STRATEGIES COMMITTEE

Composition

The Board of Directors set up the Strategies Committee in the meeting held on April 21, 2011, also taking into account the in-depth studies performed in the previous mandate.

The Strategies Committee is composed of 5 Board Members, the majority of whom are nonexecutive Directors (2 Independent  Directors).

Two Executive Managers with strategic responsibilities are also members of the Strategies Committee.

The Strategies Committee was composed as follows at the Date of the Report, taking into account the resignation of Prof. Francesco Profumo42:

  • Marco Tronchetti Provera (Chairman);
  • Franco Bruni;
  • Vittorio Malacalza;
  • Renato Pagliaro;
  • Carlo Secchi;
  • Francesco Chiappetta;
  • Francesco Gori

The Managers of the Investor Relations (Ms. Valeria Leone) and the Sustainability and Risk Management Departments (Filippo Bettini) act as Secretaries to the Committee.

Duties assigned to the Committee

The Committee has advisory and proposing functions when defining the strategic guidelines, as well as to identify and define the terms and conditions of individual transactions of strategic importance.

In particular, the Committee:

  • examines in advance the strategic, industrial and financial plans, also long-term plans of the Company and of the Group to be submitted to the examination of the Board of Directors;
  • supports the Board to assess transactions, initiatives and activities of strategic importance and, in particular:
    • entry in new markets, both geographic and business;
    • industrial alliances (for example: jointventures);
    • extraordinary transactions (merges, spin-offs, share capital increases or decreases other than decreases due to losses);
    • investment projects;
    • industrial and/or financial restructuring programmes and projects.

Operation

The Committee is appointed by the Board of Directors (and the Board also indicates the Committee’s Chairman) and remains in office for the Board of Directors’ entire mandate.

The Committee meets whenever its Chairman deems it appropriate, or when a request is made by at least one member, by the Chairman of the Board of Directors or by the Managing Director, if appointed, and however, as often as appropriate to ensure its functions are performed correctly.

The Committee appoints the secretary of its meetings.

The Committee’s meetings are convened by a notice, also sent by the secretary, at the request of the Committee Chairman.

The documentation and the information available (and in any event, the documentation and information required) are transmitted to all the Committee members sufficiently in advance to enable the members to express their opinion in the meeting.

The Committee’s meetings are validly constituted provided the majority of its members in office are present and the resolutions are passed with the absolute majority of the members in attendance.

The Committee’s meetings may also be held using telecommunication media and are regularly reported under the responsibility of the Secretariat office and transcribed in the special register.

The Committee has adequate financial resources to perform its duties with absolute expenditure autonomy and may avail itself of external consultants when performing its functions.

Activities performed during the financial year

The Strategies Committee met 3 times during the 2011 financial year; the average duration exceeded one hour and thirty minutes and the tables illustrated at the end of the Report summarise the participations of the members in the Committee’s meetings recorded during the financial year.

In particular, the Committee endorsed the Industrial Plan guidelines with an outlook extending to 2015, the review of the 2012-2014 targets and the review (a) of the functioning arrangements; (b) the processes and (c) the top management relationships of the organisation that will accompany the Group to “execute” the Industrial Plan (the reader is referred to paragraph 4.5.2 “Company Organisation” for further details concerning Pirelli’s organisation).

Lastly, the Committee examined in advance the project to enhance the presence in Argentina with a new plant to manufacture Truck radial tyres that aims to rebalance the Company’s presence in South America.

The project envisages investments of approximately 300 million dollars starting from 2012 intended for the initial development phase that will be completed within 2014. A second phase of the project would entail additional investments of approximately 200 million
dollars.

The first phase of the investment envisages a production capacity of approximately 700 thousand tyres per year and employing approximately 700 persons. The second phase would make it possible to achieve a potential production capacity, when fully operational, of approximately 1.4 million tyres per year and to employ approximately 1,200 persons.

The project aims to strengthen the leadership position already held by Pirelli in South America and forms part of the strategy that in recent years has seen the progressive increase of the direct industrial presence on markets like Argentina, which have higher rates of development, in addition to competitive industrial costs in the framework of a regional logic that, inter alia, enables the effects associated with exchange rate fluctuations to be contained. In particular, the new plant would enable the increased demand for radial tyres to be satisfied in a country that has an economic growth that is attracting new investments by the automotive industry.

The new plant is expected to be built in 2012 and envisages the production of technologically innovative tyres which offer efficient mobility solutions, in terms of performance, safety, eco-sustainability and economic operation.

The product lines foreseen will exploit the state-of-the-art SATT technology that permits the product’s useful working life to be extended, optimising its levels of wear and improving driving precision.

The Committee met once during the early months of the 2012 financial year.

42 The Reader is referred to Table 4 for further details.