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Investments held by Directors, Statutory Auditors and General Managers Pursuant to article 33 of Consob Regulation No. 11520 of July 1, 1998 and Legislative Decree No. 58 of February 24, 1998, the following information is provided as regards the investments held in the company Pirelli S.p.A., and its subsidiaries, by the Directors, Statutory Auditors and General Managers, either directly or through subsidiaries, trustee companies or individual persons, as resulting from the shareholders’ register at December 31, 1998, from notices received or other information acquired from the same Directors, Statutory Auditors and General Managers. Name Company No. of shares No. of No. of No. of shares in which held at prior shares shares held at investment year-end acquired sold current held year-end • Pirelli Alberto Pirelli spa 0 682,517 (*) 0 682,517 • Buora Carlo Pirelli spa 0 2,390,517 (*) 648,000 1,742,517 • Coppola di Canzano Eugenio Pirelli spa 39,152 0 (*) 0 39,152 • Ferrario Giovanni Pirelli spa 0 1,227,517 (*) 0 1,227,517 • Morchio Giuseppe Pirelli spa 0 2,390,517 (*) 1,088,000 1,302,517 • Perissich Riccardo Pirelli spa 0 577,517 (*) 0 577,517 • Presutti Ennio Pirelli spa 30,000 0 (*) 0 30,000 • Puri Negri Carlo Alessandro Pirelli spa 0 430,000 (*) 0 430,000 • Sozzani Vincenzo Pirelli spa 32,483 0 (*) 0 32,483 • Castagna Adalberto Pirelli spa 1 802,517 (*) 325,000 477,518 • Guatri Luigi (**) Pirelli spa 60,000 30,000 (*) 30,000 60,000 (*) Bonus shares assigned by Company. (**) Shares held by spouse. i 45
Corporate Governance As represented in the previous two years, the Board of Directors, at the proper time, conferred to the Chairman-CEO the powers necessary to carry out all the acts pertaining to corporate activity, to have single signature powers, with the exception of the power to issue guarantees for obligations of the Company and the subsidiaries in excess of single amounts of Lire 50 billion or guarantees in the interest of third parties for obligations in excess of single amounts of Lire 20 billion; in these last cases, a joint signature with the General Manager of the Finance and Administration Department is required. Specific and more limited powers were conferred to the General Managers and Management, to be used in carrying out their specific responsibilities. Also during 1998, the Chairman, the General Managers and Management used the powers conferred to them to carry out the normal operations of the company (of which the Directors of the company were periodically informed), waiving such powers in the case of significant transactions in terms of quality or value from an economic and financial standpoint, and submitting them to the same Board of Directors. By resolution of the extraordinary shareholders’ meeting of December 22, 1998, the by-laws were amended to include the procedures which up to then had been adopted, by which the directors advise the board of statutory auditors concerning the activities and any important economic, financial or equity transactions carried out by the company or the subsidiaries as well as transactions involving any potential conflict of interest. It should also be considered that in view of the organization structure of the Group, characterized by the existence of autonomous companies in several countries operating in the two main business segments, individual acts are not frequently carried out - within the Group holding company taken alone - which have a considerable impact on the economicequity situation of the Group itself; instead, at this level, strategic and operating guidelines are carried out, as well as the coordination of the specific segments and functions of the Group. Both the Group holding company and the subsidiary companies, however, are required to follow the policies and rules which govern the main areas of business, in addition to the administrative principles and rules of the Group governing the accounting treatment of administrative events and the preparation of the consolidated financial statements and period statements. Within the internal control system of the Group, organized in such a way as to ensure proper disclosure and an adequate system of control of all its activities and, in particular, in the major areas of corporate risk, there is also a planning and control system, by sector and operating unit, which monthly produces a detailed report to the General Managers - so that they have a useful instrument with which to monitor specific activities. In order to follow through on the strategies and guidelines adopted by the Group holding company, the General Managers of the Sectors and Management also sit on the boards of directors of the largest subsidiaries. Finally, reporting directly to the Chairman-CEO is the Auditing Department (not involved in financial operating activities and in the preparation of the financial statements and period statements) which has the main responsibility for seeing that the system of internal control is functioning and is adequate in terms of effectiveness and efficiency. 46 i
Page 1 and 2: Pirelli S.p.A. Milan Annual Report
Page 3 and 4: Contents Board of Directors; Board
Page 5 and 6: Structure of Pirelli Group at Decem
Page 7 and 8: Five-year Summary of Selected Conso
Page 9 and 10: Gross Domestic Product of the main
Page 11 and 12: 1997-1998 trend in raw materials pr
Page 13 and 14: Distribution of Pirelli Group 1998
Page 15 and 16: The added value of submarine system
Page 17 and 18: Cables and Systems Sector Overall p
Page 19 and 20: Distribution of 1998 Cables and Sys
Page 21 and 22: Advanced studies within the laborat
Page 23 and 24: The first submarine optical amplifi
Page 25 and 26: In Iceland, Pirelli installed 150 k
Page 27 and 28: The rotating platform of the Pirell
Page 29 and 30: The new Audi TT is fitted with ultr
Page 31 and 32: The Lamborghini Diablo is among the
Page 33 and 34: The trend of truck tyres in Brazil
Page 35 and 36: New types and sizes of the “Scorp
Page 37 and 38: Pirelli supplied the Berlin electri
Page 39 and 40: The Pirelli Corporate Web, the Intr
Page 41 and 42: Certification activities in line wi
Page 43 and 44: Distribution of Group personnel by
Page 45: • revenues for goods and services
Page 49 and 50: Results of operations The 1998 resu
Page 51 and 52: Appointment of the audit firm Upon
Page 53 and 54: Consolidated balance sheets Assets
Page 55 and 56: Liabilities and shareholders’ equ
Page 57 and 58: Consolidated statements of income (
Page 59 and 60: - positive differences, where not a
Page 61 and 62: • Provision for income taxes The
Page 63 and 64: "Investments in associated companie
Page 65 and 66: - Other receivables Other receivabl
Page 67 and 68: Provisions for income taxes The pro
Page 69 and 70: An analysis of payables by due date
Page 71 and 72: MEMORANDUM ACCOUNTS Memorandum acco
Page 73 and 74: Personnel costs Personnel costs con
Page 75 and 76: for liabilities and expenses accrue
Page 77 and 78: R&D expenditures In 1998 the Group
Page 79 and 80: Consolidated statements of cash flo
Page 81 and 82: Reconciliation of net results and s
Page 83 and 84: Assets (continued) (in thousands of
Page 85 and 86: Memorandum accounts (in thousands o
Page 87 and 88: List of investments Companies conso
Page 89 and 90: Percentage Company Activity Headqua
Page 91 and 92: Percentage Company Activity Headqua
Page 93 and 94: Other investments in subsidiaries a
Page 95 and 96: improvements and loan acquisition c
Page 97 and 98:
Extraordinary part of the sharehold
Page 99 and 100:
the two companies, given that that
Page 101 and 102:
the formation of the value in this
Page 103 and 104:
The weighted average cost of capita
Page 105 and 106:
Result of the valuation and the sha
Page 107 and 108:
Entering into the merits of the mer
Page 109 and 110:
Group structure at December 31, 199
Page 111 and 112:
Notice pursuant to art. 10, paragra
Page 113 and 114:
1.i - Evaluations by the Board of D
Page 115 and 116:
December 31, 1998, with the cancell
Page 117 and 118:
Amendment of the by-laws Present wo
Page 119 and 120:
6. Effects of the merger The transa
Page 121 and 122:
and abroad, pursuant to the terms o
Page 123 and 124:
or Managing Directors, the chair sh
Page 125 and 126:
e enclosed with the lists together
Page 127 and 128:
Attachment 2 Pirelli S.p.A. - Milan
Page 129 and 130:
Article 10 In view of the nature of
Page 131 and 132:
Article 19 The Board is authorized
Page 133 and 134:
Failing any lists, the Board of Sta
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