Accounting Policies: standards IAS/IFRS

In accordance with Regulation No. 1606 issued by the European Parliament and by the Council of the European Union in July 2002, the consolidated financial statements of the Pirelli & C. Group have been prepared in accordance with the international accounting standards IAS/IFRS in force at December 31, 2005 and in accordance with the interpretations of the "International Financial Reporting Interpretations Committee" - IFRIC.

On November 8, 2005, the European Commission adopted Regulation No. 1910/2005 which endorses, among other things, the amendments to IAS 19 (Employee benefits) approved by the International Accounting Standards Board - IASB in December 2004.
One of the amendments introduced is the option to recognize in full actuarial gains and losses on post-employment benefits of the type called defined benefits directly in a statement of recognized income and expenses. The Group elected to apply this option.

As a result of the application of this option, a change was made to the effects of the transition to IAS/IFRS published in the interim consolidated financial statements at June 30, 2005 equal to a reduction in equity of Euros 53 million at December 31, 2004.
Specifically, paragraph 1 "Summary of significant accounting policies", the comparative figures at December 31, 2004 and paragraph 4 "Transition to IAS/IFRS" of these notes now include the effects of the adoption of this option.

Furthermore, this effect had already been included in the quarterly report at September 30, 2005, in that the above amendments to IAS 19, even though they had not yet been adopted by the European Union, had already been approved at the date of the publication of the quarterly report.

The consolidated financial statements are audited by PricewaterhouseCoopers S.p.A. pursuant to art. 159 of Legislative Decree No. 58 dated February 24, 1998 and taking into account the Consob recommendation dated February 20, 1997, in execution of the resolution passed by the shareholders on April 28, 2005 which engaged the audit firm for the three years 2005-2007. The fees agreed for the audit of the consolidated financial statements for the year 2005 amount to Euros 2,896 thousand, inclusive of the fees relating to the limited review of the interim  consolidated financial statements at June 30, 2005.