2009 TARGETS FOR THE GROUP EXCEEDED

Pirelli Tyre beats targets for the year, already raised at the end of Q3

Pirelli RE reaches financial targets

PIRELLI & C. SPA

• PARENT COMPANY RETURNS TO PROFIT WITH 112.6 MILLION EUROS IN NET PROFIT (NET LOSS OF 189.5 MILLION EUROS IN 2008)

• BOARD TO PROPOSE DISTRIBUTION OF A DIVIDEND OF 0.0145 EUROS PER ORDINARY SHARE AND 0.0406 EUROS PER SAVINGS SHARE

PIRELLI & C. GROUP

• 2009 REVENUES: 4,462.2 MILLION EUROS (-3.3% ON A LIKE-FOR-LIKE BASIS), COMPARED WITH A TARGET OF MORE THAN 4.3 BILLION EUROS

• EBIT POST RESTRUCTURING CHARGES QUINTUPLED TO 217.4 MILLION EUROS, (43.2 MILLION EUROS IN 2008);

EBIT MARGIN 4.9%, BETTER THAN TARGET OF 4.5% DESPITE THE IMPACT OF ADDITIONAL RESTRUCTURING CHARGES OF APPROX. 50 MILLION EUROS COMPARED WITH 30 MILLION EUROS INITIALLY FORECAST IN 2009-2011 PLAN

• ATTRIBUTABLE NET RESULT RETURNS TO PROFIT OF 22.7 MILLION EUROS, COMPARED WITH A LOSS OF 347.5 MILLION EUROS IN 2008; TOTAL NET RESULT NEGATIVE FOR 22.6 MILLION EUROS, SIGNIFICANTLY IMPROVED OVER 2008 LOSS OF 412.5 MILLION EUROS

• NET DEBT NEARLY HALVED: 528.8 MILLION EUROS (1,027.7 MILLION EUROS IN 2008) COMPARED WITH THE INITIAL TARGET OF 1 BILLION EUROS, WHICH HAD ALREADY BEEN IMPROVED AT THE END OF Q3 TO 700 MILLION EUROS

PIRELLI TYRE

• 2009 REVENUES:  3,992.9 MILLION EUROS (-1.6% ON A LIKE-FOR-LIKE BASIS COMPARED WITH 4,100.2 MILLION EUROS IN 2008) COMPARED WITH A TARGET OF 3,900 MILLION EUROS (ALREADY IMPROVED AT THE END OF Q3)

• EBIT POST RESTRUCTURING CHARGES: 308.5 MILLION EUROS, MORE THAN DOUBLE THE  150.7 MILLION EUROS OF 2008;

EBIT MARGIN 7.7% (3.7% IN 2008), HIGHER THAN THE TARGET OF AT LEAST 7% (WHICH HAD BEEN IMPROVED AT THE END OF Q3)

• IN 2009 OPERATING CASH FLOW POSITIVE FOR 561.5 MILLION EUROS (-18.1 MILLION EUROS IN 2008)

• NET DEBT APPROX. 1 BILLION EUROS POST DIVIDENDS, COMPARED WITH A TARGET OF 1.3 BILLION EUROS BEFORE DIVIDENDS

2010 TARGETS

• PIRELLI & C. GROUP: REVENUES 4.7/4.8 BILLION EUROS, EBIT MARGIN 6.5%/7%

• PIRELLI TYRE: REVENUES +6%/+8%, EBIT MARGIN TENDENTIALLY IN LINE WITH 2009

NEW 2011-2013 THREE-YEAR PLAN TO BE PRESENTED BEFORE THE END OF 2010

Milan, 10 March 2010 – The Board of Directors of Pirelli & C. SpA, which met today, reviewed and approved 2009 draft financial statements.

The restructuring begun in 2008, which continued into 2009, to counteract the effects of the international crisis, made it possible for the Pirelli Group to close the year with significantly improved overall results, thanks to effectiveness of the measures adopted to protect the efficiency and competitiveness of the Group, as well as of the strategy set forward in the 2009-2011 three-year industrial plan.

The Group thus managed to close the year with results that were an improvement over its 2009 targets, which had already been raised last November, at the time of announcement of third quarter results.

With reference to Group targets, the following should be noted:

• revenues: 4,462.2 million euros, compared with a target of “greater than 4.3 billion euros”, which had already been increased at the end of the third quarter. Of these, 25% were derived from “green” activities (20% at end 2008), in line with the objectives of the plan
• EBIT margin post restructuring charges: 4.9%, compared with the target of “approximately 4.5%” announced at the end of the third quarter, despite the impact of additional restructuring charges of more than 50 million euros compared with the 30 million euros in charges initially expected
• net debt: 528.8 million euros, compared with an initial target of 1 billion euors, already improved to “about 700 million euros” at the end of the third quarter.

Overall, the Pirelli Group closed the year with attributable net profit of 22.7 million euros, compared with a loss of  347.5 million euros in 2008. The total consolidated net result was a loss of 22.6 million euros, a significant improvement over the loss of 412.5 million euros the previous year. EBIT after restructuring charges, which amounted to 79.6 million euros in 2009 (144.2 million euros in 2008), stood at 217.4 million euros, five times the figure of 43.2 million euros in 2008, or 4.9% of sales compared with 0.9% of sales in 2008. Revenues as of 31 December 2009 amounted to 4,462.2 million euros, down 3.3% on a like-for-like basis net of the exchange rate effect (4,660.2 million euros in 2008). The Group’s net financial position as of 31 December 2009 was a negative figure of 528.8 million euros, almost half of the figure of – 1,027.7 million euros on  31 December 2008 (691.4 million euros as of 30 September 2009), due to a positive contribution from Pirelli Tyre cash flow, income from sales of non-strategic assets, and the success of the Pirelli RE capital increase.

Performance of the core tyre business at Pirelli Tyre was especially positive, with results significantly better than targets:

• revenues: 3,992.9 million euros compared with a target of “approximately 3,900 million euros”, already improved at the end of the third quarter
• EBIT margin post restructuring charges: 7.7%, significantly improved with respect to the target of “equal to or greater than 7%”, which had already been improved at the close of the third quarter
• net debt of about one billion euros (1,027.3 million euros) after dividends, compared with a target of 1.3 billion euros before dividends.

Efficiencies reached through restructuring actions, the signals of recovery in the market (in particular in the ‘Consumer’ segment) and the positive impact of lower raw materials costs made it possible for Pirelli Tyre to close the year with a moderate reduction in revenues (-1.6% organic reduction) and a significant improvement in all indicators of profitability: the 2009 EBITDA margin before restructuring charges stood at 13.5% compared with 10.8% in 2008, the EBIT margin before restructuring charges stood at 8.7% compared with 6.1% in 2008, and the EBIT margin post restructuring charges stood at 7.7% compared with 3.7% in 2008.

In the fourth quarter, the best in the whole year, EBITDA at Pirelli Tyre more than doubled to 155.2 million euros (62.9 million euros in the corresponding period of 2008), with a margin that rose to 15% from 7.2%, and EBIT before restructuring charges that grew to a record level of 104.7 million euros (18.9 million euros in the corresponding period of 2008), with a margin of 10.1% (2.2% a year earlier). Sustained by a recovery in volumes, revenues exceeded the ceiling of one billion euros, with organic growth of 13.9% to 1.03 billion euros.

In 2009, continuous improvement in efficiency in working capital management also made it possible to register positive operating cash flow of 561.5 million euros (negative for 18.1 million euros in 2008); the net financial position improved to a negative 1,027.3 million euros from a negative 1,266.8 million euros in 2008.

Efficiencies in the cost of labour, the use of materials, purchasing, and savings on raw materials costs, net of exchange rate effects, made it possible in the year to cut costs by approximately 200 million euros (of which approximately 100 million euros linked to lower raw materials costs, net of exchange rate effects), in line with the target for 2009, 200 million euros at same exchange rates, set for Pirelli Tyre in the Group’s 2009-2011 industrial plan.

It should be noted that during a year that imposed severe attention to costs, Pirelli Tyre reduced its research and development investments as a percentage of sales from 3.5% to 3.3%, though this ratio still confirms the company at the top of its sector worldwide in terms of process and product innovation, which have always been key elements in maintaining the competitive position of the company in the industry.

During the year, Pirelli Eco Technology consolidated its important position in particulate filters. The homologations obtained, particularly in key markets such as Germany and China, as well as the recent relaunch of programs for introduction of low emissions zones, place the company among those with the greatest growth prospects in the industry. In 2009, however, the difficult economic scenario, delays in putting into effect existing regulations in terms of traffic pollution, and longer than expected waiting periods for homologations in new markets had negative effects on performance and on timing of execution of plans compared with original projections. The 2009 net result was a loss of 13.7 million euros, essentially in line with 2008 (a loss of 13.2 million euros).

In the real estate sector, Pirelli RE carried on during the year with its turnaround process, involving a plan to reduce costs and regain efficiency, an organizational overhaul, and a strengthening of the equity structure, combined with a refocusing of the business model towards assets and fund management activities and specialized services, with the goal of increaseing the level of recurring results. As confirmation of the validity of actions taken thus far, the cost-reduction plan generated around 68 million euros in structural savings in 2009, well above the original target of 50 million euros, while on the equity front, the gearing ratio improved to 0.7 (from 2.4 as of 31 December 2008) thanks to success of the capital increase carried out during the course of the year.

The main economic and financial indicators improved significantly even amid the heavy influence of the international recession: the net loss as of 31 December 2009 was nearly halved (- 104.3 million euros, compared with a net loss of 195 million euros in 2008), while EBIT, including net income from equity participations and before restructuring costs and property writedowns/revaluations, also including income from shareholder loans, stood at -26.1 million euros with a loss more than halved in comparison with that of 59.7 million euros in 2008, and in line with the better range (-25/-35 million euros) communicated to the market.

In terms of other businesses, the positive performance of Pirelli Broadband Solutions should be noted in particular. The company closed the year with revenues up 6% to 132.1 million euros and net profit of 4.6 million euros compared with 2 million euros in 2008.

As per the guidelines set forth in the 2009-2011 industrial plan, during the year the Group concentrated on:

-         focus on core business:

with the aim of strengthening its position among the leaders in the automotive sector, the Group focused more on the core business of tyres and the related business of particulate filters, grouped together in the “Tyre and Parts” division. With this in mind, the Group proceeded with sales of non-strategic assets, among which the stake it held in Alcatel Lucent Submarine Networks, announced in March 2009 and, through progressive sales over the course of the year ending in the third quarter, the Telecom Italia stake.

-         “Green perfomance”:

during the course of the year, the Group focused on developing innovative porducts and solutions in the “green” economy, reaching its target of increasing the percentage of green business on the total to 25% from 20% in 2008 (the goal for 2011 is 40%).

All the new tyres in the Cinturato product range, a historic brand name for Pirelli Tyre that the company recently relaunched, are in line with the “Green performance” strategy, along with the highly advanced winter tyres in the product range entitled “Winter”. In sustainable mobility and reduction of air pollution,  Pirelli Eco Technology supplies technology for containment of noxious diesel emissions. Pirelli Eco Technology particulate filters can reduce particulate matter by more than 90% and nitrogen dioxide by more than 50%, with significant reductions in the smallest particles. The business carried out by Pirelli Ambiente, the Group company specialized in technology and solutions for sustainable development active in renewable energy, environmental reclamation, and energy efficiency in buildings, as well as, in the real estate industry, the solutions offered by Pirelli RE to reduce potential environmental impact deriving from building conduction, in particular with the launch of eco-sustainable construction program “Ecobuilding”.

Pirelli & C. SpA Group

At consolidated level, revenues as of 31 December 2009 amounted to 4,462.2 million euros, down  3.3% on a like-for-like basis net of exchange rate effects and the accounting impact of hyper-inflation in Venezuela (-4.2% including such effects) compared with  4,660.2 million euros in 2008. In the fourth quarter, in particular, revenues amounted to 1,154.8 million euros, up 16.4% compared with 992.2 million euros in the corresponding period of 2008.

EBITDA before restructuring charges amounted to 508.1 million euros compared with 396.1 million euros in 2008. In the fourth quarter, in particular, EBITDA before restructuring charges was 146.9 million euros compared with 5.1 million euros in the fourth quarter of 2008.

EBIT before restructuring charges was 297 million euros, compared with 187.4 million euros in 2008. In the fourth quarter, in particular, EBIT before restructuring charges amounted to 91.9 million euros, compared with a negative figure of 44.9 million euros in the corresponding period of 2008.

Considering also the  restructuring charges for the whole year, amounting to 79.6 million euros (144.2 million euros in 2008), EBIT stood at 217.4 million euros (43.2 million euros in 2008), with a margin on sales increasing to 4.9% from 0.9% in 2008. In the fourth quarter, EBIT amounted to 53.6 million euros, compared with a negative figure of 139.8 million euros a year earlier. Restructuring charges were linked to reorganization of the parent company, rationalization of the staff structures and of the manufacturing base in Europe of Pirelli Tyre, as well as rationalization of Pirelli RE structures.

Attributable net profit of Pirelli & C. SpA stood at 22.7 million euros, compared with a loss of 347.5 million euros in 2008. The total net result was a loss of 22.6 million euros, significantly improved with respect to the negative figure of 412.5 million euros of 2008. In the fourth quarter, attributable net profit stood at 4.5 million euros (compared with a loss of 296.2 million euros in the fourth quarter of 2008), while the total net result was a loss of 13.9 million euros (-376.2 million euros in the corresponding period of 2008).

Consolidated net equity as of 31 December 2009 was 2,494.7 million euros, compared with 2,374.4 million euros at the end of 2008. Net equity attributable to Pirelli & C. SpA on the same date was 2,175 million euros (0.405 euros per share) compared with 2,171.8 million euros (0.405 euros per share) a fine 2008.

The net financial position of the Group as of 31 December 2009 was negative for 528.8 million euros, compared with 1,027.7 million euros as of 31 December 2008.

The net financial position at corporate level as of 31 December 2009 was positive for 598.8 million euros (537 million euros in 2008).

As of 31 December 2009 committed, non-utilized credit lines amounted to 819 million euros.

Employees of the Group as of 31 December 2009 counted 29,570 compared with 31,056 as of 31 December 2008.

The parent company, Pirelli & C. SpA, closed the year with a net profit of 112.6 million euros, compared with a net loss of 189.5 million euros in 2008.

The Board of Directors will propose to the Shareholders’ meeting distribution of a dividend of 0.0145 per ordinary share and 0.0406 euros per savings share. The dividend will be paid starting from 27 May 2010.

Pirelli Tyre

Revenues of Pirelli Tyre as of 31 December 2009 amounted to 3,992.9 million euros, down 2.6% compared with 2008 (revenues stood at 4,100.2 million euros). The organic variation (net of exchange rate effects and the accounting impact of hyper-inflation in Venezuela) was equal to a decline of 1.6%, with a positive price/mix variation (+4.2%) which in part compensated the decline in volumes (-5.8%), deriving from the continued greater focus on higher end product segments. The positive performance was particularly notable in the fourth quarter, a period in which sales exceeded the ceiling of one billion euros, reaching 1,034.3 million euros, with an increase of 18.7% in absolute terms and organic growth of 13.9%.

EBITDA before restructuring charges amounted to 538 million euros, up 21.9% compared with 441.2 million euros in 2008, or 13.5% of sales, compared with 10.8% of sales in 2008. In the fourth quarter, EBITDA before restructuring charges stood at 155.2 million euros compared with 62.9 million euros in the corresponding period of 2008, with the sales margin rising to 15% from 7.2% in the same period of 2008.

EBIT before restructuring charges was 345.5 million euros, or 8.7% of sales (6.1% in 2008) representing an increase of 37.8% compared with 250.7 million euros in 2008. In the fourth quarter, EBIT before restructuring charges amounted to 104.7 million euros (10.1% of sales) compared with 18.9 million euros (2.2% of sales) in the corresponding period of 2008.

The strong improvement in 2009 results compared with the previous year was due to the price/mix variation, to efficiencies realized – despite an operating scenario characterised by periods of overcapacity – as well as the good performance of industrial factors, in particular falling raw materials costs which during the year, before a new increase was in sight (in particular in the cost of natural rubber), had an overall positive impact (net of exchange rate effects) of 98.7 million euros. These factors more than compensated the negative aspects deriving from lower sales volumes.

Restructuring actions begun in 2008 and continued in 2009 in the context of the process of improving and making more efficient the industrial organization, and the process of adapting the fixed cost structure to a changed market scenario, brought about charges of 37 million euros during the year (100 million euros in 2008).

Including these restructuring charges, 2009 EBIT was 308.5 million euros, more than double the 150.7 million euro figure in 2008, with a margin of 7.7% (3.7% in 2008). In the fourth quarter, EBIT post restructuring charges amounted to 85.8 million euros, compared with a negative figure of 49.4 million euros in the same period of 2008.

Net profit as of 31 December 2009 amounted to 146.6 million euros, compared with 25.6 million euros at the end of 2008. In the fourth quarter, net profit stood at 55.7 million euros compared with a loss of 82.7 million euros in the fourth quarter of 2008.

The net financial position as of 31 December 2009 was negative for 1,027.3 million euros, compared with 1,298.6 million euros as of 30 September 2009. The improvement was due in particular to the continuing efficiency in working capital management, which allowed for positive operating cashflow of 561.5 million euros (compared with a negative figure of 18.1 million euros in 2008), and careful selection of investment activities in a year partly characterized by low use of manufacturing capacity.

Net investments amounted to 217 million euros (285 million euros in 2008) and were mainly focused on increasing manufacturing capacity in emerging markets offering greater growth rates and lower industrial costs, in development of innovative processes, in launching new “Green Performance” products, and in the area of workers’ health and safety, as well as environmental factory management.

Efficiencies on labour costs, use of materials, purchasing, and savings on raw materials costs net of exchange rate effects, allowed for cost reduction of about 200 million euros (of which approximately 100 million euros linked to lower raw materials costs, net of exchange rate effects).

Research and Development spending stood at 133 million euros (145 million euros in 2008), or 3.3% as a percentage of sales (3.5% in 2008), confirming the company’s place at the top in the industry worldwide in terms of commitment to product and process innovation.

In the Consumer business (Car/Light Truck and Motorcycle tyres), 2009 revenues amounted overall to 2,827.8 million euros, up 0.9% compared with 2,801.5 million euros in 2008. Net of exchange rate effects, organic growth of Consumer revenues was 1.2%. EBITDA before restructuring charges amounted to 379.7 million euros, up 34.7% compared with the previous year, or 13.4% of sales.

In the Industrial business (tyres for Industrial Vehicles and Steelcord) 2009 revenues amounted overall to 1,165.1 million euros, compared with 1,298.7 million euros in 2008. Sales volumes showed a 12.6% decline compared with 2008, narrowing to an organic decline of 7.6% thanks to the positive impact (+5%) of price/mix.

EBITDA before restructuring charges amounted to 158.3 million euros, practically in line with 2008 (159.3 million euros), while EBIT before restructuring charges was 111.8 million euros, aligned with  2008 in absolute value (111.6 million euros), but representing an improvement to 9.6% from 8.6% in 2008 in terms of profitability.

Employees of Pirelli Tyre as of 31 December 2009 counted 27,481, compared with 28,601 at the end of 2008.

Pirelli Eco Technology

During the course of the year, Pirelli Eco Technology consolidated its leading position in the particulate filters market, partly thanks to new homologations obtained, in particular in key markets like Germany and China. The difficult macroeconomic scenario, the delay in operational implementation of existing regulations on traffic pollution, and longer than expected processes for obtaining homologations to develop new markets, have all had negative effects on performance and timing of execution of growth plans of the company, compared with what was initially projected.

The company closed 2009 with a net loss of 13.7 million euros, essentially in line with 2008 (-13.2 million euros) and revenues down 10% to 56.6 million euros, due to declining sales in the white diesel fuel business, Gecam. Filter sales, on the other hand, increased from 5.5 million euros to 18.5 million euros in value terms. Homologations obtained, and the recent restart of national and international programs for introduction of low emissions zones, put Pirelli Eco Technology among the companies with the best prospects for growth in the filter industry.

Pirelli RE

For further information on the performance of Pirelli RE, please consult the press release issued on 9 March 2010.

Other businesses

In “other businesses”, 2009 revenues of Pirelli Broadband Solutions should be noted. These amounted to 132.1 million euros, up 6% from 124.6 million euros in 2008 thanks to enrichment of the product mix. EBITDA stood at 5.3 million euros, or 4% of sales, and net profit at 4.6 million euros compared with 2 million euros in 2008. Thanks to improvement in working capital management, the net financial position was positive for 35.7 million euros, compared with a financial surplus of 15 million euros in 2008. The company thus achieved and exceeded its targets for the first year of the 2009-2011 industrial plan, which had forecast revenues between 130 million euros and 140 million euros, an EBITDA margin between 3% and 3.5%, and a net financial position of around 15 million euros, in line with the previous year.

Shareholders’ meeting

The Board of Directors resolved to call the Shareholders’ meeting for approval of the financial statements for the 2009 fiscal year on 20 April 2010 (first call) and 21 April 2010 (second call).

With a view towards a corporate governance structure that is ever more attentive to needs of investors, and in order to facilitate presentation of lists for renewal of the Board of Statutory Auditors, the Board of Directors resolved to propose to the Shareholders’ meeting reduction of the threshold required by the By-laws for presentation of same lists, to 1.5%. The threshold proposed is lower than the one fixed by Consob for the current year (2% of share capital). This confirms a path begun in 2004 with the introduction in a self-disciplinary way of the system of presenting and voting on lists, for renewal of boards, as well as confirming the importance the Company attributes to giving a real possibility to minority shareholders to participate in corporate boards.

On the same occasion, in line with recently approved legislation, the Board will propose to the Shareholders introduction into the By-laws of the possibility for the Company to call Shareholders’ meetings for approval of annual financial statements within 180 days of the closing of the fiscal year, rather than 120 days as currently required.

Prospects and guidelines for the current year

During the course of 2010 the Group will focus further on its core business, becoming more of a pure tyre company with a position of absolute leadership in ‘Green Performance’.

• The ‘Tyre and Parts’ (tyres and filters) business will be strengthened further, on the basis of what has been achieved during the course of 2009. For the Tyre business in particular the Company expects continuous growth, with a differentiated approach between Consumer and Industrial segments, further improvement in cost competitiveness and an acceleration of investments, in order to increase manufacturing capacity in particular in emerging markets which present higher growth rates and lower industrial costs. During the year investments are planned for more than 300 million euros with a ratio of investments to amortization of 1.6 (from 1.1 in 2009). On the cost front, the plan for greater efficiencies already begun last year is set to continue, with a target of savings for 2010 of more than 60 million euros (before the impact of higher raw materials costs). Signs of recovery in the market, especially in the Consumer segment, allow the company to forecast an increase in revenues of between 6% and 8% and an EBIT margin tendentially in line with 2009, taking into account the impact of higher raw materials costs, in particular of natural rubber. For the Filters business (Pirelli Eco Technology), geographical diversification and especially application of more severe rules in terms of limiting polluting traffic are good premises to aim for double digit revenue growth, breakeven at operating (EBIT) level, and positive cash flow generation.

• For “other businesses”, mainly Pirelli Ambiente and Pzero, the intention is to take advantage of new growth opportunities. In particular, the Pzero project offers an opportunity to further increase the value of the brand. For 2010, these businesses aim to reach operating breakeven.

• Pirelli RE expects further consolidation of its leadership in fund management in Italy in 2010, a continued focus on services in order to increase recurring revenues, and maintenance of careful financial discipline. For services activities the company forecasts EBIT of between +20 million and + 30 million euros. The target for real estate sales in 2010 is between 1.3 billion and 1.5 billion euros, basically keeping total assets under management stable. The company also confirms the targets for 2011, and particularly the achievement of a result of 50 million euros from services.

At Group level revenues of about 4.7 to 4.8 billion euros are expected, and an EBIT margin between 6.5% and 7%. Actions for rationalization and simplification of the corporate organizational structure, announced last September, will allow the Group to achieve savings of about 10 million euros at EBITDA level, after financing of previously announced management incentive plans. The target for consolidated net debt at end 2010 is approximately 700 million euros after payment of 81.1 million euros for dividends to be attributed to the 2009 fiscal year.

Pirelli will present the new 2011-2013 three-year plan to the financial community before the end of the 2010 fiscal year.

Transfer of registered office

With effect from 15 March 2010, Pirelli & C. S.p.A. will transfer the address of its registered office from Via Gaetano Negri no. 10 to Viale Piero e Alberto Pirelli no. 25, still in Milan.

Events subsequent to 31 December 2009

• On 29 January 2010 Pirelli & C., Pirelli RE and Fimit announced the suspension of their joint feasibility study for the industrial integration between Pirelli RE and Fimit announced last November. The Pirelli Group, as announced to the market, is continuing in any case in the process of focusing the business on industrial activities, proceeding with the plan to separate out the real estate businesses, which should be completed by year end, once the specific plans, with defined terms and conditions, have been reviewed and approved by the appropriate boards.
• On 19 January 2010 renewal of the Pirelli & C. SpA shareholders’ agreement was announced. The shareholders’ agreement, binding on approximately 46.22% of the ordinary share capital of the company, thus remains in force with the same composition, until its new expiration on 15 April 2013.

Conference call

Results of the year ended on 31 December 2009 will be illustrated today at 6 p.m. during a conference call, in which the Chairman of Pirelli & C. SpA, Marco Tronchetti Provera, and the top management will intervene. Journalists will be able to follow the presentation by telephone, without the possibility to ask questions, by calling the number +39.06.3348.5042. The presentation will also be available via webcast – in real time – on the website www.pirelli.com in the Investor Relations section, where it will be possible to consult the slides.

***

The financial statements as of 31 December 2009 will be available to the public at the Company’s headquarters and at Borsa Italiana SpA, and published on the Company’s website (www.pirelli.com), by 2 April 2010.

Geneva, 2 March, 2010 – Pirelli confirms its technology partnership with Lamborghini and presents the world premiere of the new PZero Corsa System at the International Motor Show in Geneva, designed for the new supercar from Sant’Agata Bolognese, the Gallardo LP 570-4 Superleggera, designed for use on the highest-performing next generation of vehicles. Pirelli’s research department, working to reinforce the characteristics of the newest member of the Lamborghini family, developed tyres that contribute to the reduction of environmental impact, with compounds and solutions that decrease rolling resistance, while at the same time taking performance characteristics to the maximum in terms of both safety and handling. The Gallardo LP 570-4 Superleggera will use the new PZero Corsa System in the 235/35ZR19 and 295/30ZR19 sizes.

The PZero Corsa System combines the front directional tread design with an asymmetric rear design, to decrease susceptibility to hydroplaning, a typical problem when using tyres derived from semi-slick sports designs. The front PZero Corsa directional maintains the previous tread design, however innovative materials and technology choices have been introduced to help balance the increased sportiness of the new asymmetric rear tyres. The new PZero Corsa Asymmetric includes robust blocks and a full shoulder to maximize the performance on dry, even under the most extreme driving conditions. The inclusion of longitudinal channels also allows for the expulsion of water and decreases susceptibility to hydroplaning, despite the reduced tread depth. The new combination of designs and the use of innovative materials derived from Motorsports, allows the new PZero Corsa System to achieve higher levels of performance both on dry and wet surfaces.

PZero Corsa System is the best handling road tyre in the PZero collection, the line of Ultra High Performance products developed by Pirelli for the most prestigious and high-performance cars. PZero represents a revolution for the tyre industry, and offers drivers performance without precedence in every aspect: handling, comfort, and safety. This tyre from the P Zero Collection, the line of tyres produced by Pirelli, leader in the high end bracket, uses many innovative solutions developed by Pirelli and protected by 5 patents, which protect the tread design, compounds, and the tyre structure. The racing heart of PZero is guaranteed by the tread compounds and by special nano-composites that ensure comfortable driving combined with extreme sports performance. Additionally, the tread design of Pirelli’s new tyre also delivers maximum grip on wet roads and reduces noise. The asymmetric profile DA.Co (Dynamic Asymmetric Contour) gives even wear and tyre-ground contact remains the same at all speeds. Moreover, P Zero is produced with compounds which contain no aromatic oils. Pirelli’s decision on this came three years ahead of the European directive which will enforce this act from 2010.

The now well-established collaboration between Pirelli and Lamborghini is not limited to the development of road tyres, but extends to racing and the main events organised by the car maker. In fact, Pirelli is the sole supplier to the Lamborghini Blancpain Super Trofeo and the Lamborghini Track Academy.

Geneva, 2 March, 2010 – The partnership between Pirelli and Rinspeed continues with “UC?,” the new concept car from the Swiss designer, destined to be one of the stars of the Geneva 2010 motor show, and for which Pirelli, more and more focused on eco-friendly solutions for the automotive industry, is a technological partner. In fact, the Swiss company has chosen the Cinturato P7 for the new UC?. Cinturato P7 is the first ecological tyre for high-end cars, designed and developed by Pirelli to combine safety, ecology, and performance in a single tyre.

“UC?” stands for Urban Commuter. This revolutionary two-seater speedster, powered by an electric engine, is less than 2.60 meters long. The superlight “UC?” has a top speed of 120 km/h and a range of 105 kilometres. The objective of the project is to propose a solution to avoid traffic jams and stress, while guaranteeing a safe and ecological drive on urban streets.

Thanks to the Cinturato P7, Pirelli and Rinspeed are back together again with the new “UC?,” a tradition that began four years ago with the “eXasis,” followed by the “sQuba” in 2008 and the “iChange” in 2009.

Geneva, 2 March 2010. Pirelli unveiled the first environmentally friendly tyre developed for SUVs, its Scorpion Verde, as well as a new tyre designed for use by supercars, the new PZero Corsa. With these two world premiers, Pirelli again makes its mark at the Geneva Motor Show, where the Italian group continues to establish itself as a point of reference not just for high-performance vehicles, through its PZero line, but also for those focused on ecology, with its Cinturato family, which began 2010 by performing brilliantly in the summer tests of the international press with its P6 and P7 models. In fact, at the eightieth edition of the Geneva show, the Italian group’s tyres fit the lion’s share of the most eagerly awaited models, from the Lamborghini Gallardo Superleggera, one of the stars of the show, to the Tesla, the first electric supercar. The Cyber Tyre, the “intelligent” tyre able to “read” the road, is also a highlight of Pirelli’s presence in Geneva. After having passed the most rigorous tests, the Cyber Tyre is ready to enter the market in its TPMS (Tyre Pressure Monitoring System) version.

Green Performance – safety and ecology. Scorpion Verde and the Cinturato family. One of the new products that Pirelli will unveil at the Geneva motor show is the Scorpion Verde, the first eco-friendly tyre for SUVs, which combines safety with fuel savings, while limiting vehicle emissions. The new tyre in the Scorpion line will be presented on the Idiada course in Catalonia in mid-March, 2010. Scorpion Verde, also on display in Geneva on the Volkswagen Touareg, enlarges Pirelli’s green family. The family was inaugurated in 2008 with the return of the Cinturato line in the P4 and P6 versions, aimed at mid- to small-sized vehicles, and enriched by the P7 in 2009, the first ecological tyre developed for large-sized engines. In particular, the Cinturato P7, which combines reduced consumption with increased braking performance and road grip, looks to be a green phenomenon at the Swiss convention. And not just at the Pirelli stand, where it is exhibited with the Tesla; the Cinturato P7 has also been selected for various models by other prestigious manufacturers and is displayed on the BMW 5 Series and the Alfa Romeo Giulietta, among others. Cinturato P7 will also be found on the Rinspeed UC-Urban Commuter concept car.

Performance and the joy of driving: the new PZero Corsa and the PZero line. The other new Pirelli product at the Geneva Motor Show is the new PZero Corsa System, the next step for the PZero Corsa, developed to emphasize performance and safety characteristics, while still managing to simultaneously reduce rolling resistance. The new tyre in the PZero line can be viewed on the Lamborghini Gallardo Superleggera. The entire PZero line, Pirelli’s high performance sports product range, is on display on some of the most beautiful cars at the show. These include the new Maserati Grancabrio, the Audi 8 and Porsche Cayenne, as well as models from Ferrari, Aston Martin, Lotus, Bentley, Alfa Romeo, Mercedes, McLaren and BMW.

The Cyber Tyre and innovative materials. Pirelli’s research looks to the future, developing innovative solutions for the automobile industry and developing materials with ever more ecological characteristics, both in terms of use of the final product, and during production. The Cyber Tyre belongs to the first category. The smart tyre that Pirelli’s research centres are developing is able to “read” the conditions of the road surface. The Cyber Tyre has recently passed severe dynamic tests conducted on the test track in Nardò and is ready for the definitive development stage for its first application: TPMS, (Tyre Pressure Monitoring System) which makes it possible to have real time information about tyre pressure, vertical load, and internal temperature. The Cyber Tyre is the starting point of a revolution not only regarding tyres as they have always been understood until today, but as a real turning point for the automobile industry as a whole. The system created by Pirelli is the launch pad for a series of future developments, for which the Italian Group has collaborated technologically with other important leaders in the auto sector.

Pirelli research is also engaged in the development and use of a series of new materials which will reduce the use of oil-derived substances to a minimum. The use of these materials has no secondary effects on the environment, as with other products of agricultural derivation used in the industry, and will ensure optimal performance in terms of safety and ecology.

Indeed, the Pirelli Group, has long had an advanced sustainability governance system for managing the economic, social, and environmental impact associated with its processes, products, and services.
This commitment is evidenced in particular by:

- its Ethical Code, a statement of the general principles (transparency, honesty, and fairness) that guide its handling and conduct of operations and which sets out the aims and values of the business as applicable to its main stakeholders

- its “Policy for Health, Safety, Environment and Corporate Social Responsibility”, through which Pirelli’s guarantee on the right balance between sustainability and industrial development has become in-house practice and been reinforced

- its “Equal Opportunities Statement”, in which Pirelli accepts a whole series of commitments in support of Equal Opportunities in-house and, in particular, of promoting Diversity. The importance Pirelli places on equal opportunities at work is also shown by its backing for the equal opportunities charter (it was one of the first companies to sign up) as recently drawn up by Fondazione Sodalitas, AIAF, AIDDA, Impronta Etica, UCID, and Ufficio Nazionale Consigliera di Parità, with the support of the Ministry for Labour, Health, and Social Policies and the Equal Opportunities Ministry.

The sustainability “model” embraced by the Group is based on the United Nations Global Compact, to which Pirelli subscribed back in 2004.

Pirelli Group embraces a multi-stakeholder approach with a view to meeting the expectations of all who interact with the undertaking: Environment, Investors, Employees, Customers, Suppliers, Institutions, and the Community at large.

Sustainable performance by Pirelli is quantified each year in its Sustainability Report, a key component in communicating aims achieved and new challenges to all Group Stakeholders. In addition, part of the Group’s website that is constantly updated is devoted to sustainability and provides ways for interacting with the community at large.

Thanks to the Group’s commitment to sustainability and the results achieved Pirelli, for a number of years, has been included in sustainability indexes, notably FTSE4GOOD Global, European STOXX, ASPI Eurozone®, Axia Ethical Index, the Dow Jones Sustainability World and STOXX, and the ECPI Ethical Index EMU. In particular, for the third year running Pirelli was declared a world ‘Sector Leader’ in sustainability in the “Autoparts and Tyres” industry by Dow Jones, and in the 2010 Sustainability Yearbook, published by Sustainable Asset Management Group (SAM) in cooperation with Pricewaterhouse Coopers, it was recognised as a ‘Gold Class Company’ and ‘Sector Mover’ by SAM.

For years Pirelli has been operating certified management systems – OHSAS 18001, ISO 14001, ISO9001, ISO/TS 16949, and ISO/IEC 17025 - with a view to ensuring non-stop Quality improvement and a constant reduction in the impact its products, processes, and services have on its workers’ health and safety and on the external Environment,

Among official acknowledgements received by Pirelli in 2008-2009, the following deserve mention:
- Pirelli was one of the most best known Italian brands worldwide
- Pirelli secured inclusion in the “top ten” for social responsibility, a ranking system based on Accountability Rating’s measurement of response capacity and transparency among the biggest Italian undertakings
- Pirelli was awarded full marks for human rights and the environment in VIGEO’s latest CSR analysis
- Pirelli was one of the 100 most respected and reliable undertakings worldwide, according to New York’s Reputation Institute (both in 2008 and in 2009)
- Pirelli won the innovation award presented by the Italian Confederation of Industry.

Undertakings on sustainability given by Pirelli worldwide have been numerous. The main ones include:
- subscribing to the EU’s CSR Alliance;
- membership by Pirelli Tyre in ETRMA, the European Tyre and Rubber Manufacturers’ Association, which was followed by the drafting of the European Road Safety Charter;
- participation in the World Business Council for Sustainable Development (WBCSD) and in the Tyre Industry Project Group, a project that aims to identify the potential impact on health and the environment of materials associated with tyre manufacturing and use ;
- partnership signed with the European Agency for Safety and Health at Work (EU-OSHA)
- its stance on managing climate change, as stated in the “The Bali communiqué”, drawn up, signed, and submitted by 150 international undertakings, including Pirelli Tyre, concurrent with the United Nations Conference on climate change in Bali last December.

Business and sustainability: focus on the environment

The environment is one of the central planks of the 2009-2011 industrial plan that the Group presented at the start of 2009. Consistent with its announcements at that time, the Group is continuing to develop leading-edge products and solutions in the “green economy” sector, which offers significant development opportunities in various areas: sustainable mobility, eco-compatible building construction, and renewable energy. It is expected that by the end of this three-year period the “green” contribution to revenues will rise to about 40% of the total as against about 20% at the end of 2008.

In the tyre sector, in particular, Pirelli Tyre is achieving ever higher levels of “Green Performance”, as reflected in its adoption of technologies and solutions for the automotive industry that, in addition to assuring customers a high performance and safety, are increasingly ecological. “Green performance” in tyres means a commitment to reducing consumption as well as emissions of harmful substances, greater mileage, use of eco-compatible materials, and improved safety conditions.

The thrust of research by Pirelli in this direction focuses on adopting green technological solutions, ranging from compounds that are more ecological to tyre structures, while not compromising vehicle safety requirements, especially during braking and cornering.

Its Green performance strategy applies to all new Pirelli tyres, from its Cinturato line, the historic Pirelli brand newly re-launched last year, to its very advanced “Winter” tyre range.

Similarly, its Cyber Tyre, the tyre that “reads” the road surface thanks to an integrated chip, monitors the tyre’s state of health and pressure level, so contributing to a reduction in consumption and in environmental impact. In its tyre manufacturing processes Pirelli has succeeded in particular in improving energy efficiency and in securing a reduced consumption of energy (-9.2%) and water (-12.7%) in the last five years.

As regards sustainable mobility and reducing atmospheric pollution, Pirelli Eco Technology offers technologies to contain the polluting emissions of diesel vehicles. Its anti-particulate filters can reduce particulate emissions by over 90% and nitrogen dioxide emissions by over 50%, with an appreciative reduction in fine particles. Recently co-operation began on the spread of anti-particulate filters to China with the assistance of the Italian and Chinese environment ministries.

Pirelli Ambiente is the group company that specialises in technology and solutions for sustainable development and its areas of operation are renewable energy sources, environmental remediation, and the energy efficiency of buildings. In particular, the company designs and manufactures photovoltaic plants and produces fuel derived from waste that is used as a replacement for carbon in cement works. Added to this are its activities in energy certification and improving the energy efficiency of buildings.

Pirelli Broadband Solutions – the group company specializing in products for broad-band access – represents no departure from the group commitment to developing eco-compatible technology. It, too, sees eco-sustainable development as essential to its planned portfolio for the 2009-2011 period and offers the market innovative low-electricity-consumption products that are made with ecological materials.

In the real-estate field, Pirelli RE offers solutions to reduce the potential environmental impact of managing buildings and it is initiating the first integrated program of eco-sustainable building construction through a real-estate operator: “Ecobuilding“. The program concerns development projects across the entire market, from the residential to the service-sector segment, that are based on four guiding criteria: energy efficiency; use of eco-compatible materials; use of renewable sources; comfortable living. Taken together, the solutions adopted by the program make high quality standards, eco-sustainability, and energy saving achievable. The benefits for the environment are appreciable and include lower CO2 emissions into the air, reduced electrical energy for making buildings function, and an increasing use of renewable sources

The device on which the functioning of the Cyber Tyre is based is a chip just over 1cm3 in size (1cm X 1cm X 1cm), self-powered by a system which exploits the energy released by the turning of the tyre itself (energy scavenging), which also makes it eco-friendly and with low environmental impact, since it needs no batteries.

The sensor has a transceiver which can transmit and receive data. By radio, it can transmit data directly to the car’s on-board control unit; data such as the tyre temperature and pressure, and the triaxial acceleration (longitudinal, lateral and radial) generated by the interaction between the tyre and the road surface. It can also receive data from the car itself; data which may be useful for its functioning.

The aim is to make the tyre become an “active sensor” at the service of the car’s control systems, such as the ABS and the ESP, with which it will communicate, supplying data and dynamic parameters such as the force of the instantaneous contact and the maximum friction available, in order to improve performance and reduce the need for other sensors present in cars today, allowing for a potential reduction in the cost of the vehicle as a whole.

Some of the information will also be directly available to the driver by means of a graphic interface, which can help him to improve his driving style, adapting it to the road conditions and the grip, with a considerable increase in safety.

Pirelli Cinturato tyres are designed and developed in the company’s laboratories to meet new market demands and to contribute to sustainable mobility. Thanks to innovative compounds, structures and tread design, the Cinturato guarantees reductions in fuel consumption and carbon dioxide emissions, while guaranteeing better mileage and enhanced safety on dry and wet surfaces.

The Cinturato P7 uses state-of-the-art materials and engineering techniques, and is innovative in every way: compounds, materials, structure and tread design were all developed in equilibrium to guarantee steady performance through the tyre’s useful life in terms of cutting noxious emissions, reducing noise, running economy, shorter braking distances and handling. The P7’s eco profile reveals a tyre made with materials free from aromatic oils, an overall reduction in consumption of up to 4%, and a 30% reduction in noise. As far as safety is concerned, the P7 offers enhanced performance in wet and dry braking, respectively of two metres and one metre.

The Cinturato P4 and P6 are for cars with small- to mid-sized engines and have the distinctive ECOIMPACT logo on the side. This is because they offer a 20% reduction in rolling resistance, a reduction of up to 4% in energy consumption and therefore also in noxious emissions, and an average increase from 50,000 to 65,000km in tyre life. This is equal to a 30% increase (trials performed on over 1,000,000km of market testing), equivalent to changing tyres every four years instead of every three for the average motorist (15,000km/year). Safety, which together with other high performance tyres, has always been a reference point for Pirelli research, and which the Cinturato had already maximised in the fifties, is the other cardinal point underpinning the new Cinturato design. The P4 and P6 guarantee greater safety in all weather conditions. In particular, they deliver improved handling on curves and on wet roads, and, above all, decrease braking distance. A car travelling at 80km/h on a wet road needs 11% less braking distance (29.9m instead of 34m), while at 100km/h on a dry road, braking distance is just over 38m instead of the 40.5m required by comparable tyres.

Cinturato is a part of tyre history: the original Cinturato radial ply tyre was a revolutionary product, which back in the fifties made Pirelli world renowned among tyre manufacturers. The Pirelli Cinturato tyre patent – recognised worldwide – was developed as a response to the new generation of cars of that era: cars that offered everyone the driving features which were only found in fast sports cars until then. Those Cinturato tyres were not only the basis for the evolution of the entire industry, but also for Pirelli research which, with the new Cinturato tyre, combines the principles of environmental protection with those of performance and safety.

The partnership between man and technology is becoming closer and closer in the automotive industry, and this means that the tyre is becoming increasingly important for safety, representing, in fact, the only interface between the driver, the car and the road. The particular feature of the ‘intelligent tyre’ is an electronic sensor which can give the on-board computer useful information for safe driving. The sensor is completely self-powered and therefore always charged and with low environmental impact.

Materials, electronics, sensor technology and nanotechnologies are the technological frontiers which challenge leading tyre manufactures today. Pirelli, to maintain its competitive advantage in technology, has had collaboration agreements for some time now with prestigious universities (such as: UC Berkeley, Milan Polytechnic, Turin Polytechnic) and with companies that are world leaders in electronics. Pirelli’s new technological and industrial centre at Settimo Torinese will be the first production site for the ‘intelligent tyre’, which will use Mirs 2, the evolution of Mirs (Modular Integrated Robotised System), the exclusive manufacturing system developed by Pirelli.

The ‘intelligent tyre’ will be developed in two steps as regards technological evolution, application and availability on the market: the Cyber Tyre Lean and the Cyber Tyre in the strict sense.

Cyber Tyre Lean: electronics in the future of tyres

The future of the “intelligent tyre” involves the development of the most sophisticated electronic systems. Pirelli technology’s latest invention is the Cyber Tyre Lean: a TPMS sensor (Tyre Pressure Monitoring System) for monitoring tyre pressure, developed in collaboration with Schrader.
Cyber Tyre Lean (CTL) is a circular shaped device hardly bigger than a two-euro coin, applied to the inner liner of the tyre, which gives data on tyre pressure and temperature, the average load on the wheel and the number of revolutions. It is an absolutely innovative product, unique in the world, and it needs no battery: in fact, thanks to technology patented by Pirelli, it is self-powered, obtaining the necessary energy from the mechanical vibrations transmitted to the device from the movement of the tyre itself. The CTL will be on sale within the first months of 2010 and it is the first step in a technological process aimed at creating an “intelligent” tyre, which will inform the vehicle on tyre-road interaction.

Cyber Tyre: the intelligent tyre that communicates with the car

The development of the sensor which is the basis of the Cyber Tyre Lean represents the first application of electronics to tyres and will also be the starting point for the creation, scheduled for completion within 2012/2013, of the so-called “Cyber Tyre”.

The Cyber Tyre will not only be able to supply data on the tyre, but will also be able to “read” the road and will interface directly with other electronic car systems, transmitting further information for safer driving.

The tyre itself will act as an electronic “sensor”, interacting with other devices such as the ABS and the ESP, to give information in real time such as, for example, the actual and potential friction coefficients, and the force of contact between tyre and road, thus allowing for optimal and safe control of the car. The system will be based on an electronic sensor inserted inside the tyre, just over 1cm3 in size, which will transmit by wireless technology all the data relative to the tyre and will also communicate signals coming from the road, directly to the on-board computer: a sort of miniature “black box” which will be able not only to supply the driver with useful information but also to receive data directly from the car’s other electronic devices.

The information can then be sent to the car itself by means of the transceiver inside the sensor, and allow the driver to correct his style of driving.
The Cyber Tyre will first be developed for high performance cars, but in a few years’ time it will also be available for small and medium powered cars, following the logic now common to all systems which aim to improve safety on the roads.

Technology partnership

Cyber Tyre’s research and development is at the centre of a technology collaboration agreement between Pirelli, Brembo and Magneti Marelli. Cyber Tyre will be integrated into Magneti Marelli’s electronic control systems and Brembo’s advanced braking systems. The know-how and skills of the three Italian groups, recognized at the international level, will allow important synergies to be realized as well as the development of applications, particularly in the field of vehicle safety, aimed to reduce vehicle environmental impact, in line with the progress of international regulations and the European Union’s new limits on C02 emissions, scheduled to come into force in 2012.

The P Zero collection, which this year includes a new product for super sports cars, is Pirelli’s Ultra High Performance family developed for the higher performance cars and for the most demanding drivers, who seek driving pleasure together with safety.
Created in 1987, the P Zero family dominates the high-end segment, in which Pirelli is the recognised world leader. Comfort, high performance and reliability are the features of the P Zero product, the favourite original equipment tyres for the top models from Ferrari, Lamborghini, Audi, Aston Martin, Maserati, Bentley, Jaguar, Mercedes, Alfa Romeo, Porsche and BMW, with whom Pirelli has always worked.

The P Zero series (launched in 2007) includes the P Zero Nero, the P Zero Rosso, for sports cars, and the P Zero Corsa System, for the even faster racing type cars. P Zero is also one of the tyres developed by Pirelli for the 2009 world rally championships, for which the Milan company is the exclusive supplier until 2010. Not by chance, the production of tyres deriving from experience on the race tracks and the competition field is the element that characterises all the P Zero products.

P Zero. The most recent member of the family, which in less than one year has become a reference point for the most performing sports cars. The new P Zero is the most technologically advanced product produced by Pirelli’s research team, and offers the most demanding drivers performances without precedent from all aspects: performance, comfort and safety, thanks to a range of innovative solutions developed by Pirelli and protected by 5 exclusive patents. With an innovative tread pattern, futuristic compounds and a renewed structure.

P Zero Rosso. An Ultra High Performance tyre designed to combine fast driving performance with low noise thanks to the asymmetric design with wide longitudinal grooves and a tread divided laterally into three separate elements, each conceived to confer particular performance features.

P Zero Nero. A tyre with an asymmetrical tread which can guarantee maximum driving safety in every situation, ensuring excellent grip on dry and wet roads, excellent handling, high resistance to aquaplaning and maximum efficiency when braking.

P Zero Corsa. The sports model of the P Zero family, designed with two different treads: asymmetrical and directional. The total adherence on curves, in acceleration and braking make this particularly suitable for the race track, as well as on roads in extreme driving conditions.