Appointment of the Board of Directors

— determination of the number of the members of the Board of Directors;
— determination of the duration of the Board of Directors;
— appointment of the Directors;
— determination of the annual remuneration of the members of the Board of Directors.

Dear Shareholders,

the Board of Directors currently in office has been appointed by the ordinary Shareholders’ Meeting held on April 28, 2005 that has resolved upon a three-fiscal year mandate.

The mandate of the Board is, therefore, going to expire at the approval of the financial statements as at December 31, 2007.

The Shareholders’ Meeting is hence convened to appoint the new Board of Directors, subject to the determination of the number of its members, the duration of their office and the relevant remuneration.

In this regard, we remind you that article 10 of the Company’s By-laws (written in full at the end of this report) provides that the Board of Directors of the Company shall be composed of no less than 7 (seven) and no more than 23 (twenty three) members and that it shall remain in office for three fiscal years, providing also that, when appointing the Board of Directors, the Shareholders’ Meeting may grant a mandate lasting less than three fiscal years and that Directors may be re-appointed.

We also briefly remind you that, pursuant to same article 10 of the Company’s By-laws, the Board of Directors shall be appointed on the basis of slates presented by those shareholders who, alone or together with other shareholders, hold shares representing at least 1.5 per cent of the share capital entitled to vote at the ordinary Shareholders’ Meeting (threshold provided by Consob with the resolution no. 16319 of January 29, 2008), subject to their proving ownership of the number of shares needed for the presentation of slates within the term of filing of same slates.

The Shareholders who present a slate must indicate their details and the percentage of the share capital entitled to vote at the ordinary Shareholders’ Meeting that they jointly own.

The slates of candidates, such candidates being listed in a progressive order, must be undersigned by the parties submitting them and filed at the Company’s registered office and be available to anyone on request, at least fifteen days before the date set for the Shareholders’ Meeting on first call. Together with each slate, and within the same terms specified above, statements must be filed in which the individual candidates agree to their nomination and attest, under their own liability, that there are no grounds for their ineligibility or incompatibility, and that they meet any requisites prescribed for the relevant office. Together with such statements, a curriculum vitae must be filed for each candidate, setting out their relevant personal and professional data and mentioning the offices held in management and supervisory bodies of other companies and eventually the eligibility of them to be qualified as an independent candidate in accordance with the criteria established by law and adopted by the Company (Corporate Governance Code for Listed Company). Any changes that occur up to the date of the Shareholders’ Meeting must be promptly notified to the Company

Each Shareholder shall submit or concur to the submission of only one slate and each candidate shall be nominated in only one slate on pain of ineligibility.

Any slates submitted without complying with the provisions of article 10 of the Company’s By-laws shall be disregarded.

We also inform you that, in accordance with the provisions of the Corporate Governance Code for Listed Companies, the Board of Directors of the Company has resolved upon the general guidelines to determine the maximum number of offices of its members; in this regard, the Shareholders, who shall intend to submit slates for the appointment of the Board of Directors, are invited to examine the relevant document published on the Internet web site of the Company at the address www.pirelli.com, section corporate governance.

On the basis of the above, the Board of Directors,

  • having onsidered the provisions of the By-laws of the Company concerning the composition and the procedure for the appointment of the Board of Directors;

proposes to the Shareholders’ Meeting

  • to determine the number of the members of the Board of Directors, also determining the duration of their office and the relevant remuneration;
  • to vote the slates of the candidates for the office of Director of the Company that has been presented and published in compliance with the terms and conditions provided for by article 10 of the Company’s By-laws.

Article 10 of the By-laws of the Company Pirelli & C. S.p.A.

The Company shall be managed by a Board of Directors composed of no less than seven and no more than twenty three members who shall remain in office for three financial years (unless the shareholders’ meeting establishes a shorter term at the time of their appointment) and may be re-elected. The shareholders’ meeting shall establish the number of members of the Board of Directors, which shall remain unchanged until said meeting resolves otherwise.

The Board of Directors shall be appointed on the basis of slates presented by the shareholders pursuant to the following paragraphs hereof, in which the candidates are listed by consecutive number.

The slates presented by the shareholders, which must be undersigned by the parties submitting them, shall be filed at the Company’s registered office, and be available to anyone on request, at least fifteen days before the date set for the shareholders’ meeting to be held on first call.

Each shareholder may present or take part in the presentation of only one slate and each candidate may appear on only one slate on pain of ineligibility.

Only shareholders who, alone or together with other shareholders, hold a total number of shares representing at least 2 percent of the share capital entitled to vote at the ordinary shareholders’ meeting or the minor percentage, according to the regulations issued by Commissione Nazionale per le Società e la Borsa, are entitled to submit slates, subject to their proving ownership of the number of shares needed for the presentation of slates within the term of filing of same slates.

Together with each slate, and within the respective terms specified above, statements must be filed in which the individual candidates agree to their nomination and attest, under their own liability, that there are no grounds for their ineligibility or incompatibility, and that they meet any requisites prescribed for the positions. Together with such statements, a curriculum vitae must be filed for each candidate, setting out their relevant personal and professional data and mentioning the offices held in management and supervisory bodies of other companies and specifying, where appropriate, the grounds on which they qualify as an independent candidate in accordance with the criteria established by law and the Company. Any changes that occur up to the date of the Shareholders’ meeting must be promptly notified to the Company.

Any slates submitted without complying with the foregoing provisions shall be disregarded.

Each person entitled to vote may vote for only one slate.

The Board of Directors shall be elected as specified below:

a) four-fifths of the directors to be elected shall be chosen from the slate which obtains the highest number of votes cast by the shareholders, in the order in which they are listed on the slate; in the event of a fractional number, it shall be rounded-down to the nearest whole number;

b) the remaining directors shall be chosen from the other slates; to this end, the votes obtained by the various slates shall be divided by whole progressive numbers from one up to the number of directors to be elected. The quotients thus obtained shall be assigned to the candidates on each slate in the order they are respectively listed thereon. On the basis of the quotients assigned, the candidates on the various slates shall be ranked in a single list in decreasing order. Those who have obtained the highest quotient shall be elected.

If more than one candidate obtains the same quotient, the candidate from the slate that has not yet elected a director or that has elected the lowest number of directors shall be elected. If none of such slates has as yet elected a director or they have all elected the same number of directors, the candidate from the slate which obtained the highest number of votes shall be elected. If the different slates obtain the same number of votes and their candidates are assigned the same quotients, a new vote shall be held by the entire shareholders’ meeting and the candidate who obtains the simple majority of the votes shall be elected.

When appointing directors who, for whatsoever reason were not appointed under the procedure established herein, the shareholders’ meeting shall vote on the basis of the majorities required by law.

If one or more vacancies occur on the Board during the course of the financial year, the procedure established in article 2386 of the Italian Civil Code shall be followed.

The Board of Directors shall elect its own Chairman, if the shareholders’ meeting has not already done so, and may also appoint one or more Deputy Chairmen.

In the absence of the Chairman, a Deputy Chairman or a Managing Director, in that order, shall act in his/her stead; should there be two or more Deputy Chairmen or Managing Directors, the Board shall be presided over by the elder of same respectively.

The Board of Directors shall appoint a Secretary, who need not be a director.

Until the shareholders’ meeting resolves otherwise, the directors shall not be subject to the prohibition contemplated in article 2390 of the Italian Civil Code.

Appointment of one Standing Auditor

Dear Shareholders,

the Standing Auditor Mr. Paolo Francesco Lazzati, appointed by the ordinary Shareholders’ Meeting held on April 21, 2006, resigned dating from the next Shareholders’ Meeting resolving upon the approval of the financial statements as at December 31, 2007.

The Shareholders’ Meeting is therefore convened to appoint a standing auditor as a substitute of Mr. Paolo Francesco Lazzati in order to complete the Board of the Statutory Auditors.

Pursuant to article 16 of the By-Laws of the Company, the appointment shall be approved with the favourable votes of the relative majority without the application of the slate voting system.

Therefore, the Board of Directors:

  • having considered the articles of the By-Laws of the Company concerning the procedures for the appointment of the Board of the Statutory Auditors;

proposes to the Shareholders’ Meeting

  • to appoint - on the basis of the proposals that shall be possibly submitted by Shareholders - a standing statutory auditor in compliance with the terms and conditions provided for by article 16 of the By-Laws of the Company