2014 ANNUAL REPORT

Parent Company Financial Report |

EXPLANATORY NOTES

2014 Annual Report

Prysmian Group

314

The actuarial losses recognised at 31 December 2014 (Euro

973 thousand) mainly relate to the change in the associated

economic parameters (the discount and inflation rates).

Under Italian law, the amount due to each employee accrues

with service and is paid when the employee leaves the

company. The amount due upon termination of employ-

ment is calculated on the basis of the length of service and

the taxable remuneration of each employee. The liability

is adjusted annually for the official cost of living index and

statutory interest, and is not subject to any vesting condi-

tions or periods, or any funding obligation; there are therefore

no assets that fund this liability.

The rules governing this liability were revised by Legislative

Decree 252/2005 and Law 296/2006 (Finance Act 2007):

amounts accruing since 2007 by companies with at least

50 employees now have to be paid into the INPS Treasury

Fund or to supplementary pension schemes, as decided by

employees, which now take the form of "defined contribution

plans". All companies nonetheless still account for revalua-

tions of amounts accrued before 2007, while those companies

with fewer than 50 employees continue to accrue amounts in

respect of this liability that are not intended for supplemen-

tary pension schemes.

The benefits relating to this plan are paid to participants in

the form of capital, in accordance with the related rules. The

plan also allows partial advances to be paid against the full

amount of the accrued benefit in specific circumstances.

The main risk is the volatility of the inflation rate and the

discount rate, as determined by the market yield on AA

corporate bonds denominated in Euro. Another risk factor

is the possibility that members leave the plan earlier than

expected or that higher advance payments than expected are

requested, resulting in an actuarial loss for the plan, due to an

acceleration of cash flows.

The actuarial assumptions used to value employee indemnity

liability are as follows:

31 December 2014 31 December 2013

Discount rate

1.50%

3.00%

Future expected salary increase

2.00%

Inflation rate

2.00%

31 December 2014

Change in inflation rate

-0.25%

0.25%

Effects on liability

-1.58%

1.61%

Change in discount rate

-0.50%

0.50%

Effects on liability

5.10%

-4.69%

The following table presents a sensitivity analysis of the

effects of an increase/decrease in the most significant

actuarial assumptions used to determine the present value

of the employee indemnity liability, namely the discount rate

and inflation rate: