Pirelli & C.

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12. Interests of Directors and transactions with related parties

The Company has had rules of conduct for transactions with related parties, as defined by the IAS/IFRS accounting principles (signally IAS 24)73. in place since 2002. The purpose of these rules is to guarantee effective procedural and substantial correctness and transparency in transactions undertaken by the Company, directly or through subsidiaries, with parties related to itself.

On the basis of these rules, the Board is called on to approve transactions with related parties, including infragroup transactions, in advance, when the transactions are not typical or usual and concluded at standard conditions. To this end, the Board receives an adequate report on the nature of the relation, the ways in which the transaction is to be carried out, the conditions, including the economic conditions, for its execution, the evaluation procedure followed, and the underlying reasons and interest, as well as any risks for the company. If the relation is with a Director or with a related party through a Director, the Director concerned must – unless the Board decides otherwise - limit himself or herself to supplying clarification, and does not participate in the Board Meeting that will deliberate the transaction. Depending on the nature, value or other characteristics of the transaction, the Board of Directors, to ensure that the transaction is not carried out at incongruous conditions, is assisted by one or more experts who express their opinion on the economic and/or legal and/or technical aspects of the transaction. The Committee for Internal Control, Risks and Corporate Governance monitors the respect of the principles that the Company has formulated for execution of transactions with related parties.

Some transactions with related parties were undertaken in the 2009 financial year, and some of them, although typical and usual, and/or at market conditions, were in any event submitted to the Committee for Internal Control, Risks and Corporate Governance for approval; in this respect, see the section entitled “Committee for Internal Control Risks and Corporate Governance”.

Finally, it should be noted that new regulations for transactions with related parties will be issued during the 2010 financial year. The Company will assess the content of the new regulations and the consequent need to adopt new procedures.

73 The text of the principles of conduct is printed at the end of this Report and is also available in the Governance section of the Company website, www.pirelli.com