Corporate Governance System
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Corporate Governance System Report of the Board of Directors on the Corporate Governance Model adopted on 10.03.2005
Report by the Board of Directors on the Corporate Governance of the Company


On a strictly voluntary basis and without referring to any specific editorial layout, this report describes the Corporate Governance model adopted by the company in the light of its charter in force with the aim at providing efficient and effective working rules within the company.


1. Role of the Board of Directors
In accordance with the new company charter, the Board of Directors will have exclusive responsibility for the management of the company. It will therefore be empowered to take all the action necessary or that it considers useful for the start-up of the company objective, with the sole exceptions of those actions reserved expressly by law to the shareholders' meeting. Within this framework, the Board of Directors has exclusive responsibility for resolutions regarding:
  1. merger in the cases taken into consideration by articles 2505 and 2505(ii) of the civil code and, in the case of separation, those referred to in article 2506(iii) of the civil code;
  2. the setting up or closure of secondary branches;
  3. transfer of the registered office within Italian territory;
  4. the indication of the directors who legally represent the company;
  5. reduction of capital following withdrawal;
  6. adaptation of the charter to regulatory provisions.
If the resolutions passed by the Board of Directors are to be valid, the presence of the majority of the directors in office is required and the resolutions will be passed by the absolute majority of the votes of those present. Those taking part in the meetings of the Board of Directors may intervene remotely by means of audio visual connections or telephone conference.

The primary function of the Board of Directors is the address and control of the general activities of the Group. More specifically, the Board of Directors is responsible for the following operations, among others:
  1. the laying down of the strategic management, development and financial lines of the company and group;
  2. the allocation and revocation of delegated powers to the chairman, vice-chairmen and managing directors (referred to below as the "Executive Directors"), as well as those of the Executive Committee, to the extent that this is taken into account in the company charter;
  3. after examining the committee salary proposals and consulting the Board of Auditors, the determination of the salaries payable to the Executive Directors and the directors in specific offices, as well as the subdivision of the total fees due to the single members of the Board of Directors as resolved by the shareholders' meeting;
  4. the monitoring of the general trend of company management, with particular reference to situations of conflict of interests, taking into consideration the information received from the Executive Directors and the relevant terms of the company charter;
  5. the examination and approval of the operations of significant economic, financial and capital importance, with particular reference to the operations with related parties, to the extent that these are taken into account in the company charter;
  6. reporting to the shareholders' meetings.
On the basis of an internal regulation, the Board of Directors will meet every quarter to approve its reports and for any other business. In 2004, nine meetings of the Board of Directors took place. In 2005, five meetings are foreseen to take place.


2. Composition of the Board of Directors
The company charter lays down that the company will be administered by a board made up of three to fifteen members. The board of Directors in office was nominated by the shareholders' meeting on 29th April 2001 and it currently consists of eleven directors.

The members of the Board of Directors are in office for three years, are eligible for re-election and stop holding their office on the date of the Meeting passing of the financial statement relating to their office last year.


3. Chairman of the Board of Directors - Managing Director- Information to the Board of Directors
By means of a resolution passed on 3rd May 2004, the Board of directors nominated Dardanio Manuli to the posts of chairman and managing director, and Mario Manuli to the post of managing director, with the powers required for the normal management of the company. The chairman and the managing director legally represent the company, within the limits of their powers.

The chairman calls the Board meetings and acts to ensure that the directors are provided with suitable information on the matters to be discussed.

In accordance with the company charter, every half-year, the Managing Directors inform the Board of Directors and the Board of Auditors about the general management trend and its foreseeable evolution as well as about the most significant operations carried out by the company and its subsidiaries.


4. Directors' remuneration
The salaries committee is made up of three directors. It was nominated by the Board of Directors on 3rd May 2004 and is made up as follows:
Roberto Cagnazzo - chairman
Dardanio Manuli
Marco Manuli


The chairman and managing director, chairman of the Board of Auditors and, upon invitation, other company members, take part in the meetings of the committee.

The Salaries Committee, which met twice in 2004, is mainly responsible for drafting proposals to be put to the Board of directors for the fixed and variable payment of the executive directors and those with specific responsibilities. On the instructions of the executive directors, it is also responsible for the determination of the criteria for the variable part of the salaries payable to top management of the company. As concerns the calculation of the variable component of the payment, the Committee proposes specific Group economic/financial objectives.


5. Internal control
The internal auditing function is set up within the company. The responsibility of internal auditing is to deal with the implementation, correct operation and monitoring of the internal control system.

As concerns the organisational, management and control model, as provided for the legislative decree 231/2001 at MRI passed by the Board of directors, the head of internal auditing is entrusted with the internal control operations - to be carried out by a compliance officer - with a view to monitoring the running, effectiveness, compliance and updating of the model. Moreover, the company adopted a specific code of ethics containing the indication of the principles and ethical reference values for the company and its directors, employees and outside contributors.

Internal auditing reports to the chairman and executive directors, to enable these to take prompt action as needs require. It also reports to the internal audit committee and auditors to keep them updated on its operations.


6. Audit committee
The audit committee consists of two directors. It was nominated by means of a resolution by the board, passed on 3rd May 2004, and is made up as follows:
Stefano Meloni - chairman
Roberto Cagnazzo


The internal audit committee met four times in 2004.

The chairman and managing director, the chairman of the Board of Auditors and, on invitation, other company members and representatives of the auditing company take part in the meetings of the committee. Reports on the committee's operations are issued to the Board of directors on the occasion of the approval of the financial statement and half-yearly report.


7. Shareholders' Meeting
The Shareholders' Meeting, regularly constituted, is the body expressing the shareholders' want through its resolutions. The resolutions, in compliance with the law and the charter, bind on every associate, including the absent or the dissentient ones.

In accordance with the company charter, the meeting is convened by registered letter with receipt slip or fax, at least eight days prior to the day set for the meeting. The meeting can also take place in a number of adjacent or remote locations by means of telephone or video connection, provided the joint method and the principles of good faith and fair treatment of the shareholders are complied with


8. Auditors
The Board of Auditors is made up of three effective members and two replacement. The Shareholders' meeting that took place on 29th April 2004 decided on the nomination of the Statutory Auditors, charged with auditing the law and charter observance, as well as the management control. The Statutory Auditors do not practice any audit functions. It is the auditing company that deals with it. In general, the powers, duties, duration in office and methods for the nomination of the statutory auditors are those laid down by law.


9. Periodic reports and certifications
On a voluntary basis, the company believes it is useful to draw up quarterly and six-monthly management reports, to be put at the disposal of its shareholders. The company also intends to submit its balance sheets for the financial year and the consolidated group balance for certification by a leading auditing company and submit its six-monthly management reports for limited accounting auditing by that company.


10. Operations with related parties
The operations carried out by the company with its related parties essentially involve the exchange of goods, the provision and use of financial means and the provision of services, with the subsidiaries and other organisations indicated as correlated parties by the IAS 24. All these operations form part of normal management and are subject to market conditions, that is, on the conditions that would apply between two independent parties.


10th March 2005

Dardanio Manuli
Chairman and Managing Director

For the Board of Directors