Directors' interests and transactions with Related Parties

The Company had established the principles of conduct, applicable since 2002, in order to execute transactions with related parties which were designed to assure a substantial and procedural correctness and transparency in the transactions executed by the Company, directly or through subsidiaries with parties related to it.

The Company subsequently approved a specific and structured procedure for transactions with related parties (“TRP Procedure”) on November 3, 2010 following Consob’s adoption of special regulations governing transactions with related parties in March 2010 (“TRP Regulations”).

In particular, the Procedure adopted by the Company establishes procedural rules designed to enhance further the substantial and procedural transparency of the transactions executed by Pirelli with related parties. The procedural policies adopted by the Company are more rigorous compared to the requirements envisaged by the TRP Regulations; in fact: Pirelli adopted very restrictive low thresholds and established higher qualitative thresholds not prescribed by the Consob Regulations. In particular, Pirelli defined a very low threshold (150 thousand euro) (that has the consequence of exempting the transaction from the application of the procedure) and a “qualitative” threshold that qualifies a transaction as being of “greater significance” (for which prior approval by the Board of Directors is required, in addition to approval by the Independent Directors), regardless of the corresponding value (even if lower than the thresholds established by the Procedure) when the transaction concerned has a significant impact on Pirelli’s business activities or may impact its managerial autonomy due to its nature, strategic importance, extent or commitments.

Furthermore, the TRP Procedure established that the opinion of the Committee for Transactions with Related Parties is also binding in the case of less significant transactions and has decided not to avail itself of the so-called whitewash mechanism in the event of an unfavourable opinion when concerning transactions with related parties of greater significance.

Pirelli has envisaged that the Committee invited to express its opinion on the transactions with related parties is always to be composed exclusively of Independent Directors, thereby, confirming the importance acknowledged to the role of the Independent Directors (and not only in the case of transactions with related parties of greater significance, as envisaged by the TRP Regulations).

Therefore, the mandatory approval by the competent Committee is also envisaged in this case, by adopting a more rigorous approach for all transactions with related parties compared to the requirements established in the Consob Regulations, (therefore, also for transactions of “lesser significance” and not only transactions of “greater significance” as prescribed by Consob.

The Board has deemed that the advisory committees set up within the Board of Directors shall comply with the characteristics and requirements envisaged by the Consob Regulations and those established by the TRP Procedure, and accordingly, has conferred the powers of the Committee for Transactions with Related Parties on the CICRCG, with the sole exception of the responsibilities concerning the remuneration of Directors and Executives with strategic business responsibilities, which are assigned to the Remuneration Committee.

Taking into account that the Company has endorsed the Consob recommendation that envisages reviewing the TRP Procedure at least every three years, the Board of Directors duly approved some marginal amendments to the TRP Procedure, in the meeting held on November 5, 2013 (therefore, after three years have elapsed from the adoption of the TRP Procedure), confirming the solution adopted during 2010, taking into account the opinion expressed by the Committee for Transactions with Related Parties and the evaluation expressed by the Board of Statutory Auditors with the unanimous vote of the respective members.

The reader is referred to the TRP Procedure published on the Pirelli Internet website for further information.