Pirelli & C.

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2. Information on the structure of share ownership (ex art. 123 bis subsection 1, CFL) at 03/10/2010

a) Structure of the share capital

The subscribed and fully paid in share capital of the company totalled Euro 1,556,692,865.28, consisting of ordinary and savings shares of 0.29 euros par value each. The exact composition of the share capital is reported in Table 1.

Rights and obligations

Ordinary shares entitle the holder to one vote each. They are registered shares or bearer shares, to the extent permitted by law, and can be converted into the other type of shares 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 for their whole face value; if the share capital is reduced by losses, the face value of the savings shares is only reduced for the part of the losses that exceeds the overall face value of the other shares. They also retain the rights and privileges assigned to them by the law and the Company bylaws, even when ordinary and savings shares are excluded from trading.

If share capital should be increased by the issue of shares of 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 the legal allocations have been made:

  1. savings shares are attributed a sum of up to seven percent of their par value. If in a financial year the savings shares are assigned a dividend of less than seven percent of their par value, 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 two percentage points of their par value 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 five percent of their par value.

The remaining profits will be distributed to all the shares, in addition to the sums assigned previously described, 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.

Financial instruments that attribute the right to subscribe to new issue 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 issued1.

Stock incentive plans

See the financial report and the information prospectus drafted in September 2007 pursuant to art. 84 bis of the Consob Issuer Regulations and subsequent amendments, available in the Governance section of the Company website www.pirelli.com.

Please also refer to the heading “Stock Option Plans” in the explanatory notes to the Consolidated Financial Reports.

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 Consob2, 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 exercising 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 subjects that participate in the “Pirelli & C. S.p.A. Block Share Syndicate”, the purpose of which is to ensure the stability of the Pirelli & C share structure and an excerpt of the relevant agreement is provided in annex (d) to this Report, and is available on the Company website www.pirelli.com.

h) Changes to the bylaws

Changes to the bylaws of the Company are deliberated as provided by 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 of the company could occur.

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

Powers to increase share capital

Without prejudice to the matter notified below, the powers granted to the directors to increase the share capital against payment in one or more operations, and the right to issue bonds convertible in both ordinary and savings shares, or with warrants valid for share subscription, expired during the year. In consequence, the Shareholders’ Meeting to approve the 2009 Financial Reports will be asked to modify article 5 of the Bylaws3 so as to eliminate the reference to the aforementioned powers4.

It should be noted that a resolution of the Extraordinary Shareholders’ Meeting held on 7 May 2003, gave the Directors the right to issue, in one or more tranches, up to a maximum of 100,000,000 ordinary shares by 30 April 2008, to be assigned to executive managers and cadres employed by the company, its subsidiaries or their subsidiaries, of the latter in Italy or abroad, pursuant to articles 2441 subsection eight of the Civil Code and article 134 of the CFL. On 25 February 2005, the Board of Directors, in partial execution of the powers attributed to it, resolved to increase the share capital for a maximum of Euro 15,725,496.50 par value, by the issue of a maximum of 54,225,850 ordinary shares of 0.29 euros par value each, at a price of 0.996 euros each, of which 0.706 as share price premium, to be reserved for subscription by executive managers and cadres employed by the company, its subsidiaries and their subsidiaries, in Italy and abroad.

Authorisation to purchase own shares

The programme to purchase the Company’s own shares, approved by the Board of directors on 9 May 2008 after authorisation by the Ordinary Shareholders’ Meeting held on 29 April 2008, expired at the end of October 2009 5

In execution of this programme, the Company purchased 1,250,000 ordinary shares at a price of 0.2985 euros each.

At the Date of the Report, the Company held 3,867,500 of its own ordinary shares, equal to 0.07% of the whole of the share capital, and 4,491,769 of its own savings shares, equal to 3.3% of the savings share capital, and 0.084% of the whole share capital.

m) Directors’ indemnity in case of resignations, termination or cessation of appointment after a public takeover bid

The Company has not stipulated agreements with its directors that envisage indemnities in case of resignations or the termination/cancellation of appointments without good reason or if the employment relationship ceases after a public takeover bid.

n) Direction and coordination activities (ex. art. 2497 and subsequent articles of the Civil Code)

There are no subjects which may directly or indirectly, also by virtue of shareholder agreement, individually or jointly with other persons included in these agreements, exercise control over Pirelli & C..

Nor is the Company subject to direction and coordination activities by any company or body pursuant to article 2497 and subsequent articles of the Civil Code.

In contrast, Pirelli & C., which heads the Group of that name, exercises direction and coordination activities pursuant to the provisions of the Italian Civil Code over many subsidiary companies, having published appropriate information about these matters pursuant to article. 2497-bis of the Civil Code.


1 It should be noted that the right granted to Directors in a decision made by the Extraordinary Shareholders’ meeting held on 11 May 2004 to issue convertible bonds in both ordinary and savings shares, or with warrants valid for the subscription of such shares to be offered as options to shareholders and holders of convertible bonds, for a maximum nominal sum of 1,000 million euros, in one or more operations, within the limits permitted at the time of issue by the current regulations, with a consequent possible increase in share capital to serve the conversion of the bonds and/or the exercise of the warrants, expired on 10 May 2009. "See the section above entitled “Powers to increase the share capital and authorisations to purchase own shares”."

2 www.consob.it, “issuers” section.

3 By a resolution of the Extraordinary Shareholders’ Meeting held on 11May 2004, the Directors were attributed:
- the right to increase the share capital by payment, by 10 May 2009, in one or more operations, up to a total sum of 600 million euros par value, with or without share premium, by issuing a maximum of 2,068,965,517 ordinary shares to be offered in option to shareholders and holders of convertible bonds, with the possibility of excluding the right to option pursuant to the combined provisions of art. 2441, last subsection, of the Civil Code, and article 134, subsection two, of the CFL, where the shares are offered for subscription by the employees of Pirelli & C. or its subsidiaries.
- the right to issue convertible bonds in both ordinary and savings shares, or with warrants valid for the subscription of such shares to be offered as options to shareholders and holders of convertible bonds, for a maximum nominal sum of 1,000 million euros, before 10 May 2009, in one or more operations, within the limits permitted at the time of issue by the current regulations, with a consequent possible increase in share capital to serve the conversion of the bonds and/or the exercise of the warrants.

4 For more information on this point, see the Directors’ Report , available on the company website.

5 Press release of 5 November 2009.