resolutions submitted to the Ordinary General Meeting p. 71

2006 documents attached in the appendix

Report of the Chairman to the shareholders, under the Financial Security Law (LSF)

- Auditors Report

Social and environmental information, under the New Economic Regulations Law (NRE)

Limited Liability Company (Socit Anonyme) with capital of 33,514,005 euros

Registered office, management and supervision :

6, boulevard Bineau

92532 Levallois-Perret Cedex

trade register. : Nanterre B 562 088 542 SIRET number 562 088 542 00369

www.gevelot-sa.fr

Financial 2006

O rdinary General Meeting heldon 21 June 2007

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Companies in the Gevelot Group

Addresses and BusinessesTelephones

Companies Addresses Faxes BusinessInternet/E-mail

COMPANY HOLDINGGvelotChairman - Managing Director 6, boulevard Bineau +33 (0)1 41 49 03 03 Management of industrial investments

Paolo MARTIGNONI 92532 Levallois-Perret Cedex +33 (0)1 41 49 03 02 and associated services.(France) www.gevelot-sa.fr

SUBSIDIARY COMPANIES

COLD EXTRUSION/MACHINING SECTOR

Gvelot ExtrusionChairman - Managing Director 6, boulevard Bineau +33 (0)1 41 49 03 33 Cold extrusion of steel parts.

Michel DOPPLER 92532 Leval lois-Perret Cedex +33 (0)1 47 48 90 34 Machining and heat treatment.(France) www.gevelot-sa.fr

- Dold Kaltfliesspressteile Langenbacher Strasse 17/19 +49 (0)7727/509-0 Cold extrusion of steel parts.GmbH D-78147 Vhrenbach +49 (0)7727/509-166 Machining and heat treatment.

(Germany) www.doldgmbh.de

PUMPS/FLUID TECHNOLOGY SECTOR

PCM Design, manufacture and sale of positive-displacementChairman - Managing Director 17, rue Ernest Laval +33 (0)1 41 08 15 15 pumps :

Jacques FAY B.P. 35 +33 (0)1 41 08 15 00 PCM Moineau eccentric rotary pumps, PCM Delasco92173 Vanves Cedex www.pcm.eu tube pumps, PCM Prci-Pump piston metering pumps,

(France) Ecolobe lobe pumps for industry,

PCM Moineau Oilfield for the oil industry,

Solutions in fluid technology

- PCM Group UK Ltd Pilot Road +44 (0)1536 740200 Manufacture, sale and services for positive-displacementPhoenix Parkway +44 (0)1536 740201 pumps

Corby NN17 5YF www.pcm.eu Systems for metering reagents and for

(United Kingdom) solutions in fluid technology- PCM Deutschland GmbH Wiesbadener Landstrasse 18 +49 (0)611/60977-0 Manufacture, marketing and services for

65203 Wiesbaden +49 (0)611/60977-20 positive-displacement pumps

(Germany) www.delasco.de

- PCM Flow Technology Inc. Management of industrial investments and associated services.- PCM USA Inc. 11940 Brittmoore Park Drive +1 (713) 896 4888 Marketing and services of posit ive-displacement pumps.

Houston, Tx 77041 +1 (713) 896 4806 Manufacture, sale and services for petrol pumps.

(United States) www.pcmdelasco.com

- PCM Trading (Shanghai) Co. Ltd. Unit 10A01 & 10G03, Shanghaimart +86(0)2162362521 Marketing and services of positive-displacement pumps2299 Yanan Road (West) +86(0)2162362428

200336 Shanghai (China)

- Kudu Industries Inc. 9112 - 40th Street S.E. +1 403 279 5838 Manufacture, sale and services for petrol pumps.Calgary AB - T2C 2P3 +1 403 279 2192 Design and manufacture of ancillary services for the oil

(Canada) www.kudupump.com industry

Moineau Texas Corporation 1112 S. Main Street +1 (915) 698 0482 Sale and services for petrol pumps.

Seminole Texas 79360 (United States) +1 (915) 698 11 55 Kudu Australia Pty Ltd L3, 349 Coronation Drive +(61) 7 3842 3105 Sale and services for petrol pumps.

Milton, QLD, 4064 +(61) 7 3371 7300

(Australia)

Kudu Industries Kazakhstan LLP 51 Zhamakayev Str. +7 (3272) 71 58 90 Sale and services for petrol pumps.Almaty (Kazakhstan)

ZAO Canaross 4, Vosstania str. +7 (342)260 72 88 Sale and services for petrol pumps.614014 Perm (Russia) +7 (342)260 71 90

- Ensival Moret Asia (EMA) 9 Tai Seng Drive #02-02 +(65) 628 10 667 Manufacture and marketing of industrial pumps.Hesche Building +(65) 628 10 908

535227 Singapore (Singapore)

Moret Pumps Shanghai (MPS) no. 1590, Li An Road +(86) 21 5488 9599 Manufacture and marketing of industrial pumps.Minhang District +(86) 21 5488 9399

201 100 Shanghai (China)

MECHANICAL ENGINEERING/MOTOR AND GAS EQUIPMENT SECTOR

Gurtner S.A.Chairman - Managing Director 40, rue de la Libration +33 (0)3 81 46 70 22 Solutions for the circulation of fluids in the fields of

Bruno TRACCO B.P. 129 +33 (0)3 81 39 29 50 motor and gas equipment.25302 Pontarlier Cedex (France) www.gurtner.fr

- Ets Lopold Clr 17, rue Tournire +33 (0)3 22 30 72 23 Solutions for the circulation of fluids in the fields of80530 Bethencourt sur mer (France) +33 (0)3 22 30 45 34 motor and gas equipment.

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Gvelot Group Organisation chart

GEVELOT S.A .

GURTNER100 %

GVELOT

EXTRUSION99,99 %

Cold extrusion/Machining Pumps/Fluid technologyMechanical

Engineering/Engine andgas equipment

N.B. The percentages shown are the percentages controlled

(1) Company 20% controlled by Gvelot SA and 80% controlled by Gvelot Extrusion(2) Companies consolidated using the equity method

MORET PUMPSSHANGHAI (China)

100 %

DOLDKALTFLIESSPRESSTEILE

(Germany)100 % (1)

PCM99.99 %

Ets Lopold CLER100 %

PCM Group UK Ltd(United Kingdom)

99.99 %

PCM DeutschlandGmbH (Germany)

99.99 %

PCM Flow Technology(United States)

99.99 %

PCM Trading (Shanghai)Co. Ltd.100 %

PCM USA Inc(United States)

100 %

ENSIVAL MORET ASIA(Singapore)

25.71 % (2)

KUDU INDUSTRIES(Canada)

45 % (2)

CANAROSS

(Russia)

KUDU

KAZAKHSTAN

(Kazakhstan)

KUDU

AUSTRALIA

(Australia)

MOINEAU

TEXAS Corp.

(USA)

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Board of Directors

Chairman - Managing Director Paolo MARTIGNONI

Board Members Roselyne MARTIGNONIClaudine BIENAIMCharles BIENAIMPascal HUBERTYPhilippe DESTOURSRoberto BARABINO

DirectionManaging Director Paolo MARTIGNONIActing Managing Director Philippe BARBELANE

Auditors

Permanent Cabinet MAZARS & GUERARDrepresented by Robert AMOYAL

CREArepresented by Bernard ROUSSEL

Deputy Jean MARIPhilippe BAILLIN

Gvelot S.A. Managementat 21 June 2007

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Management report of the Board of Directors on the operation of the Company during

the 2006 financial year,

Auditors Reports on the consolidated company accounts for this financial year,

Approval of agreements under the terms of Articles L.225-38, L.225-42-1 and R.225-30

of the Commercial Code,

Examination and approval of the Company accounts for the financial year closed on 31

December 2006,

Examination and approval of the consolidated accounts for the financial year closed on

31 December 2006,

Allocation of the results for the 2006 financial year,

Discharge of Board Members,

Powers

Any other business

Agendafor the Ordinary General Meeting held on 21 June 2007

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Overviewof the 2006 financial year

Key figures

(in thousands of euros) 2006 2005 Variation in %

GROUP

Consolidated turnover before tax 196,832 200,226 (1.7)

Part achieved outside France 109,522 108,672 0.8

Current operational result 6,259 7,038 (11.1)

Of which Financial amortizations (8,544) (7,916) 7.9

Of which Depreciation of Assets IAS 36 (net adjustment) 635 223 -

Operating income 6,259 5,635 11.1

Current result before tax 5,117 5,349 (4.3)

Net result 4,360 5,255 (17.0)Groups Share 4,357 5,251 (17.0)

Net income from shares (in euros) 4.55 5.48 (17.0)

Minority interests share 3 4 -

Internal financing gross margin 11,712 13,282 (11.8)

Workforce 1,538 1,560 (1.4)

GVELOT S.A.

Turnover before tax 3,451 3,641 (5.2)

Current result 2,695 3,645 (26.1)

Extraordinary result (1,231) (1,319) -

Net result 2,171 3,378 (35.7)Internal financing gross margin 3,790 5,173 -

Net dividend per share (in euros) 2.20 2.20 -

Workforce 9 8 -

Consolidated turnover by business sector

Cold extrusion / Machining

Pumps / Fluid technologyMechanical Engineering /Engine and gas equipment

58.6%33.3%

8.1%

59.8%

32.3%

7.9%

196.8 M 200.2 M

6,259 K

4,357 K6,259 K

5.5 % *

Current operational resultOperating incomeShare of the Group

5,635 K

5,251 K7,038 K

6.3 % *

Consolidated results

2006 2005

2006 2005

* The percentages correspond to the current operational result on equity capital

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Ladies and Gentlemen,

In accordance with the Law and our Articles of association, we havecalled you to an Ordinary General Meeting to give you an account of thebusiness of our company and its subsidiaries over the last financial yearand to submit the company accounts and the consolidated accountsclosed on 31 December 2006 for your approval.

The consolidated turnover amounted to 196.8 M as against 200.2 Min 2005, a fall of 1.7%.

For the Extrusion Sector, the weakness of the European automobilemarket in 2006, characterised by marked falls in some markets (UnitedKingdom, France and Spain), has had a particularly unfavourable impacton our major clients. The fall in this Sector came to 3.6%, aftercorrection brought about by the firmness of sales for our subsidiary inGermany (+ 3.4%) in a rising local market.

The turnover for the Pumps Sector remains stable (+ 1%). The increasein sales of industrial pumps and the firmness of other fields of activity(food industry and ancillary services for the oil industry) have enabledus to maintain the value of sales in this sector.

Thanks to the high level of activity over the last quarter of the year,particularly in the field of carburettors for spare parts whichcompensated for the fall on the original equipment market, on the onehand, and, on the other hand, the weakness of demand from a majorclient in the field of natural gas, the turnover of the MechanicalEngineering Sector remained in the end stable.

The current consolidated operational result has declined by 11%(6.3M against 7.0 M). The net fall of the Extrusion Sector, due to a

marked reduction in business activity in France found over the secondhalf of 2006 for major clients, the continuing effects of the costs of rawmaterials and the runaway costs of energy and supplies, werecompensated for by good business in the Pumps Sector in all fields.

The consolidated operating income amounted to 6.3 M against5.6 M in 2005, a year which included industrial restructuring costs.

The financial result is negative at 1.1 M against 0.3 M in 2005,because of the increase in bank debts in the Extrusion Sector andbecause the positive exchange rates which occurred in the PumpsSector in 2005 did not recur.

In the end, the Groups net consolidated result amounted to 4.4 M asagainst 5.3 M in 2005.

The contribution of the various business sectors to the overallconsolidated results is expanded in the Appendix to the consolidatedaccounts.

The businesses of companies included within the Group are expandedbelow:

Businesses of the Parent Company

Gvelot S.A.

The turnover of the Parent Company, GEVELOT S.A., comprising rentsand services, amounted to 3,451 K, 5.2% down on 2005, mainlybecause our subsidiaries handed back offices in Levallois-Perretwhich they had been renting since October 2006 and also industrial

premises transferred to Messei (Orne) in February 2007.

The operational result for the financial year amounted to 540 Kagainst 832 K in 2005.

The financial result amounted to 2,155 K against 2,813 K in 2005

which includes the contribution of dividends from our subsidiaries

which amounts to 1,688 K

against 2,501 K

in 2005. This fall wasessentially caused by the non-renewal of the Extrusion dividend paidduring the 2004 financial year on the successful conclusion of earlier

disputes.

The current result before tax amounts to 2,696 K against 3,645 Kin 2005.

The extraordinary result is negative at 1,231 K against 1,319 K in2005. It includes an intra-Group provision for future tax on our

Subsidiaries deficits which can be carried over for 916 K, a charge

for exceptional net financial amortizations of 345 K. In addition,

various exceptional net products have been identified, amounting to

30 K.

After a charge for Company tax of 305 K and making a 1,012 Ktax saving under the fiscal integration system, the net company profit

amounts to 2,171 K against a net positive result of 3,378 K in

2005.

Businesses of the subsidiariesExtrusion Sector, Machining

The consolidated sales in this sector amounted to 115.4 M, a fall of3.6% on 2005.

Intangible and tangible investments amounted to 12.3 M against

15.5 M in 2005.

Gvelot ExtrusionIn a European automobile market which remained stable at + 0.7%,

marked by the net fall in volume and market share for French brands,

the 2006 turnover amounted to 68,806 K, a fall of 8.5% comparedwith 2005.

The operational result showed a deficit of 995 K (after a charge for

financial amortizations increased by 619 K) against a positive result

of 369 K in 2005. This fall takes account of the reductions in

volumes identified particularly in the third quarter of 2006, persistent

industrial malfunctions on the Laval Site (Mayenne) and difficulties inmaking profitable new products on the Offranville.

The financial result of 860 K against 440 K in 2005 appears

negative because of the increase in debts at the end of the heavyindustrial investment programmes.

The extraordinary result is negative at 847 K and includes netallocations to regulated provisions for 1,051 K including 1,040 Kof special financial amortizations, in accordance with the French CRC

Accounting Rule no. 2002.10 in force since early 2005. Various net

products at 191 K have been identified including 120 K for

capitalisation of the charges, following the recent tax audit.

The net result after tax for the 2006 financial year is therefore

negative at 2,808 K against a negative of 4,283 K in 2005, the

year which included the costs of closing the Messei Site (Orne).

The self-financing capacity is positive at 1,182 K

while it wasnegative at 760 K in 2005.

The total number of staff at 31 December 2006 was 687 people

including 62 temporary, against 738 in December 2005 including 103

temporary.

Management report of the Boardof Directors

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Dold Kaltfliesspressteile GmbH (Germany)

The turnover for the 2006 financial year amounted to 47,062 K up

by 3.4% on 2005 (45,507 K).Because of substantial destocking, production for the financial yearamounted to 45.8 M, or a fall of 1.3%.

Because of having managed operating costs better, the operationalresult shows a net increase and is positive at 1,616 K against aprofit of 910 K in 2005.

The financial result is negative at 473 K against a negative of631 K in 2005, since the consolidation of financial advances paid forin company capital by the shareholders in February 2006 enable usto reduce the financial charges.

The extraordinary result is negative at 4 K against a positive of65 K in 2005.

After tax expenditure of 352 K, the net result shows a profit at787 K against a profit of 330 K shown in 2005, before tax becauseearlier deficits were carried forward.

The internal financing capability amounted to 3,075 K against2,760 K in 2005, up by 11.4%.

The total number of staff at 31 December 2006 was 392, including17 apprentices and 2 temporary, against 422 at 31 December 2005,including 18 apprentices and 5 temporary.

Pumps and fluid technology sector

The consolidated sales of this Sector amounted to 64.6 M against64.0 M, up by 1%.

Intangible and tangible investments amounted to 2.3 M against anoverall 3.2 M in 2005.

PCM

This Company includes the business of PCM Dosys merged with effectfrom 1st January 2006 through transfer of all assets and liabilities(Transmission Universelle de Patrimoine).

In 2006 this Companys turnover amounted to 60.1 M (including58.5% achieved through exports) against 55.1 M in 2005, or up by9.2%, recalculated on a like-for-like basis at 0.6%.

The turnover of the Industrial Department increased by 9.2% on 2005and the Food Industry Department remained stable at 0.6%.

On the other hand, the turnover of the Energy Department (oil andgas) has suffered a setback because a large export deal was notrenewed in 2006.

Services, stable at 2.8 M, represent 5% of the overall result.

The operational result has suffered a setback to 7,734 K from8,660 K. This result derives from the combination of a reduction intrade margins in the food and industry sectors, from effects on ofmargins of the slight fall in oil industry turnover and from theincrease in commercial overheads.

The financial result is at 1,322 K and includes the merger premiumgained during the merger with PCM Dosys for 1,052 K, dividendspaid by the subsidiaries for 322 K, compensated for by a net charge

caused by variations in the exchange rate of 242 K.The current result before tax amounts to 9,057 K against 9,720 Kin 2005.

The extraordinary result is positive at 156 K against a negative of

2,453 K in 2005, and includes mainly an adjustment in the

provision for tangible assets (+ 627 K), a net allocation of special

financial amortizations (- 667 K) an adjustment in the provision for

human resource risks (+ 295 K) and client penalties (- 60 K).

After a tax on profits of 2,144 K, and employees profit sharing at

566 K, the net profit for the financial year amounts to 6,504 K

(5,452 K excluding the merger bonus), against 4,169 K in 2005.

The total number of staff at 31 December 2006 is 332 against 313

(including 30 at Dosys) at 31 December 2005, up by 6.1%.

Internal financing capability amounted to 6,148 K against 7,555 K

in 2005.

It is proposed to pay a dividend of 1,279 K for 2006 (the same as

2005).

PCM Group UK Ltd. (Great Britain)

The turnover of this company amounted to 3,413 KGBP against

2,900 KGBP in 2005, up by 17.7%, because of the increase in the sale

of systems for industry and water treatment.

The net result after Tax for this Company amounts to 281 KGBP

against 276 KGBP in 2005.

This stable result is explained by a different product mix from 2005

and by taking up environmental markets with lower margins.

For 2006, it is proposed to pay a dividend of 150 KGBP (119 KGBP in

2005).There were 29 staff at 31 December 2006 against 22 at the end of

2005.

PCM Deutschland GmbH (Germany)

In 2006, the turnover amounted to 2,098 K against 1,923 K in

2005, up by 9.1%. This increase is essentially due to sales of pumps

which rose by 25%.

The net profit is 124 K against 150 K in 2005, a reduction of 17%

because of the reduction in margins in a very competitive market.

There were 8 staff at 31 December 2006.

PCM Flow Technology (United States)This company, a 100% subsidiary of PCM, was created in April 2004,

and controls 100% of the business of the company PCM USA Inc.. Its

capital was raised to 3,501,000 USD in 2005.

PCM USA Inc. (United States)

Because production of rotors began in autumn 2006 in the USA,

following industrial investment, the 2006 turnover amounted to

2,068 KUSD against 1,118 KUSD in 2005.

The net result is a loss of 336 KUSD; it was negative at 308 KUSD in

2005.

There were 6 staff at 31 December 2006.The transfer to this subsidiary of oil rotor production for the North

America region should bring into balance in 2008.

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2006 ANNUAL REPORT - MANAGEMENT REPORT

11

PCM Trading (Shanghai) Co Ltd (China)

This company, a 100% Subsidiary of PCM, was created in August

2006. Its aim is to develop PCMs commercial business in the Asia-Pacific area.

The first invoices are expected towards the end of the first half of2007.

Kudu Industries Inc. (Canada)

In December 2006, Kudu Industries bought 50% of the RussianCompany Canaross Ltd, a company which distributes oil and of gas inRussia. Since this date, the Canaross company accounts have beenconsolidated with Kudu Industries Inc.

The total consolidated turnover of the North America subsidiaries(Canada and Texas), Kazakhstan, Australia, and the new Russiansubsidiary, amounts to 65 MCAD against 50.7 MCAD in 2005, or up by28.2%, due to the dynamic oil markets.

The net consolidated result of this grouping, on a like-for-like basis,shows a profit of 2.9 MCAD against 2.8 MCAD in 2005. The result isstable because of a reduction in margins, to take account of thecommercial context.

For 2006, it is proposed to pay an overall dividend of 750 KCADincluding 320.6 KCAD for PCM (214 KCAD in 2005).

At 31 December 2006, these companies had 180 staff against 153 in2005.

Ensival Moret Asia Pte Ltd (Singapore)

This purely financial Company controls 100% of the Moret PumpsShanghai (MPS) manufacturing company (China).

MPSs turnover is 45,094 KRMB against 34,871 KRMB in 2005, or upby 29.3%. The turnover essentially comes from the business of ourpartner Ensival Moret which is responsible for the increase.

The net result before tax is positive at 1,943 KRMB against 3,726KRMB in 2005. This deterioration in the result derives from theimpact of the cost of moving the factory which occurred during 2006.

Because we have held 25.71% since October 2002, the share of theconsolidated result which is due to us amounts to 500 KRMB or 49 K.

Mechanical Engineering Sector,engine and gas equipmentThe turnover of this sector amounted to 15.9 M, stable comparedwith 2005 (+ 0.4%)

Industrial investment amounted to 1.3 M against 0.4 M in 2005.Gurtner

In 2006 net sales amounted to 13,690 K against 13,036 K in 2005,up by 5.0%.

For the Engine Equipment business, carburettors for the originalequipment market have decreased by 15%; on the other hand, spareparts have shown a strong increase of + 57%. Overall, the EngineEquipment business has increased by 6%.

For the Gas Equipment business, with a partial merger of Clr intoGurtner Distribution (trader in natural gas) the turnover has increasedby 3.5%.

The operational result is in profit at 879 K against 695 K in 2005,

due to a very favourable product mix because of the increase ofturnover in spare parts.

The high increase in raw materials identified in 2006 has, however,had a strong impact on this result, so that the increased number ofclients has only marginally compensated for this.

The financial result is highly negative at 713 K and includes

supplementary depreciation on the Clr shares and loans to Clr,

making a total of 778 K.

The current result is therefore positive at 166 K against 497 K in

2005.

The extraordinary result is positive at 20 K mainly made up of

157 K of special financial amortizations under the terms of the new

Accounting Rules CRC no. 2002.10 and compensated for by carrying

over the provision for price rises of 158 K.

The net result, after tax on the profits of 57 K and employee profit

sharing of 19 K, is in profit at 110 K against 308 K in 2005.

The total number of staff at 31 December 2006 was 137 against 141

in December 2005.

The internal financing capability amounted to 958 K against 735 Kin 2005

It is proposed to pay a dividend of 412 K for 2006 (same level as the

previous financial year) taken in part from the balance carried

forward.

tablissements Clr

This company achieved a turnover of 2,991 K in 2006 against

3,311 K in 2005, a fall of 9.7%.

The reduction, compared with the 2005 turnover, corresponds to the

decline in business for GDF (- 380 K), to the impact of the sale of the

drop forging business (- 100 K) and to the transfer of wholesale

clients to Gurtner Distribution (-200 K). This reduction is partially

compensated for by good business with Industrial clients (spin-offs

from GDF) (+ 300 K).

The current result is negative at 658 K, due to the repercussions from

the cost of raw materials (brass) which could not be passed on in full.

After the negative extraordinary result at 169 K, which mainly

includes the effects of closing the drop forging business, the effects of

the overall depreciation of the business assets (85 K) and allocations

of special financial amortizations (55 K), the net result for the 2006

financial year remains negative at 831 K against 491 K in 2005.

The total number of staff at 31 December 2006 was 22 against 32 at

the end of December 2005.

Business of the Gvelot GroupConsolidated accounts

The consolidated turnover for the financial year amounted to

196.8 M. The consolidated operating income before tax is in profit

at 6.3 M. After a tax charge on the profits of 1.9 M, the net

consolidated result amounts to 4.4 M against 5.3 M in 2005.

Group Investments

Intangible investments amounted to 1.8 M and tangible

investments to 14.2 M.

Employment

The Group workforce, not including temporary staff, was 1,538people (including 456 outside France), against 1,560 at 31 December

2005.

At the end of 2006, Gvelot S.A. employed 9 people.

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13

Extrusion Sector, Machining

The budgeted consolidated turnover for this sector could be

120 M, up by 5.7% on 2006.At the end of March 2007, the turnover amounted to 31.9 M upby 3.8%.

Business for the early part of the 2007 financial year conforms withthe budget.

Gvelot Extrusion

The 2007 turnover for the French industrial sites could be at around74.4 M against 68.8 M in 2006, or up by 8.1%.

After implementing the restructuring plan in spring 2007 whichincluded on the one hand, various commercial renegotiations toenable margins eroded by runaway industrial costs to be re-established and, on the other hand, economy measures concerned

with staffing and other costs, the operational result is expected tobe in profit at 1.9 M against a negative result of 1.0 M in 2006.

The financial result will be negative at 1.1 M against a negativeof 0.9 M in 2006.

The current result will therefore be positive at 0.8 M against anegative of 1.8 M in 2006.

After an extraordinary result estimated to be negative at 1.7 Mincluding special financial amortizations for 1.1 M andrestructuring charges of 0.6 M, the net result after tax could benegative at 0.9 M against a loss of 2.8 M in 2006.

Dold

Dolds budgeted turnover could be 45.6 M of the same order as in

2006 (47.1 M).

The net result, because of increased salary costs, would be lower butstill positive.

Pumps Sector, Fluid technology

The budgeted consolidated turnover could be 72 M up by 10.2%on 2006.

At 31 March 2007, the turnover for this sector amounted to18.1 M, up by 6.3%.

PCM

PCMs budgeted turnover, on a like-for-like basis, not including the

new subsidiary PCM Trading (Shanghai) Asia, could be 64.2 M

, upby 6.7% (Industrial Department + 4.5%, Food Industry Department+ 6.7%, Ancillary services for the Oil Industry Department (oil andgas) + 8.7%).

Mechanical Engineering Sector,Engine and gas equipment

The expected net sales in the 2007 budget could amount to 16 M, upby 1.8%.

At 31 March 2007, the turnover of this sector amounted to 3.9 M,down by 7%.

Gurtner

The net turnover 2007 could amount to 14 M, up by 2.3%.The net result should be close to equilibrium.

Ets Clr

The turnover could amount to 2.7 M after transferring a

substantial part of its business to Gurtner.

The current result could be negative at around 0.3 M.

After taking into account the costs associated with closing theBthencourt-sur-Mer site and transferring business to the Pontarliersite, the net result would be negative.

Information systems and newtechnologiesGvelot Extrusion

In 2006, Gvelot Extrusion concentrated on developing informationsystems in two areas:

- In February the new version of the XPPS productionmanagement software was installed. This upgrade enabled us

to meet the needs of our clients in EDI, particularly with P.S.A.for its Alternative Logistics project.

- At the end of the year, upgrading the multi-site computerequipment, with both servers and work stations. Thisdevelopment with better links in CITRIX mode has madecommunication between sites more flexible.

During the year we also investigated and installed our Workflowsystem to help us exchange data especially with Dold. The firstapplication was devoted to managing clients calls for tender andhas been operational since 1st January 2007.

Since the current application is becoming outdated, the financialdepartment made a preliminary approach to text editors with aview to changing the accounting software. This project for 2008 will

favour an information system with a strong emphasis on reporting.

Updating the Computer Systems Master Plan will be a main featureof 2007, as it will direct the selection of computer systems over thecoming years.

PCM

As part of the "Perspective 2010" information systems master planwhich will eventually include all the information systems for PCMand its subsidiaries, the plan to replace PCMs accounting system hasbeen successfully completed. All the test stages were completed in2006, and the new application was fully commissioned for the 2007financial year.

The former subsidiary PCM Dosys was also included in the PCM

information systems.

At the same time as these modernisation and internationalisationprojects, commercial and decision-making applications have beeninstalled so that these tools can be used by all PCM subsidiaries.

All these projects, at the heart of PCMs business, are steered by theInformation Systems Department which ensures the reliability ofsystems and data.

Because of PCMs international development, the InformationSystems Department upgraded its skills in 2006, in both computersystem security and the Supply Chain.

Gurtner

Interfacing databases and information processing common to Gurtnerand Clr after the resumption of the natural gas business in Pontarlierwas the most significant work done on information systems in 2006.

In addition, the work undertaken during 2006 on the website resultedin a new website going on-line in the first quarter of 2007.

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Operations of Company BodiesThe Board of Directors is composed of seven Members and met

three times in 2006.The Audit Committee was created in 2004 and is composed of threeMembers who met four times in 2006. It has written a Report andhas sent the major points and conclusions to Board Members.

Delegation of powers being approved

No powers are currently delegated by the General Meeting to theBoard of Directors.

Executives: pay and duties

Under the provisions of Article L 225-102-1 of the Commercial Code,we are giving an account of the pay and fringe benefits of all kindspaid in 2006, in the controlled companies, to each executive of theGvelot Company S.A., and also the duties performed during the

financial year.

Monsieur Paolo MARTIGNONI, Chairman-Managing Director,received the following amounts:

In 2006 Reminderof 2005

(10 months)

- Gross fixed pay paid 160,004 133,337 by the Company

- Gross Directors fees paid 20,900 20,620 by the Company andby the controlled companies

He carries out the following duties within the Group:

Gvelot Board Member

Gvelot Extrusion Board Member

PCM Board Member

Gurtner Board Member

Duties outside the Group:

Chairman of the Board of Directors and Managing Director ofSopofam

Monsieur Philippe BARBELANE, Acting Managing Director,received the following amounts:


- Gross fixed pay paid by the Company 183,326 166,660

- Fringe benefits in kind issuedby the Company, valued at 7,272 7,384

- Directors fees paid by the Companyand by the controlled companies 8,300 8,020

- Variable pay(bonuses) 15,000 10,000


Permanent Representative of Gvelot, PCM Board Member

Permanent Representative of Gvelot, Gurtner Board Member

Permanent Representative of Gvelot, Clr Board MemberAs an executive, Monsieur Barbelane has been granted thefollowing benefit by the Company: Compensation equivalent to oneyears salary if removed from post.

Duties outside the Group: Nil

Mademoiselle Claudine BIENAIM, Board Member,received the following amounts:


- Directors fees paid by the Companyand by the Controlled Companies 22,300 20,500

and carries out the following duties within the Group:


PCM Board Member


Chairman of the Gvelot Audit Committee


Member of the Publicis Group SA Board of Directors

Terms of reference and Duties carried out in the Publicis Group:

Chairman:

- Publicis Group Services SAS (France)

Board Member:

- Publicis Conseil SA (France)

- Mdiasystem SA (France)*

- Solange Stricker MS&L France SA (France)

- Group Zenithoptimedia SA (France)

Permanent Representative of Publicis Group SA:

- Publicis Technology SA (France)

Permanent Representative of Publicis Conseil:

- Publicis Finance Services SA (France)- Publicis EtWe SA (France)

- Carr Noir SA (France)*

- Re: Sources. France SAS (France)

- Loeb & Associs SA (France)

- World Advertising Movies SA (France)

- Publicis Constellation SA (France)

Director:

- Publicis Group Investments BV (Netherlands)

- Publicis Holdings BV (Netherlands)

- Publicis Group Holdings BV (Netherlands)

- DArcy Masius Benton & Bowles, Inc (United States)

- US International Holding Company, Inc (United States)

Company Secretary:

- Publicis Group SA (France)

Member of the Committee of Direction:

- Multi Market Services France Holdings SAS (France) and inaddition:

Chairman-Managing Director:

- Socit Immobilire du Boisdormant SA (France)

Acting Managing Director:

- Rosclodan SA (France)

- Sopofam SA (France)

Manager:

- SCI Presbourg toile (France)

* Term of office ended during 2006

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Monsieur Philippe DESTOURS, Board Member,received the following amounts:

In 2006 Reminder

of 2005(2 months)

- Gross fixed pay paid by the Company - 58,082

- Fringe benefits in kind issuedby the Company, valued at - 696

- Directors fees paid by the Company and bythe controlled companies 19,900 17,700

- Exceptional bonus (severance pay) - 45,000


PCM Board Member

Permanent Representative of Gvelot, Gvelot Extrusion Board Member

Member of the Audit Committee

Duties outside the Group: Nil

Madame Roselyne MARTIGNONI, Board Member,received the following amounts:


- Gross Directors fees paidby the Company andby the Controlled Companies 20,900 19,500



PCM Board Member



Board Member of Sopofam

Board Member of RosclodanBoard Member of Socit Immobilire du Boisdormant S.A.

Monsieur Charles BIENAIM, Board Member,received the following amounts:


- Directors fees paid by the Companyand by the Controlled Companies 12,600 12,600




Chairman of the Board of Directors of Rosclodan

Member of the Board of directors of Meeschaert Family Office

Member of the Board of directors of the Meeschaert financing company

Board Member of the Meeschaert financing company

Monsieur Roberto BARABINO, Board Member,received the following amounts


- Gross Directors fees paid bythe Company and by the ControlledCompanies 14,000 12,600


PCM Board Member


Board Member of Ansaldo Superconduttori spa

Board Member of Ferrania Technologies spaBoard Member of Omba Impianti & Engineering spa

Board Member of Sima Impianti + Tectubi spa

Board Member of Tectubi spa

Board Member of Trametal spa

Monsieur Pascal HUBERTY, Board Member,received the following amounts:


(6 months)- Gross Directors fees paid by the Companyand by the Controlled Companies 8,000 4,000

and carries out no other duties within Group


Director of the French fresh produce market for the Amcor FlexiblesGroup

This information covers the amounts paid either by our Company orby companies controlled by it under the terms of Article L 233-16 ofthe Commercial Code.

Social and environmental consequences

of the businessGvelot S.A., a Company quoted on EUROLIST Compartment C of EuronextParis, is publishing as an appendix to its Management report aconsolidated document relating to sustainable development, bringingtogether social and environmental information, in accordance with theprovisions initially set down in Articles D 148-2 and 148-3 of the Decreeof 23 March 1967, and amended by Decree no. 2002.221 of 20 February2002.

Risk managementThe following major risks which may be met by the Group have beenidentified.

General risks

1. Market RisksThe Group is not exposed to risks encountered in the Financialmarkets.

2. Country risks

The Group is exposed to country risks for a small part of its businessmainly in the Ancillary services for the oil industry Sector. However,these risks are not significant.

Financial risks

By the nature of its business, the Group is exposed to various kindsof financial risk. These risks are associated with the Groups industrialand commercial businesses, its needs for financing and also to its

investment policy in particular internationally. The risks are mainlyconnected to variations in the exchange rate and of rate of interestbut also to sudden variations in the price of raw materials.

1. Risks for the industrial and commercial businesses

- Risks in exchange rates

The Gvelot Groups industrial and commercial businesses are notparticularly exposed to financial risks which might result fromvariation in the exchange rates for some currencies because of therelative positions of its sales areas, and its production sites whichare mainly in the euro zone.

Risk management for exchange rates in the Pumps and FluidTechnology business is based on the fact that the groupsproduction companies invoice the marketing companies in theirlocal currency or in euros. This inter-company invoicing is given

fixed term exchange risk cover if the amounts are significant.

Because the Group does not take out any firm exchange risk coveron its future sales, the operational margin is subject to variations inthe future depending on variations in the exchange rate. However,each operation which might present a significant risk for the Group


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or for a Division is given fixed term exchange risk cover. Analysis

has not shown future changes in a currency to be sufficiently large

to make it necessary to use optional exchange risk cover.

The Groups industrial and commercial businesses are not

significantly exposed to variations in the rate of interest.

- Risks of price variations

The Group is sensitive to variations in the price of its raw materials.

This is particularly true in the Extrusion Sector, as a supplier to the

automobile industry. In order to meet future variations which could

have a significant impact on the operational margin, the Group is

developing a range of sources of supply and where possible using

contracts containing clauses covering bracketed price for its

suppliers and clients.

- Credit risks

The Group pays particular attention to the security of payments forgoods and services which it delivers to its clients but in any event

there is no great concentration of credit risk. Payments from other

clients of the Group are covered by appropriate security measures.

2. Risks associated with financing

The Group uses the banking sector for financing its industrial and

commercial businesses which find it necessary.

- Risks of variation in interest rate

Where necessary the Group uses tools to cover variations in the rate

of interest for long-term variable rate loans for substantial

amounts. To do this the Groups centralised Treasurers Department

analyses the portfolio and proposes the appropriate tools (interest

rate swaps) in order to keep future risks within the limits ofappropriate controlled costs.

3. Risks associated with investment

- Exchange risks

The Group has investments abroad, and outside the euro zone,

whose net assets are exposed to currency conversion risks. These

net assets, mainly situated in the USA, are however for modest

amounts and are not currently covered.

Allocation of the resultThe following allocation of results will be proposed:

- Profit for the financial year 2,171,310.10

- Previous balance carried forward 1,764,526.04

- Total to be distributed 3,935,836.14

- Legal reserve 108,565.50

- Dividends 2,106,594.60

2,215,160.10

Balance carried forward after allocation 1,720,676.04

If the distribution shown above is approved, a dividend of 2.20 per

share, which is eligible for the 40% tax allowance given to individualswith a capped Tax Credit, will be distributed after 2 July 2007.

You are reminded, in accordance with legal requirements, that the

following distribution of dividend was made over the three previous

financial years:

Dividend Tax Number of shares

Financial Year Net tax credit credit Gross Paid-up total

2003 2.00 1.00 - 3.00 957,543 983,480

2004 2.10 - () - 957,543 983,480

2005 2.20 - () - 957,543 983,480

() for the record

Stock market

Following the combined general meeting which was held on 22 June

2006, during which an increase in company capital was approved,Company Capital at 31 December 2006 amounted to 33,514,005

divided into 957,543 shares with a nominal value of 35 .

During 2006, the price of the share, quoted by Euronext Paris on the

Eurolist Compartment C single regulated market moved as follows:

Euros

Quoted price at the end of 2005 50.95

Lowest quoted price 51.00

Highest quoted price 63.50

Quoted price at the end of 2006 57.50

Number of securities exchanged in 2006 84,4762005 113,668

At 30 March 2007 the quoted price of a share was 59 with 33,844

securities exchanged since the beginning of the year.

Shareholders

At 31 December 2006, the GEVELOT Company was controlled mainly

by:

- The SOCIT DE PORTEFEUILLE FAMILIAL (SOPOFAM), with more than

one third,

- Company ROSCLODAN, more than a twentieth.In addition, the mutual fund STOCK PICKING France and the

FINANCIRE DE LCHIQUIER, an independent portfolio management

company, each hold more than a twentieth. Finally, no company

controlled by Gvelot holds any shares in this Company.

Non-deductible charges

(Law of 12 July 1965 Article 27)

General costs reincorporated into the taxable profits during the 2006

financial year amounted to 14,117 against 17,362 in 2005.

The Board of Directors

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Consolidated accountsat 31 December 2006

2006 ANNUAL REPORT - CONSOLIDATED ACCOUNTS

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Consolidated balance sheet at31 December 2006 (Based on IFRS)

ASSETS

(in thousands of euros) Net amount Net amount

at at12.31.2006 12.31.2005

NON-CURRENT ASSETS (I)Consolidated goodwill (A) Note 4 1,182 1,646

Intangible assets (B)

Research and development costs 2,186 694

Concessions, patents, licences, brands, processes, r ights and similar values 2,886 2,834

Business assets - -

Current Intangible assets 1,009 1,402

Total intangible assets (B) Note 4 6,081 4,930

Tangible assets (C)

Land/Buildings 29,633 29,581

Plant, equipment and industrial apparatus 54,883 45,502

Other assets 3,457 3,453

Current tangible assets 2,740 4,048Advances and down payments 89 2,071

Total tangible assets (C) Note 4 90,802 84,655

Long-term financial assets (D)

Investments 50 -

Other long-term investments 2 3

Loans 413 476

Other 137 126

Total non-current financial assets (D) 602 605

Securities on a like-for-like basis (E) Note 5 5,508 4,068

Deferred tax assets (F) Note 9 - -

Other non-current assets (G) - -

TOTAL (I) NON-CURRENT ASSETS (A+B+C+D+E+F+G) 104,175 95,904CURRENT ASSETS (II)Stocks and in-process materials (H) Note 10

Raw materials and other supplies 12,975 11,749

In-process materials for production 11,030 12,094

Intermediate and finished products 10,519 9,224

Merchandise 2,097 973

Total stocks and in-process materials (H) 36,621 34,040

Client debt and other accounts payable (I) Note 11 45,283 47,147

Other debtors (J)

Advances and down payments on orders 305 256

Debts 4,639 4,843

Charges identified in advance 876 758

Total other debtors (J) 5,820 5,857

Tax due for payment (K) 175 583

Financial assets Short-term (L)

Loans 194 202

Derivatives 42 -

Securities valued at their fair value offset against results 1,350 2,220

Total current financial assets (L) 1,586 2,422

Cash and cash equivalents(M) Note 12 27,764 30,743

TOTAL (II) CURRENT ASSETS (H+I+J+K+L+M) 117,249 120,792

GENERAL TOTAL (I+II) 221,424 216,696

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LIABILITIES

(in thousands of euros) Net amount Net amount

at at12.31.2006 12.31.2005

EQUITY CAPITAL (I)Capital Note 3 33,514 30,488

Consolidated reserves 76,878 78,212

Result for the financial year 4,357 5,251

Cross-shareholding Note 3 (1,361)

Subtotal of equity capital attributable to the consolidating company 114,749 112,590

Minority interests:

- in the equity capital (before result) 25 26

- in the result 3 4

Subtotal of minority interests 28 30

TOTAL OF ALL EQUITY CAPITAL (I) 114,777 112,620

NON-CURRENT LIABILITIES (II)Provisions for long-term risks and charges (IIa)

Provisions for risks 179 186

Provisions for charges 2,183 1,696

Total long-term provisions (IIa) Note 7 2,362 1,882

Long-term financial debts (IIb)

Loans and debts with Credit Institutions 24,499 21,389

Various loans and financial debts 503 498

Total non-current financial liabilities (IIb) Note 8 25,002 21,887

Deferred tax liabilities (IIc) Note 9 10,786 10,612

TOTAL NON-CURRENT LIABILITIES (II) (IIA+IIB+IIC) 38,150 34,381

CURRENT LIABILITIES (III)Debts to operational suppliers (IIIa) 27,555 29,177

Debts to suppliers of assets (IIIb) 3,321 3,629

Provisions for short-term risks and charges (IIIc) Note 7 1,606 1,960

Other creditors (IIId)

Advances and down payments received on orders 656 332

Tax debts apart from company tax, Debts for staffing and benefits 14,303 16,671

Products identified in advance 784 818

Other debts 2,684 3,035

Total of other creditors (IIId) 18,427 20 856

Liabilities of tax due for payment (IIIe) 642 78

Short-term financial debts (IIIf)

Loans and debts with Credit Institutions Note 8 16,731 13,934

Various loans and financial debts Note 8 215 -

Derivatives Note 16 - 61

Total current financial liabilities (IIIf) 16,946 13,995

TOTAL CURRENT LIABILITIES (III) (IIIA+IIIB+IIIC+IIID+IIIE+IIIF) 68,497 69,695

TOTAL DEBTS (II+III) 106,647 104,076

TOTAL GENERAL (I + II + III) 221,424 216,696


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CONSOLIDATED RESULT ACCOUNTS

(in thousands of euros) France Abroad Financial Financial

year 2006 year 2005PRODUCTS OF THE CURRENT BUSINESS (1)

Sales of merchandise 3,252 4,993 8,245 8,785

Production sold:

. goods 83,760 103,916 187,676 190,718

. services 298 613 911 723

AMOUNT OF TURNOVER 87,310 109,522 Note 14 196,832 200,226

Production subsidies 167 176

Write-back of provisions 1,234 2,892

Other products 859 2,276

Other products of the business 2,260 5,344

In-stock production 513 131

capitalised production 1,437 805

Total products of the current business (1) 201,042 206,506

CURRENT OPERATIONAL CHARGES (2)

Purchase of merchandise 4,549 3,831

Variations in merchandise stock (1,051) 44

Purchase of raw materials and other supplies 68,457 69,691

Variation in raw materials stock and other supplies (2,988) (2,562)

Other purchases and external charges 40,485 39,604

Staffing charges 67,549 69,453

Tax, and similar payments 5,315 6,059

Allocations to financial amortizations and provisions

On assets - allocations aux financial amortizations 8,544 7,916

On non-current assets - allocations to provisions for loss of value 137 2,700

On current assets - allocations to provisions 2,259 1,466

For risks and charges - allocations to provisions 871 232

Other charges 656 1,034Total current operational charges (2) 194,783 199,468

I - CURRENT OPERATIONAL RESULT (3) = 1-2 Note 14 6,259 7,038

OTHER OPERATIONAL PRODUCTS (4a)

Write-back of provisions for client disputes - -

Other operational products - 1,774

Total operational products (4a) - 1,774

OTHER OPERATIONAL CHARGES (4b)

Cost of disputes with clients - -

Restructuring charges - 2,857

Other operational charges - 320

Total other operational charges (4b) - 3,177

II - OPERATIONAL RESULT (5) = 3+(4a-4b) Note 14 6,259 5,635

Consolidated result 2006(Based on IFRS)

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CONSOLIDATED RESULT ACCOUNTS

(in thousands of euros) Financial Financial

year 2006 year 2005PRODUCTS OF CASH AND CASH EQUIVALENTS (6a)Interest generated by cash and cash equivalents 108 62

Net products on transfers of invested securities 619 413

Result of covering changes in interest and exchange rates on cash and cash equivalents - -

Total products of cash and cash equivalents (6a) 727 475

COST OF GROSS FINANCIAL INDEBTEDNESS (6B)Interest charges on financing operations 1,574 1,064

Result of covering changes in interest and exchange rates on gross financial indebtedness - -

Total cost of gross financial indebtedness (6b) 1,574 1,064Total cost of net financial indebtedness (7) = 6a - 6b (847) (589)

OTHER FINANCIAL PRODUCTS (8A)Financial products of other securities and capitalised assets - -

Products on financial instruments 28 -

Financial products of discounting - -Positive variation in fair value of financial assets and liabilities assessed at fair value 54 186

Result of covering changes in interest and exchange rates associated with other financial products 385 685

Other financial products 194 316

Total other financial products (8a) 661 1,187

OTHER FINANCIAL CHARGES (8b)Losses on financial instruments 1 33

Financial discounting charges 164 271

Negative variation in fair value of financial assets and liabilities assessed at fair value 147 144

Result of covering changes in interest and exchange rates associated with other financial charges 549 333

Other financial charges 95 103

Total other financial charges (8b) 956 884Result of other products and financial charges (9) = 8a - 8b (295) 303

III - FINANCIAL RESULT 10 = 7+9 (1,142) (286)

IV - CURRENT RESULT BEFORE INTEGRATED COMPANY TAX 11 = 5 + 10 Note 14 5,117 5,349Tax due for payments (12a) 1,673 1,857Deferred taxes (12b) (charges) 167 -

Deferred taxes (12b) (products) - (730)

Tax Charge 12 = 12a+12b Note 9 1,840 1,127

V - NET RESULT INTEGRATED COMPANIES 13 = 11-12 3,277 4,222Proportion in the results of the Companies on a like-for-like basis (14) 1,083 1,033

Result of abandoned businesses (15) - -

TOTAL DES PRODUCTS (1+4a+6a+8a+14+15) 203,513 210,975

TOTAL DES CHARGES (2+4b+6b+8b+12) 199,153 205,720VI - NET RESULT OF THE CONSOLIDATED WHOLE Note 14 4,360 5,255

VII - SHARE GOING TO MINORITY INTERESTS 3 4

VIII- RESULT GOING TO THE CONSOLIDATING COMPANY 4,357 5,251RESULT PER SHARE (= DILUTED RESULT PER SHARE) 4.55 5.48

The result is calculated by dividing the Shareholders distributable net result by the average weighted number of ordinary shares in circulation at the financial

years quoted price, excluding ordinary shares bought by the Group or held as own shares. There are no potentially dilutive shares.

The number of shares used in calculation of the Result per share is 957,543 (see. Note no. 3 - Company Capital) for the financial years 2005 and 2006.


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(in thousands of euros) Capital Internally Consolidated Difference Conversion Net Equity Minority Totalheld reserves arising on rate result capital interests

securities revaluation adjustment

SITUATION AT 12.31.2004 30,488 (1,141) 67,970 54 (203) 10,513 107,681 30 107,711

Operations on the capital - - - - - - - - -

Operations on internally held securities - - - - - - - - -

Distributions - - - - - (2,013) (2,013) - (2,013)

Allocation of undistributed results - (220) 8,730 - (10) (8,500) - - -

Result for the 2005 financial year - - - - - 5,251 5,251 4 5,255

Reprocessing stocks - - 1,545 - - - 1,545 - 1,545Financial instruments:

variations in fair value - - (1) - - - (1) - (1)

Conversions and various variations - - (9) - 136 - 127 (4) 123

SITUATION AT 12.31.2005 30,488 (1,361) 78,235 54 (77) 5,251 112,590 30 112,620

Operations on capital (*) 3,830 - (3,830) - - - - - -

Operations on internally held securities (*) (804) 1,361 (557) - - - - - -

Distributions - - - - - (2,109) (2,109) - (2,109)

Allocation of undistributed results - 3,129 13 (3,142) - - -

Result for the 2006 financial year - - - - - 4,357 4,357 3 4,360

Financial instruments:

variations in fair value - - 47 - - - 47 - 47

Conversions and various variations - - 444 - (580) - (136) (5) (141)

SITUATION AT 12.31.2006 33,514 - 77,468 54 (644) 4,357 114,749 28 114,777(*) See Note no. 3

Table of variation in equity

capital and minority interests

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Notes nos. 1 to 21 below are an integral part of the consolidated accounts. Unless stated otherwise, all amounts are expressed in thousands of euros.

These consolidated accounts were drawn up by the Board of Directors on 13 April 2007.

Note no. 1: Information relating to the scope of consolidation

a) Scope of consolidation at 31 December 2006

the following have been consolidated according to the full consolidation method:

Companies Headquarters SIREN no. % of control % of interestsSIRET no. at at at

12.31.2006 12.31.2005 12.31.2006

Gvelot 6, boulevard Bineau 56208854292532 Levallois-Perret Cedex 56208854200369

Gvelot Extrusion 6, boulevard Bineau 399198951 99.99 99.99 99.9992532 Levallois-Perret Cedex 39919895100010

Dold Kaltfliesspressteile GmbH Langenbacher Strasse 17/19 100.00 100.00 100.00D-78147 Vhrenbach (Germany)

PCM 17, rue Ernest Laval B.P. 35 572180198 99.99 99.99 99.9492173 Vanves Cedex 57218019800010

PCM Deutschland GmbH Wiesbadener Landstrasse 18 99.99 99.99 99.9465203 Wiesbaden (Germany)

PCM Flow Technology Inc. 11940 Brittmoore Park Drive 99.99 99.99 99.94Houston Texas 77041 (United-States)

PCM USA Inc. 11940 Brittmoore Park Drive Company 100%Houston Texas 77041 owned by PCM Flow(United-States) Technology

PCM Group UK Ltd. Pilot Road Phoenix Parkway 99.99 99.99 99.94Corby NN17 5YF (United Kingdom)

PCM Trading (Shangha) Co Ltd. Unit 10A01 & 10G03 Shanghaimart 99.99 - 99.942299 Yanan Road (West)

200336 Shangha (China)

Gurtner 40, rue de la Libration B.P. 129 542103635 100.00 100.00 99.9525302 Pontarlier 54210363500026

tablissements Lopold Clr 17, rue Tournire 349171355 100.00 100.00 99.9580530 Bthencourt-sur-Mer 34917135500010

Consolidated on a like-for-like basis:

Kudu Industries Inc. 9112 - 40 th street 45.00 45.00 44.98S.E. CALGARY ALBERTA T2C 2P3 (Canada)

MOINEAU TEXAS CORP.. 1112 S. Main Street

Seminole Texas 79360 (United-States)KUDU AUSTRALIA PTY LTD. L3, 349 Coronation Drive Companies 100%

Milton, QLD, 4064 (Australia) owned by Kudu

KUDU INDUSTRIES KAZAKHSTAN LLP 51, Zhamakayev str. Industries Inc

Almaty (Kazakhstan)

Canaross 4, Vosstania str. Companies 50%

614014 Perm owned by

(Russia) Kudu Industries Inc

Ensival Moret Asia Pte Ltd. 9, Tai Seng Drive #02-02 25.71 25.71 25.69Hesche Building

535227 Singapore (Singapore)

MORET PUMPS SHANGHA CO Ltd. no. 1590, Li An Rd Company 100%

Minhang District owned by Ensival

201 100 Shangha (China) Moret Asia Pte Ltd.

Appendix to the consolidatedaccounts at 31 December 2006

}

}

}

}

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Note no. 2: Accounting rules and methods -Significant facts for the financial year

A. ACCOUNTING RULES AND METHODSThe Gvelot Groups consolidated financial statement has been drawnup in accordance with the International Financial Reporting Standards(IFRS), adopted by the European Union, published in the FrenchOfficial Journal dated 13 October 2003 and which applied from 1st

January 2005.

The consolidated financial statement is presented in thousands ofeuros, the form used by the Group for operations and presentation.

The accounting methods described below have been universallyapplied all the periods presented in the consolidated financialstatement.

The new standards, amendments and interpretations, whoseadoption was made compulsory for all financial years opened on orafter 1st January 2006, do not apply to Gvelot Group Accounts, orare irrelevant to them. The group has not opted for the amendmentto IAS 19, which enables actuarial gains and losses to be assessed byequity capital. These are:

Amendments to IAS 39 on the fair value option and covering cashflow for future intra-group transactions,

Amendment to IAS 21 on the effects of variations in the quotedprice in foreign currencies,

IFRIC 4 interpretation of the conditions which determine if anagreement contains renting out,

Standard IFRS 6 relating to the exploration and valuation of mineral

resources, IFRIC 5 interpretation relating to the rights to interest issued by

management funds devoted to refunding the costs ofdecommissioning and reinstating sites,

IFRIC 6 interpretation relating to liabilities resulting from investmentin a specific market waste electrical and electronic equipment.

The Group has not applied any amendment or any standard orinterpretation in advance, in particular the following texts, alreadypublished and adopted by the European Union, but which do notbecome compulsory until later. The Group does not expect anysignificant effect on its financial statement when these texts areapplied in the future:

Amendment to the standard IAS 1, covering information to be

supplied on capital,

Standard IFRS 7, relating to information to be supplied on financialinstruments,

IFRIC 7 interpretation relating to comparative information to beproduced under the terms of IAS 29 Financial information inhyperinflationary economies,

IFRIC 8 interpretation on IFRS 2s field of application,

IFRIC 9 interpretation relating to the evaluation of embeddedderivatives.

In addition, the standard IFRS 8 relating to aux operating segmentsand the interpretations IFRIC 10 (depreciation of assets in interimfinancial reporting), IFRIC 11 (options granted within a group and

own shares acquired to cover a share option plan) and IFRIC 12(franchise contracts) have not yet been adopted by the EuropeanUnion.

In order to draw up its IFRS opening balance sheet for 1 January 2004,the Group has complied with the provisions of the IFRS 1 standarddealing with First-time Adoption of International Financial Reporting

Standards and the exceptions to the principle of retrospectiveapplication of all the IFRS standards.

The Gvelot Group has decided on the following options for theretrospective adjustments of assets and des liabilities in accordancewith the IFRS standards:

companies consolidated before 1st January 2004 are not covered byof retrospective adjustments,

the actuarial gains and losses on pension commitments have beenidentified in exchange for equity capital for their cumulated amountat 1st January 2004,

the cumulated amount of conversion rate adjustments at 1stJanuary 2004 has been balanced in exchange for consolidated

reserves and the amount of hedging equity capital remainsunchanged. Conversion rate adjustments before the changeover dateto IFRS will not, therefore, be taken into account in the results offuture transfer of consolidated entitles or partners.

the fair value of assets at 1st January 2004 has been kept aspresumed cost. The revaluation arising from this has been shown asequity capital.

On 13 April 2007, the Board of Directors drew up and authorisedthe publication of Gvelot SAs consolidated financial statementfor the 2006 financial year. This financial statement may beamended as long as it has not been approved by the GeneralMeeting.

Presentation of the consolidated accounts:

The balance sheet is shown with current/non-current entries. Currentmeans the assets and liabilities directly associated with the operatingcycle, except for short-term financial assets and liabilities which areclassified as current.

The consolidated result account is shown by type under Charges andProducts.

2.1. Accounting principles specific to theconsolidation

2.1.1 Scope of consolidation

All the subsidiaries and holdings under the direct or indirect control

of the Parent Company, or which it exercises an appreciable influenceover, are included in the scope of the consolidation.

The companies over which the Gvelot Group does not have controlare consolidated on a like-for-like basis, or by total integration in thecase of Companies under joint control.

2.1.2 Conversion of accounts expressed in foreign currency

The financial statements of foreign subsidiaries are converted intoeuros in the following way:

- items in the Balance Sheet are converted at the exchange rate inforce on the date the financial year closed,

- items in the Profit and Loss account are converted at the averagerate,

- Cash flows are converted at the average rate.Therefore any disparities of conversion in the consolidated Equitycapital arise from:

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- the variation between the rates at the close of the previousfinancial year and those of the current financial year on the equitycapital at the opening of the year,

- the difference between average exchange rates and exchange ratesat the close, on the profits or losses over the period and on the flowof variation in equity capital.

2.1.3 Transactions in foreign currency

Transactions in foreign currency are converted into euros by applyingthe exchange rate in force at the date of the transaction. The cashassets and liabilities expressed in foreign currency are converted atthe exchange rate in force at the date of closure, and the resultantexchange differences are accounted for in the Profit and Loss accountas a profit or loss in exchange. Non-cash assets and liabilitiesexpressed in foreign currency are accounted for at the historic rate inforce on the date of the transaction.

Rates of conversion of accounts drawn up in foreign currency:The proportions of results of Companies on a like-for-like basis, KUDUIndustries (a Canadian company) and the Company EMA (Singapore)have been converted at the closing rate on 31 December 2006, i.e:

- 1 Canadian dollar = 0.65441 euro- 1 Singapore dollar = 0.49500 euro

Items on the balance sheets of the companies: PCM Flow Technology(an American company) and PCM Group UK Ltd. (an English company)have been converted at the closing rates on 31 December 2006, i.e:

- 1 dollar US = 0.75930 euro- 1 pound sterling = 1.48920 euro

and the income and expenditure accounts at the average rates i.e:

- 1 US dollar = 0.79639 euros- 1 pound sterling = 1.46666 euros

2.2 Accounting Principles specificto the Balance Sheet

2.2.1 Company grouping

The groupings of companies are accounted for according to theacquisition method in accordance with standard IFRS 3.

On the date of acquisition, goodwills were valued as the surplus ofthe cost of the company grouping over the share of interest of thepurchaser in the net fair value of the identifiable Assets, Liabilitiesand potential Liabilities acquired.

Goodwills are not amortised. Their depreciation is checked each yearor more often if events or changed circumstances suggest that theyhave depreciated.

Any depreciation found is then irreversible.

The depreciation test methods used by the Group are described in theparagraph "Depreciation of Assets" in Note 2.2.4.

2.2.2 Intangible assets

Intangible assets acquired separately appear on the balance sheet attheir historic cost. They are then valued at their amortised cost inaccordance with the reference procedure in standard IAS 38.

Intangible assets resulting from the valuation of the assets of Entitiesacquired are recorded on the balance sheet at their fair value.

Research costs are entered as charges in the financial year when theywere incurred, as are unspent development costs.

In the Extrusion Sector, research is undertaken with a view to

producing items as part of a specific order from a client. When theyare contractually financed by the client, these costs are accounted foras intangible assets up to the amount that was not financed.

Development costs must be entered as assets (IAS 38) if thecompany can demonstrate:

- that the project is clearly identified and the costs of the asset thusimmobilised can be separated out and reliably monitored, and that ithas the intention and the technical and financial ability to carry thedevelopment project through,

- that it is probable that the future economic advantages derivingfrom the expenditure will come to the company.

Intangible assets are subject to a linear financial amortization over auseful life foreseen for each category of goods.

Useful life:Development costs: lifetime of the projects themselves, generallybetween 3 and 5 years.

Software: useful life of software, between 2 and 15 years.

Others (patents, etc.): over periods that correspond to the expected

useful life but not more than 20 years.The methods of depreciation tests adopted by the Group aredescribed in the paragraph "Depreciation of fixed assets" in Notepoint 2.2.4.

2.2.3 Tangible assets

Tangible assets, mainly composed of land, buildings, technicalinstallations and plant, are accounted for at their cost of acquisitionreduced by cumulative financial amortizations and any loss in value,in accordance with standard IAS 16.

The Gvelot Group has opted for the method of periodic revaluationof its land and buildings with financial amortizations over their usefullife and periodic revaluation of the nett value against a market valueestimated by qualified professional valuers. These valuations take

place every three years.In the Extrusion Sector, special tools are bought or made to produceitems for a specific order from the client. When they are contractuallyfinanced by the client, any part of these costs that was not financedis accounted for as tangible assets.

> Cost price of fixed assets

The costs of acquiring fixed assets are incorporated at their true grossamount including tax.

According to the reference procedure in standard IAS 23, the costs ofborrowing are accounted for as charges in the financial year duringwhich they are incurred.

> Direct financing leases

Goods which the Group is provided with through a direct financinglease are handled in the balance sheet and the consolidated profitand loss account as if they had been acquired with a loan, if theeffect of the contract is to transfer virtually all the risks andadvantages inherent in the ownership of these goods to the Group.In consequence, the amounts originally financed by the lessor havebeen entered as tangible assets, and matched by a "borrowed" itemin the liabilities.

Annual instalments of rent are eliminated and replaced by:

- an allocation to financial amortizations corresponding to the fixedassets concerned,

- a financial charge relating to the loan.

Goods under a direct financing lease are amortized at a constant rateover their estimated useful lifetime similarly to other fixed assets of

the same kind or over the duration of the contract if that is less andif the Company is not certain to become the owner at the completiondate.

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> Amortizations

Amortizations are calculated on the basis of the components withdistinct useful lives that make up these fixed assets; in general theycorrespond to the following periods:

- Land: not amortizable,

- Buildings (structure, alterations, restoration, water-tightness): 10 to40 years,

- Technical installations, industrial tools and equipment: 3 to 40years, with exceptions,

- Computer equipment: 3 to 5 years.

2.2.4 Depreciation of Fixed assets

In application of standard IAS 36, the Group ensures that the net bookvalue of its assets does not exceed their recoverable value, i.e. theamount which will be recovered by their use or sale.

Apart from business assets and intangible fixed assets with an

indefinite life which have to be subjected to regular annualdepreciation tests, the recoverable value of an asset is estimatedwhenever there is an indicator showing that this asset may have lostits value.

The recoverable value of an asset is either its net sale price or itsutility value, whichever is the greater.

The net sale price is the amount which can be obtained from the saleof an asset in a transaction under conditions of normal competitionbetween well-informed and consenting parties, minus the costs ofdisposal.

The utility value is the updated value of future cash flow expectedfrom the continued use of an asset and of disposing of it at the endof its useful life, estimated on the basis of plans or budgetsestablished over 3 years maximum. Beyond this, cash flows are

extrapolated by applying a constant or diminishing growth rate.Depreciation tests are performed at the level of Cash-GeneratingUnits (CGUs).

The Group has defined its cash-generating units as follows:

- Extrusion: each company and each production unit has beenconsidered as an independent CGU. The support assets common toa company have been shared proportionately between theproduction units of the company,

- Pumps: each company has been considered as an independent CGU,

- Mechanical Engineering: each company has been considered as anindependent CGU.

A specific discount rate has been determined for each activity (seenote No. 4).

These discount rates correspond to the rates before tax of the yieldof investments without risks, corrected by a risk premium from theShares market, and of specific risks related to the activity.

For the Gvelot Group, no specific risk related to the activity wasidentified.

A loss of value is accounted for once the book value of the asset orof the CGU it belongs to exceeds its recoverable value.

2.2.5 Financial assets

Financial assets consist essentially of Loans and Credits.

They are mainly composed of deposits and loans to staff formortgages.

They are valued at the amortized cost, using the staff-interest-ratemethod. Long-term loans and credits that are not repaid or repaid atlower than the market rate are updated if the sums are significant.

Any depreciation is recorded in the results.

Financial assets are initially accounted for at a cost corresponding tothe fair value of the price paid, increased by the costs of acquisition.

Clients and other operating credits

Client credits are recognised and accounted for for the initial amountof the invoice, minus provision for depreciation and amounts writtenoff as non-recoverable.

Client credits are retained as assets on the balance sheet so long asall the risks and advantages associated with them have not beentransferred to a third party.

Provision is made for depreciation if specifics risks of non-paymentappear on credits held by the companies of the Group. However,older credits (over 6 months) not paid can be subject to depreciationon all or part of the credit.

2.2.6 Stocks and work in progress

According to standard IAS 2 "Stocks", the cost of stocks must includeall the costs of acquisition, costs of transformation and other costsincurred in making the stocks available; sales discounts, reductionsand other similar elements are deducted in determining the cost ofacquisition.

Stocks are valued according to the price method or the averageweighted cost.

Stocks are costed at their lowest manufacturing cost and their netrealisable value.

The realisable value is equal to the net estimated sale price of thecosts still to be incurred to complete the products and the sale.

Stocks do not include any cost of borrowing.

Raw materials, merchandise and other provisions are valuedaccording to one of the following methods, depending on the Site:price of purchasing of the last batch, last known purchase price,average weighted unit cost.

Manufactured products (in process and completed) are valued attheir production cost including:

- The cost of materials consumed,

- Direct production charges,

- Indirect production charges in so far as they can be reasonablyattributed to the production of the goods.

If the net realisable value falls below the gross value, provision ismade for the difference.

In the Extrusion Sector, research is undertaken and special tools arebought or made to produce items for a specific order from the client.

When they are contractually financed by the client, the costs incurredfor the research and tools are recorded as stocks of work in progressto the extent of the amount financed.

2.2.7 Cash and cash equivalents

Cash and cash equivalents include liquid assets and short-terminvestments without risk of change of value.

2.2.8 Equity capital

Own Shares: when the Group buys its own shares, they are recordedat their cost of acquisition and the equity capital is diminished. The

product from any sale of Own Shares is written directly as an increasein equity capital, so that any capital gains or losses, net of the effectof related tax, do not affect the net result of the financial year.

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2.2.9 Provisions

> Pensions and similar commitments

On the basis of national laws and practices, there are severaldifferent pension systems in the Group for the benefit of certain staff.

Retirement schemes, similar compensation and other welfarebenefits which are analysed as Schemes for Defined Services(schemes in which the Group undertakes to guarantee a definedamount or level of service), are accounted for on the balance sheeton the basis of an actuarial valuation of the commitments to the dateof closure, minus the fair value of the assets related to andcommitted to the scheme. The subscriptions paid into the schemeswhich are analysed as Schemes with Defined Subscriptions, (i.e.when the Group has no other obligation than the payment ofsubscriptions) are accounted for in the charges of the financial year.

In France, the Group has made commitments to its staff regardingretirement. The provision appearing in the consolidated accounts is

valued using the Projected Unit Credit method and takes account ofthe associated welfare benefits.

In applying local rules, the German subsidiary Dold faces up to thewelfare commitments that it has made towards its staff as part ofcontracts concluded with insurance companies.

What is sometimes called "actuarial error or actuarial deviance is themismatch between the hypotheses used and reality, or themodification of hypotheses in calculating commitments and theassets allocated to covering them:

- rate of staff turnover- rate of salary increase- discount rate- death rate- rate of return on assets

The variation in actuarial deviances on retirement benefits isaccounted for in the results by applying the Corridor Principle,spreading any variations that exceed 10% of the highest valuebetween the amount of the commitment and the market value ofhedge assets. These gains or losses are recognised over the expectedaverage remaining working life of the members of staff benefitingfrom these schemes.

Provision is made for the prizes given when the nationalemployment medals are awarded or as part of the Companys ownagreements. The latter are costed by taking account of the probabilitythat the staff reach the length of service required for each level, andare updated.

> Other provisions

Provisions are made whenever the Group has a current obligation(legal or implicit) arising from a past event, whose fulfilment shouldresult in an expenditure of resources representing economicadvantages for the Group.

The provisions correspond to specifically identified risks and charges.Any liabilities correspond to potential obligations resulting from pastevents whose existence will only be confirmed by the occurrence ofuncertain future events beyond the control of the entity, or to currentobligations for which an expenditure of resources is not probable.

Apart from those resulting from a Company grouping, they are notaccounted for but information is given on them in an Appendix.

A provision for restructuring is only accounted for if there is animplicit obligation to a third party, arising from a decision ofManagement which, before the date of closure, was planned in

detail, formalised and announced to the people concerned.

Other long term provisions have been updated.

2.2.10 Financial liabilities

Borrowings are accounted for at their amortized cost, except for thehedge accounting (see below, Derivatives and hedge accounting).

Issuing costs, discounts and redemption premiums are shownsubtracted from borrowings and are taken into account indetermining the actual rate of interest.

> Derivatives and hedge accounting

All the derivatives (swaps) are accounted for on the balance sheet attheir fair value and any variation in their fair value is accounted for inthe results.

The Group takes the option offered by standard IAS 39 of applyinghedge accounting:

- in the case of cover of fair value (borrowing at a fixed rate swappedto a variable rate for example), the debt is accounted for at its fairvalue and any variation in fair value is entered in the results. Thevariation in the fair value of the derivative is also entered in the

results. If the cover is totally effective, the two effects cancel outexactly.

- in the case of cash flow cover (borrowing at a variable rateswapped to a fixed rate for example), the variation in the fair valueof the derivative is entered as equity capital for the effective partand entered in the results in parallel to the account of the cash-flowcovered, and in the result for the ineffective part.

2.2.11 Deferred Taxes

In accordance with standard IAS 12 Tax on results, deferred taxesare recorded on all the temporary differences between the bookvalues of assets and liabilities, and their assessed values according tothe liability method of tax allocation.

Future tax relief because of the use of tax losses carried forward is

only recognised if is can reasonably be expected to occur.At 31 December 2006, deferred tax assets have been retained in theaccounts, because it seemed probable that they would be recouped.

Deferred tax assets and liabilities, whenever they fall due, have beenoffset when they concern a single tax entity.

In accordance with standard IAS 12, deferred tax assets and liabilitiesare not updated.

2.3 Accounting Principles specific to the Profit andLoss account

2.3.1 Products of ordinary activities

In accordance with standard IAS 18 "Products of ordinary activities"

the sale of goods, minus discounts granted, is accounted for asturnover on the date of transfer of ownership which transfers to thepurchaser the economic risks and advantages of the goods. Ingeneral this transfer takes place when the goods are delivered.

In the Extrusion Sector, research is undertaken and special tools arebought or made to produce items for a specific order from the client.When they are contractually financed by the client, this financingcomes within the scope of Products of ordinary activities as definedby standard IAS 18. The product is recorded as turnover as and whenthe technical stages are confirmed by the client.

2.3.2 Current operational result and Operating income

Standard IAS 1 allows for a minimum number of headings:

- Operating income,

- Financial expenses,- Proportion of results in the Companies on a like-for-like basis,- Results of activities halted or in process of sale,

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Note no. 3 : Share capital

(in euros) Alterations to face valueby incorporation

Ordinary Own Shares 12.31.05 Cancelled of reserves 12.31.2006

ORDINARY SHARESNumber 957,543 25,937 983,480 25,937 957,543 957,543

Nominal value 31 31 31 31 4 35

Total 29,683,833 804,047 30,487,880 804,047 3,830,172 33,514,005

Composition of the share capital:

At 31 December 2006, the authorised capital amounted to 33,514 thousand euros. It consisted of 957,543 ordinary shares at 35 euros each,

issued and fully paid up.

In the course of the financial year, the following transactions were effected:

- variation in the number of shares from 983,480 at 31 December 2005 to 957,543 shares at 31 December 2006 by cancelling the 25,937

shares that Gvelot SA itself held at the close of 2005;

- raising of the face value from 31 euros to 35 euros per share after the incorporation of reserves for an amount of 3,830 thousand euros.

The Group has no option plans for share purchase, by which options to buy Company shares would be offered to certain staff and managers.

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Note no. 7 : Provisions for risks and charges

01.01.2006 Allocations Reversals 12.31.2006Provision Provision Total Of which less Of which moreused not used than a year than a year

Provisions for risks

. Provisions for employment disputes 93 168 (40) (37) 184 169 15

. Provisions for industrial risks 26 - - - 26 - 26

. Other provisions for risks 200 58 (54) (26) 178 40 138

Total 319 226 (94) (63) 388 209 179Provisions for liabilities and charges

. Other provisions for charges 915 634 (52) (7) 1,490* 1,397 93

. Provisions for restructuring 296 - (218) - 78 - 78

. Provisions related to staff 536 - (241) (295) - - -

. Provisions for pensions 1,468 343 - (95) 1,716 - 1,716

. Provisions for employment medals 308 5 (15) (2) 296 - 296

Total 3,523 982 (526) (399) 3,580 1,397 2,183

Total provisionsfor risks and charges 3,842 1,208 (620) (462) 3,968 1,606 2,362

* The Other provisions for charges include:

- provisions for charges related to operations 546

- provisions for employment-related charges 712

- provisions for sales-relate

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