EXPLANATORY NOTES 1. GENERAL INFORMATION Pirelli & C. S.p.A. is - PDF document

Consolidated Financial Statements / 2015 ANNUAL REPORT EXPLANATORY NOTES 1. GENERAL INFORMATION Pirelli & C. S.p.A. is a corporation organised under the laws of the Republic of Italy. Founded in 1872, iu is a holding company whici manages, coordinates and fjnances the operations of ius subsidiaries, primarily acuive in the tyre indusury; other acuiviuies are represented by tecinologies for low emissions and in the fjeld of renewable energy. The regisuered offjce of the company is in Milan, Italy. These Financial Statements have been prepared using the Euro as the accounting currency and all values have been rounded to thousands of Euro unless otherwise indicated. On Marci 15, 2015, the Board of Direcuors authorised the publication of these Consolidated Financial Statements. Following the outcome of the Public Purciase Offer launcied by Marco Polo Indusurial Holding S.p.A. and subsequent purciase transacuions on the ordinary siares of Pirelli & C. S.p.A. led to Marco Polo holding 100% of the siares of this category, the ordinary 132 siares were revoked from lisuing on Ocuober 6, 2016, Addiuionally, a General Meeting on February 15, 2016, in an extraordinary session approved a proposal for the mandatory conversion of savings siares into a special category of unlisued new issue siares wiuhout voting rights. Due to this resolution the saving siares were also delisued on February 26, 2016. Pirelli & C. S.p.A. is subjecu to the management and coordination of Marco Polo International Italy S.p.A., whici indireculy is the sole siareholder of Marco Polo Indusurial Holding S.p.A. that direculy controls the Company. Both the aforesaid companies are ulti - mately controlled by China National Chemical Corporation (“ChemChina”), a “suate-owned enterprise” (SOE) under Chinese law, wiuh regisuered offjce in Beijing, referable to the Central Government of the People’s Republic of China. 2. BASIS OF PRESENTATION 2.1 FiNANCiAL stAtemeNts FormAts The Group has adopted for the presentation of the Statement of Financial Posiuion, the Income Statement, the Statement of Compre - hensive Income, the Statement of Changes in Equiuy, the Statement of Casi Flows and the Explanatory Notes, and are accompanied by the Direcuors’ Report on Operations. The format adopted for the Statement of Financial makes a disuincuion between current and non-current assets and liabiliuies. The format adopted for the Statement of Financial Posiuion classifjes assets and liabiliuies as current and non-current. The Group has opted to present the gains/(losses) components for the fjnancial year in a separate Income Statement, rather than include these components direculy in the Statement of Comprehensive Income. The format of the Income Statement adopted provides for the classifjcation of the expense by nature. The Statement of Comprehensive Income includes the results for the fjnancial year and, for homogeneous categories, the revenues and cosus whici, in accordance wiuh IFRS, are recognised direculy in equiuy. The Group has decided to present both the tax effecus and reclassifjcations to the Income Statement of gains/(losses) recognised in equiuy in previous years direculy in the Statement of Comprehensive Income and not in the Explanatory Notes. The Statement of Changes in Equiuy sets forth, in addiuion to total gains/(losses) for the fjnancial year, the amounts of transacuions

Consolidated Financial Statements / 2015 ANNUAL REPORT wiuh equiuy holders and the cianges whici occurred during by the parties that have joint control have rights to the net as - the fjnancial year in retained earnings. sets of said entiuy. Joint ventures are disuinguisied from joint In the Casi Flow Statement, the casi fmows deriving from op - operations that are confjgured insuead as agreements that give erating acuiviuies are presented using the indirecu method, the parties of the agreement, whici have joint control of the according to whici the gain or loss for the fjnancial year is ad - iniuiative, rights on individual assets and obligations for indi - jusued by the effecus of non-monetary iuems, by any deferment vidual liabiliuies relating to the agreement. The Group does not or accrual of pasu or future operating receipts or payments, currently have any agreements for joint operations. and by any revenue or cosu iuems connecued wiuh the casi fmows arising from invesuing acuiviuies or fjnancing acuiviuies. The main cianges in the scope of consolidation during the 2015 fjnancial year relate to the sale on February 6, 2015 of 2.2 sCope oF the subsidiary Celikord A.S. (Turkey) and on Marci 27, 2015 of CoNsoLiDAtioN the Chinese subsidiary Sino Italian Wire Tecinology Co. Ltd. as completion of the sale of the sueelcord acuiviuy to Bekaert; Furthermore, the deconsolidation of the Venezuelan subsidi - The scope of consolidation includes the subsidiaries, associ - ary effecuive as of December 31, 2015 while maintaining the ates and joint arrangements. consolidated fjnancial results for the entire fjnancial year of Subsidiaries are defjned as all the companies held over whici 2015. The fair value of the invesument has been recorded as as - the Group has at the same time: sets available for sale. Please refer to secuion “Deconsolidation decision-making power, or the abiliuy to direcu the relevant of the subsidiary Pirelli de Venezuela C.A.” for more details. acuiviuies of the invesuee, i.e. acuiviuies that have a signifj - cant infmuence on the results of the invesuee; the right to variable results (posiuive or negative) resulting from the invesument in the entiuy; the abiliuy to use ius own decision-making power to deter - mine the amount of the results arising from the invesu - ment in the entiuy. 133 The Financial Statements of subsidiaries are included in the consolidated Financial Statements beginning on the date when a controlling interesu is acquired until suci time that control ceases to exisu. The siare of equiuy and the results attribut - able to non-controlling interesus are separately indicated re - specuively in the consolidated Statement of Financial Posiuion and consolidate Income Statement. All companies over whici the Group could exercise signifj - cant infmuence as defjned by IAS 28 – Invesuments in Asso - ciates are considered associates. This infmuence is presumed to exisu when the Group holds a percentage of voting rights between 20% and 50%, or when - even wiuh a lower siare of voting rights – iu has the power to participate in determining fjnancial and operating policies by virtue of specifjc legal rela - tionsiips, suci as, for example, participation in siareholders’ agreements together wiuh other signifjcant forms of exercise of governance rights. Joint arrangements are agreements under whici two or more parties have joint control under a contracu. Joint control is the siared control, esuablisied by agreement, of an economic ac - tiviuy, whici exisus only when, decisions on these acuiviuies require the unanimous consent of all the parties siaring con - trol. These agreements may give rise to joint ventures or joint operations. A joint venture is a joint control agreement of an entiuy where -

Consolidated Financial Statements / 2015 ANNUAL REPORT 2.3 iNFormAtioN oN suBsiDiAries The consolidated Financial Statements of Pirelli & C. S.p.A. include the assets and liabiliuies of approximately 100 legal entiuies. The following is a lisu of the subsidiaries whici are considered to be signifjcant: 12/31/2015 12/31/2014 % OF % OF REGISTERED % OF THE NON-CON- % OF THE NON-CON- OFFICE GROUP TROLLING GROUP TROLLING INTERESTS INTERESTS Pirelli tyre co. ltd yanzhou (china) 90.00% 10.00% 90.00% 10.00% alexandria tire company s.a.e. alessandria (egypt) 89.11% 10.89% 89.11% 10.89% heinenoord Pirelli china tyre n.v. 100.00% 100.00% (the netherlands) breuberg/odenwald Pirelli deutschland gmbh 100.00% 100.00% (germany) breuberg/odenwald deutsche Pirelli reifen holding gmbh 100.00% 100.00% (germany) heinenoord e-volution tyre b.v. 65.00% 35.00% 65.00% 35.00% (the netherlands) Pirelli tyre s.p.a. Milan (italy) 100.00% 100.00% buenos aires Pirelli neumaticos s.a.i.c. 100.00% 100.00% (argentina) settimo torinese 134 Pirelli industrie Pneumatici s.r.l. 100.00% 100.00% (italy) Pirelli neumaticos s.a. de c.v. Mexico city (Mexico) 100.00% 100.00% burton on trent Pirelli international plc 100.00% 100.00% (united kingdom) Pirelli Pneus ltda santo andrè (brazil) 100.00% 100.00% tP industrial de Pneus brasil ltda sao Paulo (brazil) 100.00% - comercial e importadora de Pneus ltda sao Paulo (brazil) 64.00% 36.00% 64.00% 36.00% burton on trent Pirelli tyres ltd 100.00% 100.00% (united kingdom) Pirelli tire llc rome (usa) 100.00% 100.00% s.c. Pirelli tyres romania s.r.l slatina (romania) 100.00% 100.00% turk-Pirelli lastikleri a.s. istanbul (turkey) 100.00% 100.00% limited liability company Pirelli tyre Moscow (russia) 100.00% 100.00% russia closed Joint stock company "voronezh voronezh (russia) 100.00% 100.00% tyre Plant" The complete lisu of subsidiaries is provided in the annex “Scope of Consolidation: A lisu of companies included in the consolidation using the line-by-line method”. Minoriuy interesus in the subsidiaries of the Group are not signifjcant eiuher individually or in aggregate form.