12. INVESTMENTS IN ASSOCIATES

Equity investments in associates amounted to euro 140,114 thousand compared with euro 152,927 thousand at December 31, 2010.

The following changes occurred during the year:

The following table shows in detail the changes in equity investments in associates:

The equity investment in the company RCS MediaGroup S.p.A (5.3% of the voting shares) is owned by PIRELLI & C. S.p.A., one of the major shareholders. It is represented on the Board of Directors and is a party to the shareholders’ agreement, which aims to ensure the stability of the shareholding structure and coherent strategies in the management of the RCS Group (the parties to the agreement hold shares representing 63.5% of the share capital).

In order to consolidate this equity investment with the equity method, the last published accounts were used, as set out in the interim financial report at September 30, 2011 (similarly to what has been done for the financial statements at December 31, 2010, which considered the last published accounts, as set out in the interim financial report at September 30, 2010).

The decrease in the share price of this stock from December 31, 2010 and the worsening in flows of the consensus result versus those set out in the Plan are impairment indicators. Consequently, the equity investment was tested for impairment and adjusted to its value in use (euro 1.02 per share). Its value in use was determined on the basis of an independent appraisal. This resulted in an impairment loss of Euro 16,816 thousand that, in addition to the euro 1,015 thousand share of loss of the associate, resulted in a euro 17,831 thousand charge to the income statement.

The fair value attributable to the equity investment in the associate RCS MediaGroup S.p.A., which is listed on the Milan Stock Exchange, calculated using the reference price at December 31, 2011 (euro 0.68 per share), was euro 26.6 million (euro 40.7 million in 2010, using the reference price of euro 1.04 per share at December 31, 2010).

The item increases refer mainly to acquisition of an equity interest in GWM Renewable Energy II S.p.A. (GWM RE II), the vehicle that controls the renewable energy assets of the GWM Group, with a 16.87% shareholding. This was acquired through an aggregate outlay of euro 25,416 thousand. This was made in part through reinvestment of the proceeds from sale of its own equity investment in GP Energia S.p.A. for euro 7,680 thousand, a joint venture that was set up last year with the GWM Group to which PIRELLI, through its subsidiary Solar Utility S.p.A., had contributed its assets in the photovoltaic business. This equity investment is classified as an associate insofar as the Group exercises significant influence over it through, inter alia, assignment of some PIRELLI managers to it.

The item disposals and liquidations refers to the equity investment in CyOptics Inc. sold in January 2011 (euro 17,535 thousand) and to the equity investment in GP Energia mentioned hereinabove (euro 7,680 thousand).

In regard to the column “Share of net income (loss),” see the comments made below at note 35.1 “share of net income (loss) of associates and joint ventures.”

The highlights for the principal associates are illustrated as follows: