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PIRELLI GROUPPIRELLI GROUPPIRELLI GROUPSTRATEGIES & 1999 RESULTS

LONDON AND MILAN PRESENTATIONSTRATEGIES & 1999 RESULTSSTRATEGIES & 1999 RESULTS

LONDON AND MILAN PRESENTATIONLONDON AND MILAN PRESENTATION

Pirelli GroupPirelli Group

E-PIRELLIEE--PIRELLIPIRELLI

Total project investment :>Euro 1 bln ( Itl 2.000 bln )Total project investment :Total project investment :>Euro 1 >Euro 1 bln bln ( ( ItlItl 2.000 2.000 bln bln ))


E-PIRELLIEE--PIRELLIPIRELLI

2000 expected on-line salesEuro 1 bln

2000 expected on2000 expected on--line salesline salesEuro 1 Euro 1 blnbln


PICTURE OF GROUP INITIATIVESPICTURE OF GROUP INITIATIVESComponents, products and systemsComponents, products and systems ServicesServices

Pirelli Pirelli SpASpA Pirelli & C.Pirelli & C.

Create Value Create Value --IPOIPO

Innovate & Innovate & GrowGrow

International International developmentdevelopment

Post merger Post merger integration to integration to

world world leadershipleadership

RelaunchRelaunchwith radical with radical

company company innovationinnovation

Post merger Post merger integration integration

to local to local leadershipleadership

Develop new Develop new businesses businesses also abroadalso abroad

Break into new market spaces and boost operating performance Break into new market spaces and boost operating performance in all business areasin all business areas

Capture value creation Capture value creation opportunities through opportunities through

incubatorincubator

EE--business developments and innovations stemming from traditional business developments and innovations stemming from traditional businesses (e.g. Ebusinesses (e.g. E--TyresTyres))

Optical components

Optical Optical componentscomponents

Special Fibers

Special Special FibersFibers

TLC CablesTLC TLC

CablesCables

TLC Systems

(Submarine, …)

TLC TLC Systems Systems

(Submarine, (Submarine, …)…)

Energy Cables,

Systems, Devices

Energy Energy Cables, Cables,

Systems, Systems, DevicesDevices

TyresTyresTyres Real EstateReal Real

EstateEstateNew

Services (e.g.

UMTS, band-width)

New business

investments

New New Services Services

(e.g. (e.g. UMTS, UMTS,

bandband--width)width)New New

business business investmentsinvestments


EE--PIRELLI PERIMETERPIRELLI PERIMETERAND ENVISAGED INVESTMENTS AND ENVISAGED INVESTMENTS

Initiatives that integrate our suppliers, customers, endInitiatives that integrate our suppliers, customers, end--usersusers

EE--business developments and innovations stemming from traditional business developments and innovations stemming from traditional businesses (e.g. Ebusinesses (e.g. E--TyresTyres))

Optical components

Optical Optical componentscomponents

Special Fibers

Special Special FibersFibers

TLC CablesTLC TLC

CablesCables

TLC Systems

(Submarine,… )

TLC TLC Systems Systems

(Submarine,(Submarine,… )… )

Energy Cables,

Systems, Devices

Tyres Real Estate

New Services

(e.g. UMTS,

band-width)New

business investments

New New Services Services

(e.g. (e.g. UMTS, UMTS,

bandband--width)width)New New

business business investmentsinvestments


E - b u s i n e s s d e v e l o p m e n t s a n d i n n o v a t i o n s s t e m m i n g f r o m t r a d i t i o n a l b u s i n e s s e s

EE -- b u s i n e s s d e v e l o p m e n t s a n d i n n o v a t i o n s s t e m m i n g f r o m t r a d i t i o n a l b u s i n e s s d e v e l o p m e n t s a n d i n n o v a t i o n s s t e m m i n g f r o m t r a d i t i o n a l b u s i n e s s e sb u s i n e s s e s

Opt i ca l

c o m p o n e n t s

Opt i ca l Op t i ca l

c o m p o n e n t sc o m p o n e n t s

S p e c i a l F i b e r s

S p e c i a l F i b e r sS p e c i a l F i b e r s

C o m municatio

n

C a b l e s

C o m mC o m municatiounicatio

n n

C a b l e sC a b l e s

C o m m

unication

System

s ( S u b , … )

C o m mC o m m

unicatiounication n

SystemSystem

s ( S u b , s ( S u b , … )… )

N e w S e r v i c e

s ( e g.

U M T S , b a n d-

width)

N e w b u s i n e s

s

investments

N e w N e w S e r v i c eS e r v i c e

s (s ( e ge g. .

U M T S , U M T S , b a n db a n d--

width)width)

N e w N e w b u s i n e sb u s i n e s

s s

investminvestmentsents

VALUE ENHANCEMENT OF BUSINESSES

LINKED TO INTERNET DEMAND

VALUE ENHANCEMENT OF BUSINESSES VALUE ENHANCEMENT OF BUSINESSES

LINKED TO INTERNET DEMANDLINKED TO INTERNET DEMAND

• Pirelli among the founders of optical technologies

• Numerous patents and capability to produce components and

modules

• USD 6 Bln market, with 60% growth rate

• Start-up of High-Tech company in the USA, with local

management and 10% Cisco participation

•• Pirelli among the founders of optical technologiesPirelli among the founders of optical technologies

•• Numerous patents and capability to produce components and Numerous patents and capability to produce components and

modules modules

•• USD 6 USD 6 BlnBln market, with 60% growth rate market, with 60% growth rate

•• StartStart--up of Highup of High--Tech company in the USA, with local Tech company in the USA, with local

management and 10% Cisco participationmanagement and 10% Cisco participation

E.g. Optical ComponentsE.g. Optical ComponentsE.g. Optical Components

E n e rE n e r

g y g y

C a b lC a b le s , e s ,

S y s t eS y s t e

ms , ms , D e v iD e v i

c e sc e s

T y r eT y r ess & &

EE --

T y r eT y r ess

R e a l R e a l

E s t a tE s t a t

ee




Opt i ca l

c o m p o n e n t s





C o m municatio

n

C a b l e s


n n


C o m m

unication

System

s ( S u b , … )

C o m mC o m m

unicatiounication n

SystemSystem

s ( S u b , s ( S u b , … )… )

E n e rE n e r

g y g y


S y s t eS y s t e


c e sc e s


EE --

T y r eT y r ess

R e a l R e a l

E s t a tE s t a t

ee

N e w S e r v i c e

s ( e g.

U M T S , b a n d-

width)

N e w b u s i n e s

s

investments


s (s ( e ge g. .


width)width)


s s


• USD 7 Bln market

• Pirelli “wet technology” holder

• Start-up of dedicated company, complete with engineering

and installation services (10% Cisco participation)

• Synergies with submarine optical cables manufacture

•• USD 7 Bln marketUSD 7 Bln market

•• Pirelli “wet technology” holderPirelli “wet technology” holder

•• StartStart--up of dedicated company, complete with engineering up of dedicated company, complete with engineering

and installation services (10% Cisco participation)and installation services (10% Cisco participation)

•• Synergies with submarine optical cables manufactureSynergies with submarine optical cables manufacture

VALUE ENHANCEMENT OF BUSINESSES

LINKED TO INTERNET DEMAND

VALUE ENHANCEMENT OF BUSINESSES VALUE ENHANCEMENT OF BUSINESSES

LINKED TO INTERNET DEMANDLINKED TO INTERNET DEMAND

E.g. Submarine Optical

Systems

E.g. Submarine Optical E.g. Submarine Optical

SystemsSystems




Opt i ca l

c o m p o n e n t s





C o m municatio

n

C a b l e s


n n


C o m m

unication

System

s ( S u b , … )

C o m mC o m m

unicatiounication n

SystemSystem

s ( S u b , s ( S u b , … )… )

E n e rE n e r

g y g y


S y s t eS y s t e


c e sc e s


EE --

T y r eT y r ess

R e a l R e a l

E s t a tE s t a t

ee

N e w S e r v i c e

s ( e g.

U M T S , b a n d-

width)

N e w b u s i n e s

s

investments


s (s ( e ge g. .


width)width)


s s


Approximately 20 initiatives launched• Radical process and product innovation (MIRS), in Car, Truck and Motorcycle

tyre• Development of “Intelligent Tyre”, capable of interacting on- and off-line with:

•vehicle security systems•end-users•dealers•vehicle manufacturers

• Organization managed by “end to end” processes, integrating suppliers, customers, etc. through Internet

• Innovation in relations with customers and distribution channelsA change destined to revolutionize the sector’s profitability parameters

Approximately Approximately 20 initiatives20 initiatives launchedlaunched•• Radical process and product innovation (MIRS), in Car, Truck andRadical process and product innovation (MIRS), in Car, Truck and Motorcycle Motorcycle

tyretyre•• Development of “Intelligent Tyre”, capable of interacting onDevelopment of “Intelligent Tyre”, capable of interacting on-- and offand off--line with:line with:

••vehicle security systemsvehicle security systems••endend--usersusers••dealersdealers••vehicle manufacturersvehicle manufacturers

•• Organization managed by “end to end” processes, integrating suppOrganization managed by “end to end” processes, integrating suppliers, liers, customers, etc. through Internetcustomers, etc. through Internet

•• Innovation in relations with customers and distribution channelsInnovation in relations with customers and distribution channelsA change destined to A change destined to revolutionize the sector’s profitability parametersrevolutionize the sector’s profitability parameters

TRANSFORMATION OF CORE BUSINESSTRANSFORMATION OF CORE BUSINESSTRANSFORMATION OF CORE BUSINESS

E.g. E-TyreE.g. EE.g. E--TyreTyre




Opt i ca l

c o m p o n e n t s





C o m municatio

n

C a b l e s


n n


C o m m

unication

System

s ( S u b , … )

C o m mC o m m

unicatiounication n

SystemSystem

s ( S u b , s ( S u b , … )… )

E n e rE n e r

g y g y


S y s t eS y s t e


c e sc e s


EE --

T y r eT y r ess

R e a l R e a l

E s t a tE s t a t

ee

N e w S e r v i c e

s ( e g.

U M T S , b a n d-

width)

N e w b u s i n e s

s

investments


s (s ( e ge g. .


width)width)


s s


• In Italy, 20% of Pirelli sales to electrical distributors already made

through Internet

• The service permits 24 x 7 access to the following:

•product information

•sizing software

•order taking

•e-payment

•Track-Tracing - VMI (Vendor Managed Inventory)

•• In Italy, 20% of Pirelli sales to electrical distributors alreadIn Italy, 20% of Pirelli sales to electrical distributors already made y made

through Internetthrough Internet

•• The service permits 24 x 7 access to the following:The service permits 24 x 7 access to the following:

••product informationproduct information

••sizing softwaresizing software

••order takingorder taking

••ee--paymentpayment

••TrackTrack--Tracing Tracing -- VMI (Vendor Managed Inventory)VMI (Vendor Managed Inventory)

TRANSFORMATION OF CORE BUSINESSTRANSFORMATION OF CORE BUSINESSTRANSFORMATION OF CORE BUSINESS

E.g. B2B CablesE.g. B2B CablesE.g. B2B Cables



Opt i ca l

c o m p o n e n t s





C o m municatio

n

C a b l e s


n n


C o m m

unication

System

s ( S u b , … )

C o m mC o m m

unicatiounication n

SystemSystem

s ( S u b , s ( S u b , … )… )

E n e rE n e r

g y g y


S y s t eS y s t e


c e sc e s


EE --

T y r eT y r ess

R e a l R e a l

E s t a tE s t a t

ee

N e w S e r v i c e

s ( e g.

U M T S , b a n d-

width)

N e w b u s i n e s

s

investments


s (s ( e ge g. .


width)width)


s s


• Fund dedicated to High-Tech/Internet start-ups in Europe

• Investors:

•Pirelli, Camfin, Benetton, Caltagirone, Gazzoni

•Merrill Lynch, Mediobanca, Banca Intesa

• Management Company (My Qube) directed by G.L. Braggiotti

• First project: Italian Real Estate Portal

•• Fund dedicated to HighFund dedicated to High--Tech/Internet startTech/Internet start--ups in Europeups in Europe

•• Investors: Investors:

••Pirelli, Pirelli, CamfinCamfin, Benetton, , Benetton, CaltagironeCaltagirone, , Gazzoni Gazzoni

••MerrillMerrill Lynch, Lynch, MediobancaMediobanca, , Banca Intesa Banca Intesa

•• Management Company (My Qube) directed by G.L. Management Company (My Qube) directed by G.L. BraggiottiBraggiotti

•• First project: Italian Real Estate PortalFirst project: Italian Real Estate Portal

INVESTMENTS IN NEW BUSINESS

OPPORTUNITIES

INVESTMENTS IN NEW BUSINESS INVESTMENTS IN NEW BUSINESS

OPPORTUNITIESOPPORTUNITIES

E.g. Euro Cube FundE.g. Euro Cube FundE.g. Euro Cube Fund

Pirelli & Pirelli & CoCo..



Opt i ca l

c o m p o n e n t s





C o m municatio

n

C a b l e s


n n


C o m m

unication

System

s ( S u b , … )

C o m mC o m m

unicatiounication n

SystemSystem

s ( S u b , s ( S u b , … )… )

E n e rE n e r

g y g y


S y s t eS y s t e


c e sc e s


EE --

T y r eT y r ess

R e a l R e a l

E s t a tE s t a t

ee

N e w S e r v i c e

s ( e g.

U M T S , b a n d-

width)

N e w b u s i n e s

s

investments


s (s ( e ge g. .


width)width)


s s


• Pirelli participates in the Dix.it consortium bidding for the fifth

UMTS mobile telephony licence, with joint shares alongside e-

Biscom, Securfin, IFIL, Banca di Roma, e-Planet

•• Pirelli participates in the Dix.it consortium bidding for the fiPirelli participates in the Dix.it consortium bidding for the fifth fth

UMTS mobile telephony UMTS mobile telephony licencelicence, with joint shares alongside e, with joint shares alongside e--

BiscomBiscom, , SecurfinSecurfin, IFIL, , IFIL, Banca diBanca di Roma, eRoma, e--PlanetPlanet

INVESTMENTS IN NEW BUSINESS

OPPORTUNITIES

INVESTMENTS IN NEW BUSINESS INVESTMENTS IN NEW BUSINESS


E.g.: Dix.itE.g.: Dix.itE.g.: Dix.it




Opt i ca l

c o m p o n e n t s





C o m municatio

n

C a b l e s


n n


C o m m

unication

System

s ( S u b , … )

C o m mC o m m

unicatiounication n

SystemSystem

s ( S u b , s ( S u b , … )… )

E n e rE n e r

g y g y


S y s t eS y s t e


c e sc e s


EE --

T y r eT y r ess

R e a l R e a l

E s t a tE s t a t

ee

N e w S e r v i c e

s ( e g.

U M T S , b a n d-

width)

N e w b u s i n e s

s

investments


s (s ( e ge g. .


width)width)


s s


• Master in e-commerce

• Internet Award

•• Master in eMaster in e--commercecommerce

•• Internet AwardInternet Award

INVESTMENT IN NEW BUSINESS

OPPORTUNITIES

INVESTMENT IN NEW BUSINESS INVESTMENT IN NEW BUSINESS


Institutional initiativesInstitutional initiativesInstitutional initiatives



• Pirelli has ample resources to finance this

development (own funds and income derived

from Cisco operation)

• The Group has already put the planned

initiatives in stock

•• Pirelli has ample resources to finance this Pirelli has ample resources to finance this

development (own funds and income derived development (own funds and income derived

from Cisco operation)from Cisco operation)

•• The Group has already put the planned The Group has already put the planned

initiatives in stockinitiatives in stock

PIRELLI GROUPPIRELLI GROUPPIRELLI GROUP


InnovationInnovationTechnologyTechnology QualityQuality

Enhancing shareholder’s valueEnhancing shareholder’s value

byby

forfor

Customer satisfactionCustomer satisfaction

MISSIONMISSION


MAJOR EVENTS IN 1999/2000MAJOR EVENTS IN 1999/2000

Cables & SystemsCables & Systems

TyresTyresStrategic alliance with Cooper TireStrategic alliance with Cooper Tire

Acquisition ofAcquisition of ATCoATCo -- EgyptEgypt

New manufacturing process New manufacturing process -- MIRS MIRS

•• SiemensSiemens Power Cables DivisionPower Cables Division

•• Power cables and construction business ofPower cables and construction business of MetaMetal l Manufacturers Manufacturers -- (Australia)(Australia)

•• NKF power activities in Netherlands and FinlandNKF power activities in Netherlands and Finland

•• FOS (fibre optics)FOS (fibre optics)

•• BICCGeneral activities in UK, Italy, Asia and Africa BICCGeneral activities in UK, Italy, Asia and Africa

CorporateCorporateMerger with SIP Merger with SIP -- Société InternationaleSociété Internationale PirelliPirelli

AcquisitionsAcquisitions

AllianceAlliance

•• Strategic alliance with CiscoStrategic alliance with Cisco


THE CISCO DEAL THE CISCO DEAL

Teroptic sale

Gross capital gain

Related costs

Net Tax

Teroptic sale

Gross capital gain

Related costs

Net Tax

TOTALTOTAL

1,576

1,522

(93)

(298)

1,576

1,522

(93)

(298)

1,1311,131

Euro/ MlnEuro/ Mln

Impact on 1st quarter 2000Impact on 1st quarter 2000


2000 SCENARIO 2000 SCENARIO

NORTH AMERICANORTH AMERICA

GDP +3.8%Inflation rate 2.6%Interest rate 5.8%

GDP +3.8%Inflation rate 2.6%Interest rate 5.8%

EUROPEAN UNIONEUROPEAN UNION

GDP +3.1%Inflation rate 2% Interest rate 4%

GDP +3.1%Inflation rate 2% Interest rate 4%

JAPANJAPAN

GDP +0.7%GDP +0.7%

CHINACHINA

GDP +7.4%GDP +7.4%

BRAZILBRAZIL

GDP +2.2%Interest rate 18.4%

Inflation rate 7%

GDP +2.2%Interest rate 18.4%

Inflation rate 7%

EASTERN EUROPEEASTERN EUROPE SOUTH-EAST ASIASOUTH-EAST ASIA

TURKEYTURKEY

GDPHungary +4.6%

Czech Rep. +1.7%

Inflation rateHungary 8.6%

Czech Rep. 3.9%

GDPHungary +4.6%

Czech Rep. +1.7%

Inflation rateHungary 8.6%

Czech Rep. 3.9%

Strong recovery after the economic crisis

Strong recovery after the economic crisis

GDP +4.5 %Inflation rate 53%

GDP +4.5 %Inflation rate 53%


SHAREHOLDER STRUCTURE (as of 29/02/2000)

SHAREHOLDER STRUCTURE (as of 29/02/2000)

99.79%99.79% 100%100%

PIRELLI TYREHOLDING N.V.PIRELLI TYREHOLDING N.V.

PIRELLI & C.PIRELLI & C.

PIRELLI S.p.A.PIRELLI S.p.A.

BZ Group Holding Limited

BZ Group Holding Limited

10.6%10.6%

PIRELLI CAVIe SISTEMI S.p.A.

PIRELLI CAVIe SISTEMI S.p.A.

TREASURY SHARES AT 31TREASURY SHARES AT 31--1212--1999: 173,074,000 (9.1% of capital) 1999: 173,074,000 (9.1% of capital) BOOK VALUE: Euro Mln 336BOOK VALUE: Euro Mln 336

30.5%30.5%


TURNOVER AT 31.12.99TURNOVER AT 31.12.99BY GEOGRAPHIC AREABY GEOGRAPHIC AREABY SECTORBY SECTOR

33

44 55

22

1.2.3.4.5.

1.2.3.4.5.

ItalyRest of EuropeCentral and S. AmericaNorth AmericaAustralia, Asia and Africa

ItalyRest of EuropeCentral and S. AmericaNorth AmericaAustralia, Asia and Africa

12%46%17%15%10%

12%46%17%15%10%

1.2.1.2.

Cables & SystemsTyresCables & SystemsTyres

60%40%60%40%

6,482 Million Euro6,482 Million Euro

22

11 2233

114455


PROFIT & LOSSPROFIT & LOSS

FULL YEAR RESULTSFULL YEAR RESULTS

19991999Euro/ MlnEuro/ Mln1998@1998@ Var. Var. 19981998Var. Var.

Net SalesNet Sales

Operating ResultOperating Result% on Net Sales% on Net Sales

Net DebtNet Debt

Net pre-minoritiesNet pre-minorities% on Net Sales% on Net Sales

Net ResultNet Result

6,4826,482

3313315.1% 5.1%

1,0171,017

3053054.7% 4.7%

293293

7.1%7.1%

240240

5,2895,289

378378

288288

4.5%4.5%

+18%+18%

-20%-20%

+11%+11%

+18%+18%

7.5%7.5%

276276

5,4875,487

412412

265265

5.0%5.0%

249249

+23%+23%

-12%-12%

+27%+27%

+36%+36%216216

Gross Op. MarginGross Op. Margin% on Net Sales% on Net Sales

67867810.5% 10.5% 12.8%12.8%

678678 -6%-6%

13.1%13.1%7217210%0%

@ AT 1999 EXCHANGE RATES@ AT 1999 EXCHANGE RATES


SALES VARIATIONS - 1999/1998 SALES VARIATIONS - 1999/1998

Volume

Currency

Prices

Agri deconsolidation

Mix and other

New consolidations

Volume

Currency

Prices


Mix and other

New consolidations

TOTALTOTAL

Var. %Var. %

+ 9.1%

- 4.4%

- 5.2%

- 1.0%

+ 4.8%

+ 14.8%

+ 9.1%

- 4.4%

- 5.2%

- 1.0%

+ 4.8%

+ 14.8%

+ 18.1%+ 18.1%


EBIT VARIATIONS – 1999/1998EBIT VARIATIONS – 1999/1998

Euro/ MlnEuro/ Mln

Exchange rateExchange rateExchange rate (34)(34)(34)

Agri - deconsolidationAgriAgri -- deconsolidationdeconsolidation (11)(11)(11)

PricePricePrice (271)(271)(271)

Volume and mixVolume and mixVolume and mix +155+155+155

Siemens, MM & ATCo - cons.SiemensSiemens, MM & , MM & ATCoATCo -- cons.cons. +39+39

MaterialsMaterialsMaterials +35+35+35

TotalTotalTotal (316)(316)(316)

EfficiencyEfficiencyEfficiency +67+67+67

OtherOtherOther (61)(61)(61)

TotalTotalTotal (81)(81)(81)


PERSONNEL EFFICIENCIES PERSONNEL EFFICIENCIES

Employees at 31.12.1998

Acquisitions

Efficiencies


Employees at 31.12.1998

Acquisitions

Efficiencies


Employees at 31.12.1999Employees at 31.12.1999

*36,226

6,284

**(1,913)

(494)

*36,226

6,284

**(1,913)

(494)

***40,103***40,103

* excluding acquisitions* excluding acquisitions** of which 1,101 on new acquisitions** of which 1,101 on new acquisitions*** including 2,192 temporaries*** including 2,192 temporaries


FINANCIAL HIGHLIGHTS FINANCIAL HIGHLIGHTS

Total GroupTotal Group

19991999 19981998Euro/ MlnEuro/ Mln

Capital ExpendituresCapital Expenditures

Net DebtNet Debt

Employees Employees

R&D ExpendituresR&D Expenditures

40,10340,103

200200

469469

1,017*1,017*

38,20938,209

196196

415415

265265

*of which Euro 291 Mln due to new acquisitions and Euro 229 Mln to the merger with SIP*of which Euro 291 Mln due to new acquisitions and Euro 229 Mln to the merger with SIP


CONSOLIDATED CASH FLOW STATEMENT (Euro Mln)CONSOLIDATED CASH FLOW STATEMENT (Euro Mln)

331331 348348

(647)(647)

3434 4848114114

(54)(54) (91)(91) (109)(109) (185)(185) (526)(526)

DeprecDeprec..andand

AmortizationAmortization

OperatOperat..Work.Work.

Capital Capital VariationsVariations

Other Other and Funds and Funds VariationVariation

FreeFreeCashCashFlowFlow

EBITEBIT Net Net Invest.Invest.

Acquisition Acquisition of treasury of treasury

sharesshares

Dividend Dividend paidpaid

ExtraordExtraord. . Items and Items and

other other VariationsVariations

TaxationTaxation NetNetCashCashFlowFlow

Net Net financialfinancialchargescharges

19991999

(201*)(201*)

*of which Euro 159 Mln due to new acquisitions*of which Euro 159 Mln due to new acquisitions


KEY RATIOSECONOMIC VALUE ADDED (Euro Mln)

KEY RATIOSECONOMIC VALUE ADDED (Euro Mln)

8.3%8.3%8.8%8.8%

R.O.I.R.O.I.WACCWACC

NOPAT/CNINOPAT/CNI

12.5%12.5%

11.8%11.8%

10.2%10.2%

9.0%9.0%

5.4%5.4%

7.7%7.7%

9.4%9.4%

6.9%6.9%

10.3%10.3%

11.3%11.3%

12.2%12.2%12.8%12.8%

224224

19941994 19991999 19941994 19991999

10%10%

EVAEVA

EBITEBIT

NOPATNOPAT

328328 351351393393 412412

175175

245245312312 301301 283283

(230)(230)

(131)(131)

66 1212 1515

8.8%8.8%

1313

331331266266

9.2%9.2%

7.0%7.0%

7.4%7.4%8.3%8.3%


ENHANCING SHAREHOLDER’S VALUE ENHANCING SHAREHOLDER’S VALUE

Jan. 92Jan. 92 Dec. 99Dec. 99

+ 495% in 7 years+ 495%

in 7 years

-50

50

150

250

350

450

550

650

+ 481% in 8 years+ 481%

in 8 years

+ 331% in 8 years+ 331%

in 8 years

PIRELLIPIRELLI

MIB (Milan Stock Index)MIB (Milan Stock Index)

BASE 1992 = 100BASE 1992 = 100


A VALUE ORIENTED TEAM A VALUE ORIENTED TEAM

• Incentive Plan (1999-2000): 300 Key Executives and Cadres

• Incentive Plan (1999-2000): 300 Key Executives and Cadres

STOCK OPTION PROGRAMSSTOCK OPTION PROGRAMS

Main targets for Incentive Plans: Net Results and EVAMain targets for Incentive Plans: Net Results and EVA

1st step (launch: 1999)

1st step (launch: 1999)

2nd step (launch: 2000)

2nd step (launch: 2000)

• Retention Plan for 800 people : Executives (90 Senior Executives) and Key Cadres

• Incentive Plan (2000-2001): 90 Senior Executives

• Retention Plan for 800 people : Executives (90 Senior Executives) and Key Cadres

• Incentive Plan (2000-2001): 90 Senior Executives


Net Profit (millions)

Ordinary

Saving

Net Profit (millions)

Ordinary

Saving

PIRELLI S.P.A. STATUTORY ACCOUNTSas proposed by the Board to Shareholders

PIRELLI S.P.A. STATUTORY ACCOUNTSas proposed by the Board to Shareholders

229

0.0826

0.0930

229

0.0826

0.0930

1 9 9 91 9 9 9 1 9 9 81 9 9 8EuroEuro

202

0.0723

0.0826

202

0.0723

0.0826

DividendDividend


INFORMATION TECHNOLOGY: A TOOL FOR BUILDING VALUEINFORMATION TECHNOLOGY: A TOOL FOR BUILDING VALUE

I

PHASE

I

PHASE

II

PHASE

II

PHASE

Client ServerArchitecture

Client ServerArchitecture SAPSAP IntranetIntranet

Standardization Integration GlobalizationStandardization Integration Globalization

12,000 connected users 5,000 SAP users 78 WEB Applic.

BusinessIntelligence

Supply ChainManag.

ElectronicCommerce

Supporting Business Strategy

InternetInternetIntegration with Integration with supplierssuppliers

Business Business ComplexityComplexity

1999 - …..1999 - …..

CorporatePortal

IntranetIntranet

PIRELLI GROUPPIRELLI GROUPPIRELLI GROUP

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