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  As Of               Filer                 Filing     As/For/On Docs:Pgs              Issuer               Agent

 1/31/05  Telecom Italia SpA                CB/A                  15:4022 Telecom Italia SpA                RR Donnelley/FA

Document/Exhibit                   Description                      Pages   Size 

 1: CB/A        Telecom Italia Form CB (Amendment No. 5)            HTML     56K 
 2: EX-1.9      Plan for Merger of Tim S.P.A. Into Telecom Italia   HTML    128K 
                          S.P.A                                                  
 3: EX-2.0      Report by the Board of Directors of Telecom Italia  HTML    359K 
                          S.P.A                                                  
 4: EX-2.1      Report by the Board of Directors of Tim S.P.A       HTML    420K 
 5: EX-2.2      Balance Sheet of Telecom Italia S.P.A. Sept 30      HTML  2,384K 
                          2004                                                   
 6: EX-2.3      Balance Sheet of Telecom Italia Mobile S.P.A Sept   HTML  1,501K 
                          30 2004                                                
 7: EX-2.4      Telecom Italia S.P.A Annual Report December 31,     HTML  9,291K 
                          2003                                                   
 8: EX-2.5      Olivetti S.P.A Annual Report December 31, 2002      HTML  5,425K 
 9: EX-2.6      Olivetti S.P.A Annual Report December 31, 2001      HTML  6,267K 
10: EX-2.7      Telecom Italia Mobile S.P.A Annual Report December  HTML  4,664K 
                          31, 2003                                               
11: EX-2.8      Telecom Italia Mobile S.P.A Annual Report December  HTML  4,262K 
                          31, 2002                                               
12: EX-2.9      Telecom Italia Mobile S.P.A Annual Report December  HTML  3,226K 
                          31, 2001                                               
13: EX-3.0      Notice of Convening of Extraordinary Meeting of     HTML     29K 
                          Telecom Italia Shareholders                            
14: EX-3.1      Convening of Extraordinary Meeting of Tims          HTML     22K 
                          Ordinary Shareholders                                  
15: EX-3.2      Convening of Extraordinary Meetig of Tim's Savings  HTML     22K 
                          Shareholders                                           

EXHIBIT 2.6    

Olivetti S.p.A.

2001 Annual Report

Contents

3

Olivetti S.p.A. – Registered Office: Via Jervis 77, Ivrea, Italy

Share capital 8,792,700,632 Euro fully paid – Registered on the Turin Companies Register no. 00488410010

4

 Directors’ Report on Operations

 Evolution of the Olivetti Group in 2001

During 2001, Olivetti Group pursued its plans to consolidate the activities begun in 2000 regarding the restructuring and development of the business and to further accelerate the process of strengthening the financial structure of the companies.

In the first half of the year, an important extraordinary transaction on Olivetti S.p.A.’s capital was completed, aimed at improving the debt to equity ratio. The transaction, approved by the Company’s Board of Directors on 18 December 2000, pursuant to the proxies granted by the Shareholders’ Meeting on 7 April 1999, generated a cash inflow of around 0.9 billion euros for the portion relating to shares (which may increase to 1.25 billion euros in the event of the full exercise of the warrants attached to the shares) and of 1.27 billion euros for the portion relating to the convertible bond. 348,249,405 ordinary shares were issued for this transaction (as well as an equal number of free warrants of the “Olivetti ordinary shares 2001-2002 warrants” series, attached to the shares and exercisable in the ratio of 2 warrants for each newly-issued share) and 487,549,167 bonds of the “Olivetti 1.5% 2001-2004 convertible with redemption premium” series. The transaction achieved immediate positive effects for the income statement and the cash-flow of the Company, also for the bond element, considering that the issue took place at conditions better than those of already existing loans.

In July, a fundamental change took place in the shareholding structure of Olivetti S.p.A., further to the agreement between Pirelli S.p.A., along with Edizione Holding S.p.A. (Benetton Group), and Bell S.A., relating to the purchase of around 23% of Olivetti’s capital held by Bell. The purchase was completed in the second half of the year through a holding company called Olimpia S.p.A. (initially 80% owned by Pirelli and 20% owned by Edizione Holding), into which the Olivetti shares already owned by the two groups were placed. On 24 October 2001, Unicredito Italiano and IntesaBci finalised their entry into the share capital of Olimpia with a 10% stake each. Following this transaction, Pirelli S.p.A.’s stake became 60%, while the stake of Edizione Finance International SA (controlled by Edizione Holding S.p.A., which it replaced on 7 August 2001) remained at 20%.

Also in July, further to the above mentioned transaction, Roberto Colaninno resigned as Chairman and Chief Executive Officer of Telecom Italia and as Chief Executive Officer of Olivetti.

In the meetings of 31 July 2001, the Boards of Directors of Olivetti and Telecom Italia accepted Roberto Colaninno’s resignation and substituted him with Enrico Bondi, who was named Chief Executive Officer. Subsequently, in September 2001, following further resignations, Marco Tronchetti Provera (named Deputy Chairman of Olivetti and Chairman of Telecom Italia) and Gilberto Benetton (named Deputy Chairman of both Olivetti and Telecom Italia) and Carlo Buora (named Chief Executive Officer of Olivetti) were elected to the Boards of Olivetti and Telecom Italia. Further resignations meant that the entire Boards were deemed to be vacant and therefore the shareholders’ meeting of Olivetti on 13 October 2001 and that of Telecom Italia on 7 November 2001 elected new Boards for the three-year period 2001-2003.

Considering the difficult conditions on the international marketplace, the new management firmly accelerated the financial restructuring within the framework of a comprehensive review of the Group’s long-term industrial plans, submitting the new strategic guidelines for the approval of the Boards of Directors of Olivetti and Telecom Italia, held in September.

The plan was based on the principle of creating value, both by developing the activities deriving from new business opportunities and advances in technology as well as from continuously seeking an optimal financial structure based on increased cash flows. Specifically, it was estimated that by focusing on the

core businesses and reviewing the equity investment portfolio, it would have been possible, taking into account the particular international economic situation, to obtain cash flows from disposals of around 5 billion euros for Telecom Italia and around 1 billion euros for Olivetti over a two-year period. This programme will be linked to carefully managed costs and investments.

The management team, significantly strengthened during the year with the addition of men with wide experience in the various sectors of operations and of staff, in line with the general principles laid out in the plan, will place a strictly industrial emphasis on the management of the Group, ensuring prompt and effective control of operations, costs, purchases and investments.

All the activities of the Group have been resolutely focused on the core businesses. The plan foresees further consolidation in domestic fixed and mobile telephony as well as in international mobile telephony in part through acquisitions and/or agreements, while no further acquisitions are envisaged in international fixed telephony. The directories and the Internet activities connected to the two types of telephony fall within the core businesses. The above will involve a global review of the business portfolio. The Telecom Italia Group will operate as a provider of a variety of services, especially in some business segments.

Regarding more in detail the main areas of business:

Referring specifically to Olivetti S.p.A., the Board of Directors deemed it necessary to reinforce the financial restructuring plan, both by disposing of non-core equity investments as well as through a new extraordinary share capital transaction, approved on the basis of the proxies granted by the General Meetings of 7 April 1999 (for the outstanding portion) and of 13 October 2001.

The transaction was successfully completed in November 2001. Overall, 1,491,373,698 shares were issued (for the equivalent of 1,491.37 million euros) and 2,412,962,875 convertible bonds (for the equivalent of 2,412.96 million euros), denominated “Olivetti 1.5% 2001-2010 convertible with redemption premium” having an effective yield on redemption of 3.5% p.a. gross. The shares and bonds were offered at 1 Euro each, on an either/or basis, at the choice of the rights holders.

In accordance with its prior undertaking, Olimpia S.p.A. subscribed the rights to which it was entitled (50% in shares and 50% in bonds); as a result of the transaction, Olimpia S.p.A. owned 28.736% of Olivetti.

In the event of full conversion of the above bonds, the new share capital transaction will involve a significant reduction in indebtedness to 13.5 billion euros.

The Board of Directors also unanimously approved the proposal of the Deputy Chairman and Chief Executive Officer, Mr. Tronchetti Provera, not to further implement the outstanding proxies to issue shares, convertible bonds or bonds with warrants, warrants, options or other similar securities which

grant rights to subscribe to Olivetti shares, and to submit to a future Shareholders’ Meeting the withdrawal of the aforementioned proxies, relating to the unused outstanding portion.

As well as the success achieved on the extraordinary share capital transactions front, the prompt execution, starting towards the end of last year, of a part of the plan to dispose of non-strategic businesses should be underlined.

Specifically, in December, Olivetti S.p.A., Olivetti International S.A. and Finsiel S.p.A. accepted the public tender offer made by Tyche S.p.A. (De Agostini Group) regarding Lottomatica S.p.A. shares.

Moreover, Telecom Italia Group agreed with Endesa, Union Fenosa and Santander Central Hispano (SCH) to sell its 26.89% stake in AUNA (Auna Operadores de Telecomunicaciones, S.A.), the Spanish telecommunications operator. The sale of this equity investment generated a net cash inflow of approximately 1,850 million euros. Finally, also in December, Telecom Italia completed the disposal of equity investments in Eutelsat, Intelsat, Inmarsat and New Skies Satellites, all ex-satellite consortia, to the recently incorporated company, Mirror International Holding Sarl, owned by the Lehman Brothers Merchant Banking Partners II L.P. closed-end fund with minority stakes held by IntesaBci and Interbanca. The portfolio which Telecom Italia sold to Mirror International Holding Sarl, in which it maintained a 30% stake, was valued at 550 million euros, with a cash inflow of 450 million euros (net of the investment in the new company) and a net capital gain of more than 100 million euros at statutory accounts level.

On the operations front, the marketplace in which the Telecom Italia Group operates has witnessed a rise in demand for telecommunications services of approximately 10% per annum, driven by the widespread use of mobile telephony and the development in data and Internet services. The sector is expected to continue to grow over the next few years and the shift in part of family and business expenditure towards digital products and services is also expected to continue, thereby increasing the possibilities of integrating transmission services and online application content. In 2001, the telecommunications market was characterised by a phase of restructuring and consolidation after the substantial growth caused by the Internet phenomenon and the boom in stock prices. The financial markets have in part re-directed investments from “alternative” carriers, typically characterised by large investment flows linked to the accomplishment of business plans based on the expectation of substantial growth of the Internet and telecommunications market, to those which can leverage assets, distinctive skills and a solid financial structure.

Compared to the major European countries, the Italian market is also characterised by a high penetration of mobile phones, which is in contrast with a relatively modest penetration of Internet and broadband services, whether residential or business. At the end of 2001, Internet penetration in Italy was 23% for families and 44% for small-to-medium sized businesses. Family access is still primarily based on dial-up technology (98%), only a small part (2%) via broadband ADSL. However, a progressive improvement on these figures is expected, in part based upon the experience of the German market, which indicated that widespread use of ADSL accesses may occur fairly rapidly. There is also ample room for growth in the areas of data transmission, services connected with the Internet and new-generation mobile services (GPRS, UMTS). The sector will continue growing over the next few years and the shift in part of family and business expenditure towards digital products and services will continue, thereby increasing the possibilities of integrating transmission services and online application content.

In 2001, the Telecom Italia Group conducted a major restructuring of its Business Units organisation, the details of which will be specified later. Operations through these units were as follows:

With regard to the other industrial activities directly controlled by Olivetti, an important role is played by Olivetti Tecnost, which operates in the office products sector where the market was characterised by fierce competition, particularly with reference to the ink-jet products segment and to IT systems specialising in services for banking, retail and gaming automation and public administrations, which achieved good results for the year and which represent an important sector in the company’s growth strategy.

Industrial and marketing activities were aimed at offering innovative services based on Internet technology, with solutions tailored for small-to-medium sized companies and in the home automation sector, with solutions for private residential use.

 Group Structure and Activities

The Olivetti Group operates in the telecommunications sector through the companies of the Telecom Italia Group, which represents approximately 96% of its total revenues.

The Telecom Italia Group is one of the major international companies in the Information and Communication Technology industry. Its companies are leaders in wireline, mobile and satellite communications, Internet and media, information technology and research, providing integrated and innovative services in Italy and abroad. In the domestic market, Telecom Italia is both the technology and the market leader in the highest growth sectors (mobile, broadband, data transmission). Its international presence is geographically focused on Latin America and Europe. Olivetti is also active in other industrial sectors through directly owned subsidiaries, such as office products, Internet appliances and IT services (Olivetti Tecnost Group), Internet services (Webegg Group), facility management and property services (Olivetti Multiservices).

 Financial highlights by sector

 The Telecom Italia Group

During 2001, the Telecom Italia Group operated through a structure of business units, which was comprehensively reorganised during the year.

Domestic Wireline

The Domestic Wireline Business Unit operates nationwide and is the established market leader in wireline voice and data services and call centres, both for end-users and other operators. Internationally, Domestic Wireline develops optical fibre networks for wholesale customers, mainly in Europe and South America.

In 2001, the Business Unit had the following structure:

At the end of the year, a new organisational structure became operational (Marketing, Customer Operations, Residential Customers, Business Customers, Executive Customers, Domestic Wholesale, International Wholesale, Network, Public Telephony), the main objective of which is to shift the emphasis from the product to the customer and to improve time-to-market.

The table below compares the main financial results, almost entirely attributable to Telecom Italia’s Domestic Wireline business, as well as capital investments made and the staff employed, with those of 2000:

2001 was highly competitive, based upon price reductions in the “voice traffic” business area and in the Internet access (ISP) market. In this context, the activity of Domestic Wireline was principally characterised by a consolidation in market leadership in the business areas of access, data services, web services and wholesale, by a substantial increase in traffic “carried” on behalf of other operators and in on-line traffic and by the price reductions in domestic traffic and outgoing international traffic, which was partially offset by an increase in the standing charge.

The main operational figures for 2001 are compared with 2000 in the table below:

During 2001, many commercial offers were launched in the voice sector; in particular, in the Residential voice sector, 3,240,000 customers subscribed to the “Teleconomy voce” offer and “Sirio 187”, the first telephone in the world capable of managing SMSs, was also launched.

In the Business voice sector, more than 840,000 customers subscribed to the “Teleconomy24 aziende” offer by the year-end.

As regards the installations of Public Telephony, there were 70,000 ISDN terminals at the end of the year (+54% compared to 2000).

In data transmission, the year was characterised by a broader range of data products on offer, such as:

During the year, Telecom Italia consolidated its Domestic Wholesale activities, increasing interconnection traffic by 126.4% compared to 2000.

The year was characterised by a wider range of products on offer, such as “Canale virtuale permanente” (Permanent Virtual Channel), which enables Internet Service Providers and Other Licensed Operators to offer end-users services and data via broadband access technology using a copper pair or optical fibre, and, to meet the increasing market demand for broadband, “dark optical fibre” provided without power supplies and equipment to use Telecom Italia’s network, ensuring potentially unlimited transport capacity.

At the International Wholesale level, the year saw a growth in demand, particularly for Internet and data with an 18.7% increase in traffic volume compared to 2000.

The Domestic Network’s performance was characterised by infrastructure and management system upgrades, in part as a consequence of the increased activity of other operators in the Italian market. Of particular interest are the activation of dialling mobile phones numbers without the “0”, the activation of the call return service (which advises the customer of the last call, giving number, data and time, with the possibility of automatically dialling the recorded number) and the completion of the digitalisation and the migration of customers from analogue exchanges to digital ones.

Progress was also made on the development of the ring connection, which uses the latest generation SDH and DWDM (Dense Wavelength Division Multiplexing) technology and is the platform for the new “Rete di Trasporto Ottico” (Optical Transport Network) which carries flows with high levels of quality and availability.

The SDH optical network was strengthened during the year and higher capacity equipment (radio links) was installed to meet the increased demand of the mobile operators.

Regarding the International Network, infrastructures and management systems were developed in geographical areas characterised by a strong increase in the demand for capacity and of strategic importance due to the presence of subsidiary and associated companies. Of particular note is the activation of the Pan European Backbone, which connects nine countries (Austria, Belgium, France, Germany, Italy, Holland, Spain, Switzerland and Great Britain) by high speed optical fibre and a ring structure, so as to ensure protection of traffic in the event of a fault in one link. To this end, fully-owned subsidiary companies have been incorporated in each of the nine countries mentioned above.

The initial configuration of the LAN (which connects eight nodes in South America, including Rio de Janeiro, Sao Paulo, Buenos Aires and Santiago, via a ring structure with the Miami node) has been activated and progress was made in laying the submarine optical ring (Mediterranean Nautilus) which will connect Italy, Greece, Turkey, Israel and Egypt, with the help of the subsidiaries MED1 and MED Nautilus.

Approximately 3% of the total revenues of the Domestic Wireline Business Unit is attributable to subsidiary companies in Italy (Saritel, Atesia and Path.Net) and abroad (Pan American Backbone, Latin American Nautilus, Mediterranean Nautilus – incorporated between the end of 2000 and the beginning of 2001 to follow specific projects – and the TMI and MED1 groups).

Mobile Services

The Mobile Services Business Unit (TIM Group) operates in the sector of domestic and international mobile telecommunications. Its international presence focuses on the Mediterranean Basin and South America.

During 2001, the Business Unit operated with the following structure:

2001 saw the incorporation of Tim Brasil, a sub-holding company for the equity investments TIM Celular Centro Sul, TIM Sao Paulo, TIM Rio Norte, incorporated during the first months of the year, the transfer to TIM Brasil by TIM International N.V. of the equity investment in Bitel (parent company of Tele Nordeste Celular and Tele Celular Sul) and the merger of TIM International B.V. into SMH N.V., which was simultaneously re-named TIM International N.V..

The income statements of Digitel and the Maxitel Group, which were acquired at the end of 2000, were consolidated.

The main results achieved in 2001 compared with 2000 are stated in the table below:

Revenues from sales and services, gross of the amounts due to third-party telecommunications operators, increased by 8.8% compared to 2000, mainly as a result of increased revenues from TIM S.p.A.. The percentage increase in the gross operating margin is lower than the increase in revenues as a consequence of international start-ups.

TIM S.p.A. had total revenues of 8,357 million euros (+5.4%), this increase being due to the further expansion in traffic (+7.6% in terms of revenues, +13.6% in terms of minutes). The revenues deriving from value added services increased by 56.5% compared to 2000, mainly due to the increase in Internet services (more than 140%) and SMSs (approximately 35%). The gross operating margin (+9.9%) benefited from containing external costs. TIM’s net income (equal to 1,907 million euros) reflects international companies value adjustments, which led to a 532 million euros pre-tax extraordinary writedown of the subsidiary company TIM International N.V.

Significant investments have also been made to improve the GSM network, to complete the infrastructures for the launch of the data services (WAP, GPRS) and to continue developing UMTS.

During the year, TIM confirmed its leadership in the highly competitive domestic market, mainly through a broadening of its offer range by proposing innovative products, a further diversification of the rates offered, significant growth of the international networks (+7.4 million lines) and a greater focus on customers, by improving the CRM structures.

Below are the main operational figures for 2001, compared with the year 2000:

TIM’s year was characterised by the development of SMS traffic, the creation of innovative services and the extension of the offered product profiles with initiatives such as “LoSai di TIM”, the free service which advises GSM customers of calls received while unreachable or when the telephone was switched off, “FreeSMS” which proposes a self-recharging mechanism based on SMS traffic, and marketing proposals with special seasonal rates (CartAmici/CartAuguri) or which offer products and services which can be used for a limited period and at very low unit costs (Last Minute di TIM).

Moreover, all TIM lines are GPRS ready, fundamental for the business market, which acknowledges TIM as the only operator capable of ensuring this service.

As concerns abroad:

Internet & Media

The Internet and Media Business Unit covers the entire value chain in the media sector, extending its activities to telephone publishing and to television and is the leader domestically in marketing products and services for the office. Seat Pagine Gialle also develops all elements of Internet services for residential customers and small-to-medium businesses: access, portals and web services.

Within the framework of the new strategic guidelines, a new mission has been set for the Business Unit, aimed at creating a multiplatform media group which, by using paper, telephone, Internet and TV, satisfies the information and entertainment needs of the public and the communication and services requirements of companies.

The Business Unit comprises the Seat Pagine Gialle Group, which includes Seat P.G. S.p.A. (Directories Div.) and the subsidiaries Tdl Infomedia Ltd. Group (Directories), Telegate AG Group (Directories Assistance), Seat Internet and Matrix (Internet), Buffetti Group (Products and Services for the Office), Consodata S.A. Group (Business Information), Holding Media e Comunicazione Group (TV and others) and other minor companies.

In 2001, the consolidation included many recently acquired companies, amongst which the French group Consodata (Business Information), the British telephone publishing company TDL Infomedia (Directories), the German company Telegate (Directory Assistance), the television group Holding Media e Comunicazione (ex-Cecchi Gori Communications).

The main transactions during the year were the following:

The table below sets out results for 2001, compared to results for 2000 restated on the basis of the same area of consolidation:

During the year, Seat PG strengthened its position as leader or co-leader in almost all the areas it operates in, thanks to its widely recognised brand portfolio. The Group’s activities were characterised by:

International Operations

The International Operations Business Unit operates in the wireline and integrated fixed-mobile sector and its presence is largely focused in Europe and South America.

The Business Unit is structured in subsidiaries (9Télécom Réseau Group, Entel Chile Group, Entel Bolivia Group, BBNed and Intelcom S. Marino) and associated companies (AUNA Spain Group, Telekom Austria Group, Telecom Srbija, Telecom Argentina Group, Brasil Telecom Participaçoes Group and Globo.com). 2001 saw the following transactions:

The table illustrates the 2001 results, compared with 2000:

The figures for 2000 have been restated by de-consolidating the activities of Nortel Inversora/Telecom Argentina. In 2001, revenues and the gross operating margin of the Business Unit increased, in part as a consequence of the Entel Chile and Jet Multimedia groups being consolidated.

Provisions and value adjustments relating to the Entel Chile and 9Télécom groups and higher amortization for goodwill, however, contributed to the worsening of operating result.

In 2001, the development and management of the international portfolio were aimed at maintaining Telecom Italia Group’s presence in strategic markets (Latin America and Europe) and in business sectors with high growth potential.

As regards the consolidated subsidiaries, 9Télécom Réseau Group operates in the sectors of wireline telephony and voice, data and Internet services. It also operates in traditional hosting in France.

A considerable increase in turnover (+188.5%) was reported in 2001.

In Latin America, the Entel Chile Group operates in the sectors of wireline and mobile telephony, data transmission and Internet access services and, in 2001, recorded increases (in local currency) of 35.8% in revenues and 12.5% in operating earnings.

During the year, it consolidated its position of integrated provider of telecommunications services and became market leader in mobile telephony through the investee company Entel PCS (owner of the first GSM network in South America); moreover, three WLL licences to provide fast access Internet services and wireline telephony in Chile and abroad were acquired.

The Entel Bolivia Group operates in the sectors of wireline and mobile telephony, Internet, data transmission, telex e telegraphy.

In 2001, GSM technology was introduced in Bolivia and market leadership was confirmed in the segment of services for business and corporate customers.

As regards associated companies, an agreement was reached in December with the other shareholders of AUNA Holding (Spain) for the sale of the 26.89% stake held by the Telecom Italia Group for an expected net cash inflow of approximately 1,850 million euros. The AUNA Group operates in the sectors of wire-line and mobile telephony, data transmission, Internet access.

Information Technology Services

The “Information Technology Services” (IT Services) Business Unit is in charge of the Group’s IT activities and covers the whole value chain of IT services.

The Business Unit, established as part of the project to integrate such diverse entities as Finsiel, Netsiel, Telesoft, Sodalia and the ex-IT division of Telecom Italia, comprises the subsidiaries IT Telecom, Finsiel Group, Telesoft Group, Netsiel S.p.A. and Sodalia S.p.A..

During the year, the first phase of industrial rationalisation and corporate restructuring by homogeneous areas of the BU was fully carried out through the following transactions:

This transaction was carried out in anticipation of the subsequent listing in 2001 on the Italian Exchange

The main results for 2001, compared against 2000, are stated in the table below:

The trend of revenues from sales and services is affected by the new outsourcing contracts signed in 2001 by Telesoft and Netsiel with the Wireline Services Business Unit of Telecom Italia S.p.A., thereby completing the corporate spin-offs of the ex-IT division of Telecom Italia; these contracts, aiming to achieve maximum efficiency through competitive fees compared to the market conditions, have led to a substantial reduction in revenues in the areas dedicated to those activities. Profitability progressively improved during the year, in terms of both gross operating margin and operating profit.

During the year, operations were characterised by a series of ventures to ensure the innovation, development and optimal management of IT within the Group, develop proposals in the professional IT market for traditional and new market segments and start acting on the organisation, the governance processes, the technology and the skills necessary to implement the new IT industrial plan.

This Business Unit’s structure, compatible with the new strategic guidelines, was altered at the beginning of 2002 and divided into two new sub-divisions: Group Information Technology (ITG), aimed at increasing quality and efficiency within the framework of the service activities directed at all the Business Units of

the Telecom Italia group operating in the market, and Market Information Technology (ITM), which, though the Finsiel Group companies, will pursue those activities aimed directly at the outside market.

Satellite Services

The “Satellite Services” Business Unit (Telespazio Group and the “Satellite Telecommunications” business of Telecom Italia) is in charge of developing systems for voice and data satellite communications, radio-television transmissions and observation of the earth.

It comprises the subsidiaries Telespazio S.p.A., Telespazio Brasil, Eurimage, MCS Europe Group, e-Geos, Telespazio North America, Telespazio Luxembourg S.A. and CTM S.c.p.a.

Among the main corporate events of mention is the exit from the Astrolink venture and the sale at the end of 2001 of the equity investments in the satellite consortia Intelsat, New Skies Satellite, Inmarsat and Eutelsat; these transactions did not change the area of consolidation.

The main results for 2001, compared against 2000, are stated in the table below:

The 2001 operating results were affected positively by the industrial development and the success of the “Media & Communication” and “Space System” areas and negatively by the premature closure of the Astrolink contract, the effects of which were partially absorbed by capital gains from the sale of shares held in portfolio.

The main activities for the year may be summarised as follows:

TILAB

The TILAB Business Unit (which generated 134 million euros of revenues in 2001, an 8.9% increase compared to the previous year) was formed through the integration of CSELT’s technology with Telecom Italia’s venture capital management skills. It is responsible for identifying and managing innovative ventures by creating new business opportunities for both Group companies and the outside market.

The main transactions involving TILAB were:

The BU’s activities, focused in the field of research and development and which has also witnessed the first collaboration with Pirelli Labs and strategic suppliers, involved:

Other activities

The “Other activities” of the Telecom Italia Group mainly comprise the “Real Estate and General Services” function, the company Stream and the financial companies Softe and Sogerim.

The “Real Estate and General Services” function manages and maximises the value of the Group’s property portfolio (asset and property management), plans and executes property projects and provides facility and property services (project and facility management).

The total turnover generated in 2001 was 953 million euros, a 2.8% decrease compared to the previous year, due to the alignment of prices to the best market conditions.

In 2001, Softe and Sogerim provided financial support to the companies of the Telecom Italia Group on the international markets.

In particular, as regards Sogerim, in the first half of 2001, as part of the Telecom Italia Group’s debt restructuring plan, bonds were issued for a total of 8.5 billion euros.

Stream S.p.A. is an associated company operating in the Pay-TV sector.

In February 2002, Telecom Italia reached an agreement with News Corporation and Vivendi Universal/ Canal + for the sale of its 50% of Stream. The agreement, which is conditional upon the approval of the

relevant Italian authorities, envisages the simultaneous sale of Telecom Italia’s 50% of Stream to News Corporation and the purchase of 100% of Stream’s capital by the French group Vivendi Universal.

The sale price of Telecom Italia’s 50% of Stream will be US$ 42 million.

 Products, specialised systems and IT services directly controlled by Olivetti S.p.A.: Olivetti Tecnost

The Olivetti Tecnost Group is active in office products (Home Office Division) and in specialised IT systems for service automation for banking, retail, gaming and Public Administrations (Vertical Markets Division).

During 2001, Olivetti Tecnost integrated its industrial and marketing activities by investing substantially in proposals for Internet services with solutions tailored to small-to-medium sized businesses through GoToWeb S.p.A. and in the home automation sector with automated solutions intended for private residential users through DomusTech S.p.A.

The Group operates in the main international geographical markets (where 69% of total turnover is achieved) and, while being predominantly focused in Europe (29%) and Latin America (16%), it is also present in the United States with its subsidiary Royal Consumer Information Product Inc. in the consumer sector.

The @Home@Office Division specialises in office products and communication and image processing devices directed at the business, SoHo and consumer markets. The product catalogue – alongside original supplies and professional services which ensure qualified assistance and support – is marketed in over 70 countries through diversified channels which mainly include networks of dealers, distributors and mass merchandising chains.

In 2001, Olivetti Tecnost further improved its leadership position in Europe in the plain-paper fax and ink-jet technology sector, reaching a market share of 25%. The slowdown in the world market, however, created substantial competitive tension which led to a squeeze in prices and, consequently, in margins.

In the sector of ink-jet printers, Olivetti Tecnost has introduced a compact multifunctional “Flat Bed” system, CopyLab 200, which offers, in a single product and at a contained price, the entire range of peripherals needed to carry out activities at home or in a small office.

Moreover, significant growth was achieved in niche markets such as “mobile printing” (which has led to contracts being signed with important international customers) and “printing for foodstuffs” (which has raised substantial interest among operators in the sector).

As regards the range of laser products, the printer market did not show any great changes during the year, while fax machines based on the same technology continued to be very popular, especially in Italy. 2001 was the year in which the copying sector went digital.

The introduction of a complete range of multifunctional photocopiers led to an increase in digital product deliveries of 114% in revenues and 64% in quantity.

The introduction of the euro had a positive effect on the calculator market as well, with both revenues and margins increasing during the year.

2001 marked the real entry of Olivetti Tecnost into the (growing) market of Personal Digital Assistants (P.D.A.), tools which offer and will offer the core functions of a personal computer, e-mail, Internet access, communication over the GSM networks and GPS location tools.

The year was not positive for the range of original supplies for ink-jet products. Weaker demand for fax machines in Europe inevitably affected demand for printheads and ink cartridges, which the increase in hardware sales did not manage to offset.

In 2001, the Specialised products and services for vertical applications division recorded third-party revenues of approximately 295 million euros, a 29% increase in value compared to the year before. In May 2001, Olivetti Tecnost S.p.A.’s Vertical Markets business was transferred to Tecnost Sistemi S.p.A., with the aim of ensuring maximum focus on markets which, due to the specific nature of the target and the product type, require a highly specialised and dedicated organisation from both the production and the offer/support points of view.

As regards banking, the PR2 printer was once again the reference for the market and for competition worldwide (255,000 units sold in 2001, a 61% increase). The new PR2 Enhanced model was also launched (approximately 21,000 units in 2001), which is the natural technological evolution of the PR2 (faster, greater flexibility to interface with other equipment), and the project for the development of a new line of ink-jet validating printers commenced, mainly aimed at geographical regions such as North and South America.

Special mention must be made of the PR6 printer supplied to the Italian Post Office. This device automates payment of services with special post office forms, and approximately 30,000 units have already been installed in post offices throughout Italy.

The Retail sector is basically divided into two broad product areas with decidedly different requirements: the Linea PR4 and Shop Automation.

The Linea PR4 (printers for organised large-scale retailing) confirmed the revenues achieved in 2000 with a total of 23,000 units sold throughout the world, of which 8,000 in Latin America. During 2001, marketing proposals were launched aiming to increase the business in North America with an up-to-date product line, together with the development of a new line of products based on ink-jet technology called J-POS, the aim of which is to adequately re-position Olivetti’s name in the retail sector.

As regards Shop Automation, 2001 was positively affected by the introduction of the euro, which led to a substantial increase in sales linked to products in the cash-register line; overall, approximately 97,000 units were sold (of which 95,000 in Italy), revenues increased by 35% compared to 2000 with a gross margin of approximately 47%.

In this context, Olivetti reinforced its leadership in the Italian market with approximately 300,000 units installed and a 30% market share (+2% compared to 2000).

A new company, called Net Shop, was also established, involving Confcommercio, Confesercenti, MWCR and Olivetti Tecnost. Net Shop’s brief is to implement a project which can re-define the role “of the shop business” and of the retail distribution system, which in Italy comprises as many as 950,000 outlets between family-run shops, associations and franchising.

The Special projects sector, which mainly creates customised products designed specifically to meet the needs of a customer’s request, recorded total revenues of more than 10 million euros in 2001.

Part of this sector is a new product, TP-Label, with which Tecnost Sistemi was awarded an Italian Post Office tender in February 2001 for the supply of 18,000 automatic weighing and franking machines worth approximately 12.5 million euros. 11,000 systems were delivered in 2001, the remaining 7,000 will be supplied in 2002.

Tecnost Sistemi has been operating for over twenty years in the Gaming sector, where it has won major contracts such as those with CONI – the Italian Olympic Committee – (supply of terminals to manage the Totocalcio – soccer bets) and Lottomatica (supply of terminals to manage the lottery).

In the past few years, 77,000 units have been installed or are being installed in Italy and can count on a widespread after sales service managed directly by Tecnost Sistemi.

In 2001, turnover was approximately 84 million euros.

During 2001, Tecnost Sistemi was awarded an international tender by Lottomatica for the supply, and related maintenance until 2012, of 13,000 terminals for the lottery and 13,000 specialised printers to be installed at the sales outlets; the printers will enable customers to be offered additional services such as accounting of the volume of bets handled by the outlet, printing tickets for sports events, printing telephone contracts, issuing certificates, etc.

A new range of terminals (called M-380) is being developed to automate the lottery. These compact devices feature a 12” colour LCD screen and PC architecture to support a wide range of configurations and therefore the possibility to be integrated into various scenarios.

The Industrial Partnerships business model, based on long-term relationships, was positive for 2001 as well, further consolidating its leadership in banking terminals in China: the PR2, in its various models, occupies the overwhelming majority of front office workstations in the 5 major banks and is the printer of reference.

In 2001, other ventures were started in China, such as the adoption of the fiscal cash-register CRF 4050, suitably adapted, by the city and province of Shanghai as a tool for the pilot project to extend the tax obligation in China and, in the gaming field, contacts have been made to introduce our products (again adapted to local needs) for the Chinese lottery and soccer football pools.

The industrial partnerships business model has been implemented in the Maghreb countries and in the CSI, in particular, where there is an agreement with the railways to use the PR2 printer for ticketing. In 2001, the financial results of the Industrial Partnerships increased significantly in Korea, Iran and India.

In India, a solid base has been established to cope with the expected growth over the next years in the automation of banking, post offices (PR2, PR4) and telecommunications (fax).

In 2001, the Olivetti Tecnost Group vigorously pursued the development of the new business areas in which it had concentrated its energies and skills the year before: home automation, through DomusTech S.p.A., and the Internet, through GoToWeb S.p.A..

During 2001, the company continued the substantial programme directed at research, planning, development and implementation of an intelligent management system for residential environments, with

technological solutions capable of managing a variety of subsystems present in a so-called “smart home” through intelligent electronic devices and sensors controlled by fixed units (DomusLink and DomusWeb), integrated in a wireline or mobile telephone system.

The company is therefore committed to implement a complex and detailed industrial plan comprising its own and external research, development and integration activities in the areas of mechanical and electronic planning, telecommunications, services, plant engineering and centralised and remote management. In October 2001, with the aim of completing the range of proposals through partnerships which bring know-how in specific distribution channels and sectors, DomusTech finalised the acquisition from Giesse Gruppo Industriale S.p.A. of the 100% equity investment in Aprimatic S.p.A., into which Gruppo Giesse transferred its “opening systems automation” business (gates, doors, windows, etc.).

The services are primarily provided as an ASP (Application Service Provider) and distributed over the Olivetti Tecnost dealer network. In this manner, traditional strengths have been joined in an innovative way with new marketing proposals made possible by Internet technology. During the year, the hardware and software platform to provide the service was implemented, the technical and marketing structure of the Company was set up and the sales structure was selected and trained. To date, there are more than 150 GoToWeb partners.

In 2001, the Olivetti Tecnost Group achieved total revenues to third parties of 1,097 million euros (of which 1,076 million with third-party customers), EBIT before non-recurring income and charges of approximately 4 million euros (a loss of approximately 10 million euros in 2000) and a 55 million euros net loss to be consolidated for the Olivetti Group. This reflected 70 million euros of non-recurring charges, of which 20 million are extraordinary writedowns relating to the I-Jet company (for the drastic downsizing of production in response to the substantial downturn in market forecasts for ink-jet products and supplies) and 23 million euros for lay-off charges (gross of 3 million euros of utilised provisions already set aside the previous year).

There were 4,896 employees at 31 December 2001, compared to 5,373 at 31 December 2000.

 IT solutions and services for the web: Webegg

Olivetti operates in this sector through Webegg (50% Olivetti S.p.A., 30.2% Finsiel and 19.8% I.T. Telecom), which had 718 employees at 31 December 2001 and Italian offices in Milan, Turin, Bologna and Rome and a US office in San Francisco (opened in February 2001).

The opening of an office in Geneva is being considered, which would be directed at online solutions for the private banking market.

The Webegg Group operates as a strategic consultant for the online positioning of companies (Web consulting), integrating solutions of its own with those deriving from a network of partnerships with world leaders in web solutions (Web integration) with technology partners such as Broadbase, Plutree, Neon, Applix, Midas Kapiti International, Documentum, Cisco, Siebel, Genesys and Digital Think.

In 2001, Webegg S.p.A. offered consultancy and services for the organisation and positioning of companies on the web using a multidiscipline approach and it broadened its specific skills in the sector of Interactive Design.

In 2001, the company participated in the European Foundation for Quality Management (EFQM) quality award, obtaining the best placing among Italian companies and receiving an official mention; it also maintained its ISO 9000, TICK IT and environmental certifications.

TeleAp S.p.A. (100% owned) is a company offering advanced applications and services to improve and increase the efficiency of a company’s contacts with its customers via the traditional media and Internet (customer services).

Constant attention to the quality of the processes has enabled the company to obtain the ISO 9001 – 2000 (VISION 2000) certification, one of the first Italian companies to do so.

Software Factory (100% owned) was acquired in 2001 and offers organisational and IT services.

The company designs, develops and markets software programmes and systems, for itself and for third parties, for electronic data processing, providing consultancy to satisfy organisational, IT and telematics requirements. It also designs and implements integrated systems for data monitoring and management. Domus Academy S.p.A. (51% owned, acquired in 2001) is a post-graduate school of training activities in the field of industrial, graphic and fashion design and develops projects linked to the world of Internet and specific studies on Interactive Design themes.

Domus Academy organises periodic courses in Interactive Design and, as of 2002, will offer a master’s course in Interactive Design.

The areas covered regards digital information and the Web and their constant evolution linked to new technology (WAP, UMTS, GPRS).

In 2001, the Webegg Group had a consolidated turnover of 91.7 million euros, of which 54.2 million with customers outside the Olivetti Group (compared to 74.9 million euros of the pro-forma 2000 figures) and a net profit of 1.2 million euros.

 Facility and Property Management: Olivetti Multiservices

Olivetti Multiservices is a group operating in property and the provision of global services and Facility Management; as well as managing the property portfolio of the Olivetti Group, in 2001 it achieved a noteworthy position in the outside market by being one of the top ten companies in the sector. Particular attention has been paid to the services market, where the growth rate of the past two years was confirmed, especially in Facility Management, where Olivetti Multiservices has been awarded major contracts throughout Italy.

Overall 2001 turnover was 97.6 million euros (72.7 million euros in 2000 in comparable terms), of which 30.1% deriving from the captive market and 69.9% from third parties (the latter posting a 23% increase compared to 2000). Property Management, mainly comprising rentals, purchases, restructuring and sales, represents 38.9% of turnover; the provision of global services (Facility Management), in which, as well as general services, are high added value activities such as energy management and the planning and running of technology facilities, accounted for 61.1%.

The net profit as adjusted for consolidation purposes was 1.7 million euros, worthy of note when considering that Olivetti Multiservices has only been fully operational since 1 January 1999 following the contribution of the business from Olivetti S.p.A..

353 persons were employed at 31 December 2001, compared to 302 at 31 December 2000.

 Human Resources

At 31 December 2001, the employees of the Olivetti Group companies included in the consolidation numbered 116,020 (120,973 at 31 December 2000).

There was a net decrease of 4,713 employees at the Telecom Italia Group, the main item being the 5,460 reduction in staff at Telecom Italia S.p.A., comprising 5,562 departures, 693 net transfers to other Group companies and 795 new hirings.

The change in the area of consolidation essentially involved the International Operations Business Unit (which reported the most significant numerical changes: the exclusion of the Nortel Inversora Group with –7,498 staff and the inclusion of Entel Chile with +4,681 staff), Mobile (new companies in Brazil) and Internet and Media (increases in the media and IT activities), with a virtually unchanged final balance (0.1%).

Olivetti Tecnost Group staff decreased by 477, of whom 250 in Italy and 227 abroad: in particular, the net decrease of 250 in Italy is attributable to 382 resignations, 14 net transfers to other Olivetti Group companies and 10 for the disposal of a business, partially offset by 114 new hirings and 42 new staff for the acquisition of Aprimatic.

Webegg Group staff increased by 257, mainly due to new hirings (175) and the acquisition of the equity investments in Domus Academy (6) and Software Factory (157), as well as 84 resignations.

 Financial Review

 The Group

The full-year operating results for 2001 and the balance-sheet values as at 31 December 2001 were strongly influenced by the changes in the consolidation area.

With regard to the Telecom Italia Group, the consolidation does not include the operating results and balance-sheet values of the Nortel Inversora Group, which at 31 December 2000 was consolidated on a proportional basis. In order to permit comparisons between data for the two years, comments on 2001 operations and balance-sheet values refer to 2000 consolidated data restated to exclude the Nortel Inversora Group.

Furthermore, the 2001 consolidation includes the income statement of the Seat Group, which was acquired at the end of 2000; at 31 December 2000, only the balance sheet of the Seat Group was consolidated on a line-by-line basis.

* * *

For financial 2001, the Olivetti Group posted a consolidated net loss of 3,090 million euros, or a consolidated net loss of 1,791 million euros before amortisation of goodwill on purchases of Telecom Italia shares (1,299 million euros). The result was largely due to high non-recurring costs charged to the year. In 2001, the Group reported a net loss of 940 million euros (net income of 111 million excluding the 1,051 million euros amortisation charge on goodwill on purchase of Telecom Italia shares).

At 31 December 2001, the Olivetti Group’s total shareholders’ equity amounted to 26,353 million euros (12,729 million euros pertaining to the Group) compared to 30,529 million euros at 31 December 2000 excluding the Nortel Inversora Group (13,856 million euros pertaining to the Group). The decrease of 4,176 million euros arose from the loss for the year of 3,676 million euros (of which 3,090 million euros pertaining to the Group), dividends totalling 2,461 million euros (of which 255 million euros for Olivetti S.p.A. and 2,206 million euros for the Telecom Italia Group) and other net decreases totalling 463 million euros, offset in part by share capital increases subscribed during the year for 2,424 million euros.

Net financial indebtedness at 31 December 2001 totalled 38,362 million euros, an increase of 2,634 million euros compared to 35,728 million euros at 31 December 2000 restated to exclude debt at the Nortel Inversora Group and permit comparison between the two years.

Capital investments amounted to 11,565 million euros.

Group business performance

2001 business performance is reflected in the reclassified statement of income set out below, which also includes data for 2000. The statement classifies income components by nature, with separate disclosure of non-recurring income and expense items.

To permit comparison, comments on 2001 operations refer to 2000 data restated to exclude the Nortel Inversora Group from the consolidation.

Group revenues for 2001 totalled 32,016 million euros, of which 30,818 million euros for the Telecom Italia Group, an increase of 12.8%, after deconsolidation of the Nortel Inversora Group from the 2000 figure (+ 2.5% at constant size, considering companies present in both years). Telecom Italia Group accounted for 96.3% of total revenues and achieved growth of 13.4% (i.e., excluding the Nortel Inversora Group); net of amounts due to other telecommunications operators, revenues totalled 27,104 million euros and rose by 2,649 million euros from 2000 (+ 10.8%).

The 3,649 million euros revenue growth at the Telecom Italia Group reflected positive performance in mobile telephone services and the contributions of the new companies included in the consolidation, in

particular the Entel Chile Group (1,247 million euros) and the Seat Pagine Gialle Group (1,707 million euros), which were offset in part by the exclusion from the consolidation of the manufacturing and system installation companies (Sirti and Italtel groups).

The growth of the mobile telephone services business was flanked by a reduction in revenues from wire-line telephone services, where, despite a significant increase in minutes, traffic revenues reflected a reduction in the average traffic yield (retail and wholesale), from 5.5 euro cents per minute in 2000 to 3.9 euro cents per minute in 2001.

Operating costs and other net charges totalled 26,678 million euros in 2001 (of which 24,074 million euros for the Telecom Italia Group), an increase of 3,416 million euros from 2000 (23,262 million euros, of which 20,617 million euros for the Telecom Italia Group). As a percentage of revenues, excluding amortisation of consolidation goodwill, the heading decreased by 0.9 percentage points (76.2% in 2001, against 77.1% the previous year).

Costs of materials and services rose by 2,272 million euros, mainly as a result of the inclusion of the Entel Chile Group and the Seat Pagine Gialle Group in the consolidation (whose 2001 consumptions amounted overall to 1,693 million euros), higher costs at Telecom Italia due to rents of 252 million euros on property transferred to IM.SER (offset by lower amortisation charges) and higher costs for the operation and development of mobile telecommunications services in and outside Italy; such increases were offset only in part by the exclusion of the manufacturing and installation companies from the consolidation area. Costs for the year included contributions totalling 524 million euros to public authorities for the operation of telecommunications services, of which 290 million euros for Telecom Italia, 182 million euros for TIM and 52 million euros for overseas subsidiary companies.

The ratio of costs of materials and services to revenues rose to 42.1% from 39.4% in 2000.

Labour costs, at 4,877 million euros, were largely unchanged (–60 million euros) from 2000. They reflected the exclusion of the Sirti and Italtel groups from the consolidation for 383 million euros and lower labour costs at Telecom Italia, as a result of the reduction in the workforce due to the application of mobility schemes, offset to a large extent by the inclusion in the consolidation of the Entel Chile Group (114 million euros) and the Seat Pagine Gialle Group (360 million euros). As a proportion of revenues, labour costs decreased from 17.4% in 2000 to 15.2% in 2001.

Depreciation and amortisation charges amounted to 7,641 million euros (6,519 million euros in 2000). They included charges totalling 3,561 million euros in respect of intangible fixed assets (of which 2,278

million euros for goodwill on the acquisition of equity investments in controlled companies) and 4,080 million euros in respect of tangible fixed assets. The overall increase of 1,122 million euros arose mainly from higher goodwill amortisation charges (+908 million euros, of which 574 million euros for the acquisition of Seat Pagine Gialle, 102 million euros for the acquisition of Jet Multimedia and 99 million euros for the companies in the Seat Pagine Gialle group), which were offset only in part by the reduction of 99 million euros in depreciation charges on tangible fixed assets, which related almost entirely to the Telecom Italia Group.

Provisions for writedowns and risks amounted overall to 758 million euros (654 million euros in 2000) as follows:

EBIT before non-recurring income and charges for 2001 therefore amounted to 5,338 million euros, an improvement of 226 million euros (+4.4%) from the previous year (5,112 million euros).

Non-recurring income amounted to 999 million euros (1,705 million euros in 2000). It consisted of 465 million euros for capital gains from the year’s disposals (1,408 million euros in 2000) and 534 million euros for sundry income (297 million euros in 2000).

Capital gains from disposals totalled 465 million euros, of which 392 million euros for the Telecom Italia Group, as follows:

Capital gains for the other Group companies amounted to 73 million euros, as follows:

Other non-recurring income amounted to 534 million euros; this included 460 million euros for the Telecom Italia Group, as follows:

The 74 million euros of other non-recurring income for the other Group companies included:

Non-recurring charges amounted overall to 4,354 million euros (1,583 million in 2000); they included 3,947 million euros at the Telecom Italia Group, as follows:

Non-recurring charges for the other Group companies amounted to 407 million euros, as follows:

EBIT after the above non-recurring charges, was positive, at 1,983 million euros, but down from 5,234 million euros reported in 2000.

Net income from equity investments totalled 221 million euros (391 million in 2000) and included 154 million for the Telecom Italia Group (301 million in 2000), consisting largely of dividends from investee companies and net gains from the sale of equity investments in listed companies.

The residual amount of 67 million euros included 24 million euros from the sale of rights on Olivetti shares in the Olivetti International portfolio.

Interest expense and other net financial charges amounted to a total of 3,105 million euros (1,673 million euros in 2000), of which 2,153 million euros related to the Telecom Italia Group (609 million euros in 2000) and 952 million euros to the other Group companies (1,064 million euros in 2000).

Net financial charges at the Telecom Italia Group increased by 1,544 million euros as a result of the Group’s increased financial exposure, the impact of consolidation of the income statements of the Maxitel Group (net financial charges of 187 million euros), the Seat Pagine Gialle Group (85 million euros) and the Entel Chile Group (67 million euros), and charges arising from the re-negotiation of Telecom Italia put/call options on Seat shares (569 million euros).

Net financial charges for the other companies decreased by 112 million euros, due to lower average financial exposure as a result of the share capital increases subscribed during the year and also to debt-refinancing at lower servicing charges through the liquidity raised by the capital increases and bond issues.

Value adjustments to financial assets generated an overall charge of 2,196 million euros (1,194 million euros in 2000), of which 1,955 million euros for the Telecom Italia Group (1,147 million euros in 2000) and 241 million euros for the other Group companies (47 million euros in 2000).

Value adjustments for the Telecom Italia Group (1,955 million euros) included 316 million euros for the Group’s share of profit and losses of companies valued with the equity method, including amortisation of goodwill arising on acquisition; the heading reflected the loss posted by IS Tim (334 million euros) as a result of start-up costs and the impact of the currency crisis in Turkey with application of inflation accounting procedures, the writedown of Stream (241 million euros), the writedown of listed shares and securities held as current assets to reflect market values (291 million), the 238 million euros loss posted by the Nortel Inversora Group (as a result of the economic crisis in Argentina, in particular exchange rate losses on debt and writedowns of securities) and the 259 million euros writedown of Astrolink charged by Telespazio upon termination of the project.

Value adjustments relating to the other Group companies amounted to 241 million euros (47 million euros in 2000), as follows:

Income taxes for 2001 amounted to 579 million euros (1,813 million euros in 2000), relating in the main to the Telecom Italia Group (951 million euros) and to other Olivetti investee companies (24 million euros), offset by tax benefit (net of current taxes and tax consolidation adjustments) at Olivetti S.p.A. through use of the deferred tax reserve.

Income attributable to minority interests amounted to 586 million euros (compared to a loss of 1,885 million euros in 2000) and consisted chiefly of earnings attributable to Telecom Italia Group minority shareholders.

As a result, the Group posted a net loss for 2001 of 3,090 million euros (a loss of 940 million euros in 2000); excluding amortisation of goodwill on the acquisition of Telecom Italia, the Group net loss amounted to 1,791 million euros (net earnings of 111 million euros in 2000).

Analysis of the Group balance sheet

The reclassified balance sheet of the Olivetti Group at 31 December 2001 is set out below: