Information on the structure of share ownership

  • Shareholders approved the decision to separate Pirelli RE from the Pirelli Group
  • Ordinary shares entitle the holder to one vote par share
  • Savings shares have the right of pre-emption in the reimbursement of capital up to an amount of euro 3.19 per share

The subscribed and fully paid-in share capital of the company totalled Euro 1,377,878,879.78, consisting of a total of no. 487,991,493 shares without par value, 475,740,182 of which (Euro 1,343,286,427.00) are ordinary shares while 12,251,311 (Euro 34,592,452.78) are savings shares.

In this regard, note that the 15 July 2010 extraordinary sessions of the Company's ordinary shareholders' meeting resolved to eliminate par value of ordinary and savings shares, and to convert shares to stock with a ratio of 1 ordinary or savings stock for every 11 shares of the same type held.

In execution of the resolutions passed in the previous meetings, on 26 July 2010 the following operations were performed:

(i) conversion of the 5,233,142,002 ordinary shares without par value at a ratio of 1 new ordinary stock for every 11 ordinary shares owned;
(ii) conversion of the 134,764,421 savings shares in circulation according to a ratio of 1 new savings stock for every 11 savings shares owned.

At the same meeting, shareholders approved the decision to separate Pirelli RE from the Pirelli Group by proportionate assignment to ordinary and savings shareholders of 487,231,561 ordinary shares in Pirelli & C. RE owned by the Company. To this end, the Company approved a reduction of its share capital by Euro 178,813,982.89, corresponding to the value of the Pirelli RE shares assigned, determined on the basis of the official price of Pirelli RE shares as of 14 July 2010.

The Pirelli RE shares were assigned on 25 October 2010 with a ratio of one ordinary Pirelli RE share for each Pirelli & C. ordinary or savings stock owned after the conversion of shares into stock.

The share capital of Pirelli & C. as of the date of the Report is Euro 1,377,878,879.78, consisting of a total of no. 487,991,493 shares without par value, 475,740,182 of which (Euro 1,343,286,427.00) are ordinary shares while 12,251,311 (Euro 34,592,452.78) are savings shares.

Table no. 1 illustrates the precise breakdown of share capital. Note that the shareholders' meeting asked to approve the 2010 Financial Statements is asked to reduce the company's share capital by euro 32,498,345.12 (and therefore from Euro 1,377,878,879.78 to Euro 1,345,380,534.66) without deleting any shares in order to reduce to zero the negative reserve under shareholders' equity referred to as "Reserve for assignment of Prelios shares". Readers are referred to the Directors' Report available on the Company's website for more information on this point.

Rights and obligations

Shares are divided into ordinary shares and savings shares, without par value.
Ordinary shares entitle the holder to one vote par share. They are registered shares or bearer shares, to the extent permitted by law, and can be converted into the other type of share at the request and expense of their owner. Savings shares do not have voting rights and, unless otherwise provided by law, are bearer shares.
They may be converted into nominal savings shares at the request and expense of the shareholder.

In addition to the rights and privileges specified by the law and the Company bylaws, savings shares have the right of pre-emption in the reimbursement of capital up to an amount of euro 3.19 per share. If the share capital is reduced by losses, the par value of the savings shares is only reduced for the part of the losses that exceeds the overall par value of the other shares.

Savings shares also retain the rights and privileges assigned to them by the law and the Company's bylaws, even when ordinary and savings shares are excluded from trading.
If share capital should be increased by the issue of shares in a single category, they must be offered as an option to all categories of shareholders.

If capital is increased by the issue of both ordinary and savings shares:

  1. holders of ordinary shares have the right to receive options for ordinary shares and, for any difference, savings shares;
  2. holders of savings shares have the right to receive options for savings shares and, for any difference, ordinary shares;

The net annual profits are divided as follows, after legal allocations have been made:

  1. savings shares are attributed a sum of up to seven percent of euro 3.19. If in a financial year the savings shares are assigned a dividend of less than 7% of euro 3.19, the difference is added to the preference dividend in the two following financial years. The profits remaining after the dividend specified above has been assigned to the savings shares are allocated to all the shares in such a way that the savings shares receive a dividend that is 2% points of euro 3.19 higher than that of the ordinary shares;
  2. without prejudice to the above provisions concerning the increased total dividend payable on savings shares, ordinary shares are attributed a sum totalling 5% of their par value (defined as the ratio between the amount of share capital and the total number of shares issued).

The remaining profits will be distributed to all the shares, in addition to the sums assigned as described in letters a) and b) above, unless the Shareholders' Meeting should decide to approve the Board's proposal to make special allocations to extraordinary reserves or other uses, or should decide to carry forward part of said share of the profits.
If reserves are distributed, the savings shares have the same rights as the other shares.
Advances may be paid on dividends as permitted by law.

Financial instruments that attribute the right to subscribe to new issues of shares

At the date of approval of the Report no financial instruments that attribute the right to subscribe to new issue shares were found to have been issued.

Stock incentive plans

The Company does not currently have any stock incentive plans in place.

b) Restrictions on the transfer of securities

There are no restrictions on the transfer of securities.

c) Major shareholdings

Those subjects which, according to the criteria published by Consob1, own ordinary shares representing more than 2% of the ordinary voting capital, are listed in Table 2.

d) Securities that confer special rights

No securities that confer special monitoring rights have been issued.

e) Employee shareholdings: mechanism for exercising voting rights

In the case of employee shareholders, there are no mechanisms for the exercise of their voting rights when the voting rights are not exercised directly by said employees.

f) Restrictions on voting rights

There are no restrictions on voting rights (such as, for example. limitations on voting rights at a certain percentage, namely a certain number of votes, terms imposed on the exercise of voting rights, namely systems in which, with the cooperation of the Company, the financial rights related to the securities are separate from the ownership of the securities).

g) Shareholder agreements

The list of participants in the "Sindacato Blocco Azioni Pirelli & C. S.p.A." (Pirelli & C. S.p.A. Shareholders' Agreement) as of December 31 2010, aimed at guaranteeing the stability of Pirelli & C.'s shareholding structure, and an extract from the text of the agreement appear in the annex to the Report and may be accessed on the Company's website.
Please note that, after the end of the financial year, Mr. Massimo Moratti sold on the stock market n. 3,330,00 Pirelli's ordinary shares of all n 5,673,392 transferred to the Shareholders' Agreement.
Consequently, at the Report date, n. 216,541,863 ordinary shares of Pirelli (equal to 45,52% of the ordinary share capital issued with voting rights) are transferred to the Shareholders' Agreement.

h) Changes to the bylaws

Changes to the bylaws of the Company are deliberated as provided for the legal regulations.

i) Change of control clauses

There are no subjects which may directly or indirectly, also by virtue of shareholder agreements, individually or jointly with other persons included in these agreements, exercise control over Pirelli & C..
It follows that, this being the case, no change of control may occur in the Company.

l) Powers to increase share capital and authorisations to purchase owned shares

Powers to increase share capital

Directors have not been give power to increase the share capital against payment in one or more operations, or to issue bonds convertible in both ordinary and savings shares or with warrants valid for share subscription2.

Authorisation to purchase own shares

As of the Date of the Report, the Board of Directors has not been authorised to purchase any of the Company's own shares.
As of the Date of the Report, the Company held 351,590 of its own ordinary shares, equal to 0.07% of the whole of the share capital, and 408.343 of its own savings shares, equal to 3.3% of the savings share capital, and 0.084% of the whole share capital.

1 www.consob.it, "issuers" section.
2 The shareholders' meeting asked to approve the 2010 Financial Statements will be asked to change article 5 of the Company Bylaws to eliminate the reference to the powers granted by the May 7 2003 extraordinary shareholders' meeting to issue up to 100,000,000 ordinary shares in one or more operations to be completed by April 30 2008, to be assigned to executives and managers in the Company, its subsidiaries and their subsidiaries in Italy and abroad, and the reference to the circumstance that the February 25 2005 Board of Directors' meeting deliberated, in partial execution of the powers granted it, to increase the Company's share capital by a maximum par value of Euro 15,725,496.50 by issuing a maximum of 54,225,850 ordinary shares with a par value of Euro 0.29 each at a price of Euro 0.996 each, including Euro 0.706 in share premium, to be reserved for subscription by executives and managers in the Company, its subsidiaries and their subsidiaries in Italy and abroad. For more information the reader is referred to the Directors' Report to the Shareholders' Meeting available on the Company's web site.

m) Directors' indemnity in the case of resignation, termination or cessation of appointment after a public takeover bid3

The Pirelli Group's policy is not to stipulate agreements with Directors, managers with strategic business responsibilities, senior managers and executives regulating economic aspects before the fact of potential advance cessation of the employment relationship on the Company's or the individual's initiative (referred to as "parachutes").
In the event of interruption of the employment relationship with the Group for reasons other than just cause, the Company's policy is to seek to come to an agreement for "closing" the relationship. In any case, obligations under the law and/or contract remaining in effect, any agreements that may be reached regarding cessation of employment with the Group shall be inspired by the benchmarks in this area and fall within the limits determined by jurisprudence and practice in the company for which the agreement is made. For more information the reader is referred to the "General Remuneration Policy" appearing at the end of this Report.

n) Direction and coordination activities (under art.2497 et seq. of the civil cod e)

There are no subjects which may directly or indirectly, also by virtue of shareholder agreements, individually or jointly with other persons included in these agreements, exercise control over Pirelli & C..
Nor is the Company subject to the direction and coordination of other companies or bodies under article 2497 of the Civil Code.
In contrast, Pirelli & C., which heads the Group of that name, exercises direction and coordination activities over numerous subsidiary companies, having published appropriate information about these matters pursuant to article 2497-bis of the Civil Code.

3 The information appearing in this section is provided in compliance with Consob's request in its Communication DEM/11012984 of February 24 2011