2019 ANNUAL REPORT Pirelli & C

— 2019 ANNUAL REPORT Pirelli & C. S.p.A. – 2019 Annual Report CONTENTS CORPORATE BODIES ...................................................................................................................... 5 PRESENTATION OF 2019 INTEGRATED ANNUAL REPORT ........................................................8 DIRECTORS’ REPORT ON OPERATIONS ....................................................................................10 MACROECONOMIC AND MARKET SCENARIO..................................................................... 11 SIGNIFICANT EVENTS OF 2019 .............................................................................................14 GROUP PERFORMANCE AND RESULTS ..............................................................................15 RESEARCH AND DEVELOPMENT ACTIVITIES .....................................................................29 PARENT COMPANY HIGHLIGHTS .........................................................................................34 RISK FACTORS AND UNCERTAINTY ....................................................................................36 OUTLOOK FOR THE 2020 - 2022 THREE-YEAR PERIOD .....................................................50 SIGNIFICANT EVENTS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR ............... 52 ALTERNATIVE PERFORMANCE INDICATORS .....................................................................53 OTHER INFORMATION ...........................................................................................................58 REPORT ON RESPONSIBLE MANAGEMENT OF THE VALUE CHAIN - CONSOLIDATED NON-FINANCIAL DISCLOSURE PURSUANT TO LEGISLATIVE DECREE OF DECEMBER 30, 2016, N. 254 .............................................................................................................................. 62 METHODOLOGICAL NOTE .....................................................................................................63 ECONOMIC DIMENSION .........................................................................................................80 ENVIRONMENTAL DIMENSION ............................................................................................111 SOCIAL DIMENSION ............................................................................................................. 144 REPORT ON THE CORPORATE GOVERNANCE AND SHARE OWNERSHIP OF PIRELLI & C. S.p.A. PURSUANT TO ARTICLE 123-BIS TUF ........................................................................ 203 GLOSSARY ............................................................................................................................ 204 INTRODUCTION .................................................................................................................... 208 COMPANY PROFILE .............................................................................................................208 INFORMATION ON THE OWNERSHIP STRUCTURE ..........................................................210 COMPLIANCE ........................................................................................................................ 218 BOARD OF DIRECTORS .......................................................................................................219 PROCESSING OF CORPORATE INFORMATION ................................................................234 BOARD COMMITTEES ..........................................................................................................234 STRATEGIES COMMITTEE ...................................................................................................236 1 Pirelli & C. S.p.A. – 2019 Annual Report APPOINTMENTS AND SUCCESSION COMMITTEE ............................................................237 RELATED-PARTY TRANSACTIONS COMMITTEE...............................................................238 REMUNERATION COMMITTEE ............................................................................................239 REMUNERATION OF THE DIRECTORS...............................................................................240 AUDIT, RISKS, SUSTAINABILITY AND CORPORATE GOVERNANCE COMMITTEE ........ 240 SYSTEM OF INTERNAL CONTROL AND RISK MANAGEMENT ......................................... 242 INTERESTS OF THE DIRECTORS AND RELATED-PARTY TRANSACTIONS ................... 248 BOARD OF STATUTORY AUDITORS ...................................................................................248 GENERAL MANAGER OPERATIONS ...................................................................................252 INFORMATION FLOWS TO THE DIRECTORS AND STATUTORY AUDITORS .................. 252 RELATIONS WITH SHAREHOLDERS ...................................................................................253 SHAREHOLDERS’ MEETINGS ..............................................................................................253 CHANGES SINCE THE END OF THE YEAR.........................................................................255 THE PIRELLI WEBSITE .........................................................................................................255 CONSIDERATIONS ON THE LETTER OF 19 DECEMBER 2019 BY THE CHAIRMAN OF THE CORPORATE GOVERNANCE COMMITTEE ................................................................256 REPORT ON THE REMUNERATION POLICY AND COMPENSATION PAID ............................. 271 REMUNERATION POLICY FOR YEAR2020 .........................................................................277 REPORT ON COMPENSATION PAID FOR YEAR 2019 .......................................................310 CONSOLIDATED FINANCIAL STATEMENTS ..............................................................................323 FINANCIAL STATEMENTS ....................................................................................................324 EXPLANATORY NOTES ........................................................................................................330 SCOPE OF CONSOLIDATION ...............................................................................................438 PIRELLI & C. S.p.A. SEPARATE FINANCIAL STATEMENTS ......................................................445 FINANCIAL STATEMENTS ....................................................................................................446 EXPLANATORY NOTES ........................................................................................................451 ANNEXES TO THE EXPLANATORY NOTES ........................................................................507 REPORT OF THE BOARD OF STATUTORY AUDITORS TO THE SHAREHOLDERS’ MEETING ................................................................................................................................ 513 PROPOSAL FOR THE ALLOCATION OF THE RESULT .............................................................532 CERTIFICATIONS ......................................................................................................................... 534 2 Pirelli & C. S.p.A. – 2019 Annual Report a. Certification of the Consolidated Financial Statements pursuant to art. 154 bis of Legislative Decree 58 of February 24, 1998, and pursuant to article 81-ter of Consob Regulation No. 11971 of May 14, 1999, as amended ......................................................534 b. Independent auditors report on the Consolidated Financial Statements ......................... 536 c. Certification of the Separate Financial Statements pursuant to art. 154 bis of Legislative Decree 58 of February 24, 1998, and pursuant to article 81-ter of Consob Regulation No. 11971 of May 14, 1999, as amended ......................................................544 d. Independent auditors report on Separate Financial Statements ......................................546 e. GRI Content Index and Correlation Tables ......................................................................552 f. Independent Auditor’s Report on the Consolidated Non-Financial Disclosure in accordance with article 3, paragraph 10 of Legislative Decree 254/2016 and with article 5 of CONSOB Regulation 20267 adopted by resolution of January 2018 ............. 569 3 Pirelli & C. S.p.A. – 2019 Annual Report 4 Corporate bodies Pirelli & C. S.p.A. – 2019 Annual Report CORPORATE BODIES Board of Directors1 Chairman Ning Gaoning Executive Vice Chairman and Chief Executive Officer Marco Tronchetti Provera Director Yang Xingqiang Director Bai Xinping Director Giorgio Luca Bruno Independent Director Laura Cioli Independent Director Domenico De Sole Independent Director Fan Xiaohua Director Ze’ev Goldberg Independent Director Giovanni Lo Storto Independent Director Marisa Pappalardo Independent Director Cristina Scocchia Independent Director Tao Haisu Director Giovanni Tronchetti Provera Independent Director Wei Yintao Secretary of the Board Alberto Bastanzio 1 Appointment: August 1, 2017 effective August 31, 2017. Expiry: Expiry: Shareholders’ Meeting convened for the approval of the Financial Statements at December 31, 2019. The Director Giovanni Lo Storto was appointed by the Shareholders’ Meeting held on May 15, 2018. Ning Gaoning was co-opted by the Board of Directors on August 7, 2018, (replacing Ren Jianxin, who resigned on July 30, 2018) and was confirmed as Director and Chairman by the Shareholders’ Meeting held on May 15, 2019. 5 Pirelli & C. S.p.A. – 2019 Annual Report Corporate bodies Board of Statutory Auditors2 Chairman Francesco Fallacara Statutory Auditors Fabio Artoni Antonella Carù Luca Nicodemi Alberto Villani Alternate Auditors Elenio

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