ANNUAL REPORT 2015

PRYSMIAN GROUP | DIRECTORS’ REPORT

(rules for the use and application of accounting policies), the Administrative Processes Manual, the

procedures for creating and publishing financial information and other procedures for the preparation of the

consolidated financial statements and interim financial reports (including the chart of accounts, the

consolidation procedures and procedures for related party transactions). Prysmian Group Head Office

functions are responsible for distributing this documentation to operating companies, which can be accessed

through the Group's intranet website. The operating companies also issue local policies, procedures and

rules that comply with the Group's guidelines.

The Group has adopted a centrally coordinated evaluation system and attestation process for the purposes

of assessing the adequacy and effectiveness of the internal control system, which includes controls over the

financial reporting process. This system has been developed using the "COSO Framework

" to identify key

risks and thus the required key controls to adopt to mitigate the risks identified and to ensure the internal

control system operates effectively.

A scoping exercise is carried out annually to identify the companies, processes and sub-processes to be

audited. In fact, the Internal Audit Department, serving in an independent capacity, tests the operation of the

controls previously identified for each of the Group's "in-scope" operating companies and processes. The

Chief Executive Officer and Chief Financial Officer of every Group operating company, and the Heads of the

relevant Head Office Functions and Departments, are responsible for maintaining an adequate system of

internal control; this includes periodically testing the key controls, identified and tested by the Internal Audit

Department during the implementation phase of the centrally co-ordinated evaluation system, to confirm that

they continue to operate effectively and efficiently. These officers are required to submit an attestation every

six months confirming that the internal control system is operating properly. This signed attestation is sent to

Prysmian Group's Chief Financial Officer, the Managers responsible for preparing corporate accounting

documents, and to the Head of Internal Audit. To support this attestation the officers must also confirm that

they have specifically tested the operation of key controls and that evidence supporting their conclusions has

been retained for future independent review. To achieve this, Prysmian requires each operating company to

submit a detailed "Internal Control Questionnaire" (ICQ). These ICQs document the key controls for each

critical business process and describe how the control works in that reporting entity and what type of tests

have been performed in the reporting period to confirm the adequacy of the control. The ICQs are updated

every six months by the owners of each process. The Internal Audit Department centrally reviews the ICQ

submissions and accordingly will select a number of reporting entities or processes for detailed follow-up

audits to confirm the integrity of the submission. An action plan is agreed with each reporting entity to

strengthen existing controls or rectify any specific weaknesses.

The Group believes that the number of processes analysed and reporting entities incorporated within the

evaluation system is sufficient to satisfy its ongoing Law 262/05 obligations.

2 "

COSO Framework - Committee of Sponsoring Organizations of the Treadway Commission".