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ANNUAL REPORT
CONSOLIDATED AND STATUTORY FINANCIAL STATEMENTS
AT DECEMBER 31, 2004 — 99TH FISCAL YEAR

Table of contents

  • Page 1
    ANNUAL REPORT CONSOLIDATED AND STATUTORY FINANCIAL STATEMENTS AT DECEMBER 31, 2004 - 99TH FISCAL YEAR

  • Page 2
    ...and Services Sustainability Report Innovation and Technology Environment Human Resources Financial Review of the Fiat Group and Fiat S.p.A. Transition to International Financial Reporting Standards (IAS/IFRS) Corporate Governance Stock Option Plans Transactions among Group Companies and with Related...

  • Page 3
    ... Meetings) and Article 12 (Corporate Offices, Committees and Directors' Fees) of the Articles of Association; relevant resolutions. Fiat S.p.A. Corporate Headquarters: 250 Via Nizza, Turin, Italy Paid-in capital: 4,918,113,540 euros Entered in the Turin Company Register Fiscal Code: 00469580013

  • Page 4
    ... 27 - May 28, 2004. He was 69 years old and had been Chairman of Fiat S.p.A. since February 28, 2003. For many years, Umberto Agnelli served in top positions at the Group's holding companies and at Fiat. He was always guided in his work by a commitment to innovation, change and internationalization...

  • Page 5
    ... AND CONTROL BODIES Board of Directors Chairman Vice Chairman Chief Executive Officer Luca ...Board Franzo Grande Stevens (1) Member of the Nominating and Compensation Committee (2) Member of the Internal Control Committee Board of Statutory Auditors Statutory Auditors Cesare Ferrero - Chairman...

  • Page 6
    REPORT ON OPERATIONS 01

  • Page 7
    ... GROUP 19 INNOVATION AND TECHNOLOGY 22 ENVIRONMENT 23 HUMAN RESOURCES 27 FINANCIAL REVIEW OF THE FIAT GROUP AND FIAT S.P.A. 44 TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (IAS/IFRS) 50 CORPORATE GOVERNANCE 54 STOCK OPTION PLANS 55 TRANSACTIONS AMONG GROUP COMPANIES AND WITH RELATED...

  • Page 8
    ...people. From an economic standpoint, the work done during the year helped the Group achieve across-the-board improvements. All Sectors except Fiat Auto reported a positive operating result. In 2004, the Group was faced with the need to change its top management, following the painful loss of Umberto...

  • Page 9
    ... CEO job at Fiat Auto as well. The time has come to focus on the key aspects of the carmaking business: products, sales network and customer service. With this in mind, in 2005 Fiat Auto will improve its sales network, continue to cut nonessential costs, increase manufacturing efficiency and work to...

  • Page 10
    ... construction equipment business through the Case, New Holland and Kobelco brands. The Sector's financial services provide support to end customers and to its dealers. - AUTOMOBILES The Group's automobile operations are managed primarily by its Automobile Sector, which includes Fiat Auto Holdings...

  • Page 11
    ..., facility management, administrative and corporate finance consulting, information and communication technology, purchasing, and e-procurement. Publication of the La Stampa newspaper, and sale of advertising space for multimedia customers through Publikompass. â- PRODUCTION SYSTEMS This Sector...

  • Page 12
    ...3,907 3,630 3,757 3,236 1,725 1.5% 4.2% 1.0% 5.1% 1.28 223,953 STATISTICAL DATA BY GEOGRAPHICAL REGION Number of Companies Number of Employees Number of Facilities Number of R&D Centers Italy Europe excluding Italy North America Mercosur Other regions Total 173 291 89 43 104 700 71,329 42,879 12...

  • Page 13
    ... of euros) of euros) Number of employees 2004 2003 Automobiles (Fiat Auto) Ferrari - Maserati Agricultural and Construction Equipment (CNH) Commercial Vehicles (Iveco) Components (Magneti Marelli) Metallurgical Products (Teksid) Production Systems (Comau) Services (Business Solutions) Publishing...

  • Page 14
    ... monthly trading volumes (in millions of shares) 600 Financial communications It is Fiat's primary interest to create and maintain a constant dialogue with its Stockholders and its Institutional Investors. Through its investor relations program, the Group pursues a policy of open communication with...

  • Page 15
    Minimum and maximum monthly price (in euros) Fiat ordinary shares Major stockholders at 12/31/2004 8 Others 34% IFIL Investments S.p.A. 30.06 % TIAA Cref 4.1% 7 6 International Institutional Investors 11% Generali 3.25% LAFICO 2.71% 5 Italian Institutional Investors 10% 01/04 02/04 03/04 ...

  • Page 16
    ... the sales and service network, focusing in particular on improving the profitability of new contracts. Leasys, jointly owned by Fiat Auto and Enel, reinforced its leading position on the Italian long-term rental market by setting up a new business unit dealing in specially equipped light commercial...

  • Page 17
    ..., whose center-swing boom can be positioned right along a foundation, and a new range of wheel loader/tool carriers. In Latin America, Fiat Allis implemented new standards for 13 Brazilian dealers and their 22 sales outlets. IVECO PRODUCTS Iveco continued to renew its van and light truck lineup...

  • Page 18
    ... coverage. Spare parts logistics service for Irisbus and Iveco Motors, for example, was closely integrated with the service developed for commercial vehicles customers. Gradual standardization of on-board equipment made it possible to develop service schemes that can be extended to all types 16

  • Page 19
    ... in the same ethical values that for over a century have informed Fiat's dealings with shareholders, employees, customers, the public, and the environment. The social role that the Group has played in Italy's industrial and economic development is written in the history books, as is its contribution...

  • Page 20
    ... and the market, adding further important information to that provided in the Annual Report. For example, this section provides details of how added value was achieved, about loans and financing, about salaries and the cost of labor, about customer satisfaction, and how the Group's suppliers are...

  • Page 21
    ... by over 20% under particular severe traffic conditions and provides an excellent cost-benefit ratio without detracting from ride comfort and driveability. New natural gas applications for commercial vehicles. IVECO's Tector CNG and Cursor 8 CNG compressed natural â- Innovation and Technology 19

  • Page 22
    ...went into production, were developed with the help of the Fiat Research Center's extensive know-how in natural gas propulsion systems for buses and heavy trucks. Compared with earlier electronicallycontrolled natural gas injection powerplants, the new engines offer higher specific horsepower, better...

  • Page 23
    ... car prototype, the Alfa Romeo 8 C, whose engineering solutions will be used on future Fiat Auto models. Together with the Fiat Research Center, Elasis designed a modular platform that can be used for vehicles with different wheelbases and for low environmental impact propulsion systems (natural gas...

  • Page 24
    ... all the people involved. The Group's research work is spearheaded by the Fiat Research Center, Elasis and the Center for the Study of Transportation Systems, who work in partnership with public and private organizations as well as with the R&D teams at each of the Group's companies. This year, the...

  • Page 25
    ... new model involved the Group's top executives. The assessment process is gradually being applied to all management employees. Training and Professional Development. In 2004, the Group invested 108 million euros (2.4% of its total payroll) in training and professional development programs designed...

  • Page 26
    ... of Fiat Auto. The policy of pursuing a dialog and holding discussions with employee representatives was followed at the national level in other countries as well, according to local practices and labor agreements. In Italy in particular, the Group's Chief Executive Officer met with Italian union...

  • Page 27
    ... generally in line with the rate of inflation. Increases in excess of the rate of inflation were granted by companies with favorable operating results or in special situations. In Italy, employees received the wage increases provided for under the National Collective Labor Agreement for Metalworking...

  • Page 28
    ... Auto employees. The strikes in Brescia were called to demand negotiations for a supplemental labor agreement at the factory level that would provide wage increases in excess of those paid in the rest of the Group. Consequently, the Company refused to negotiate these demands. The main development...

  • Page 29
    .... At that time, Fidis Retail Italia controlled part of the European activities of Fiat Auto Holdings in the field of retail consumer financing for automobile purchases. The sale to Fidis Retail Italia of the equity investments in the other financial companies covered by the agreement was finalized...

  • Page 30
    ..., 1,193,000 vehicles were sold, 1.2% more than in the previous year. Most of the increase in sales volumes occurred in Italy (+4.9%), thanks to the success of new models, while volumes contracted on the other principal markets of Western Europe, with decreases of 8.9% in France, 9.1% in Germany, and...

  • Page 31
    ... and foreign exchange basis, revenues increased by 6%, driven mainly by technological improvements of its products. In particular, production of the Diesel Buy system was launched in the Engine Control area, together with that of new headlights in the Lighting area. The Suspension business reported...

  • Page 32
    ... of the strategy to renew its product range and its commitment to innovation. Research costs increased at Fiat Auto, largely on account of the introduction of the New Ducato and Punto models, at Magneti Marelli, partly on account of the consolidation of the Electronic Systems business, and by...

  • Page 33
    ... exchange effect. Comau posted operating income of 32 million euros, compared with income of 2 million euros in 2003. This marked improvement was realized thanks to higher margins on contract work, extensive streamlining of overhead costs, and more efficient use of internal resources. Business...

  • Page 34
    ...regional tax on production activities in Italy and 187 million euros (31 million euros in 2003) for other current taxes, largely in consequence of the positive results posted by a number of companies operating abroad. These amounts were offset by the benefits of the Italian tax consolidation program...

  • Page 35
    ... Property, plant and equipment Vehicles covered by operating leases Financial fixed assets Financial receivables held as fixed assets Deferred tax assets Total Non-Current Assets Net inventories (1) Trade receivables Other receivables Financial assets not held as fixed assets Finance lease contracts...

  • Page 36
    ...for contract work in progress, totaled 5,972 million euros, against 6,484 million euros at December 31, 2003. The decrease is largely attributable to Fiat Auto, which reduced its stock of new and used vehicles by over 20% during the year, and the impact of the change in the euro/dollar exchange rate...

  • Page 37
    ...of the reimbursement of bonds, including the bond for approximately 1 billion euros issued by Fiat Finance & Trade, reimbursed at the end of March 2004, and the bond exchangeable for General Motors shares for 2.2 billion dollars, equal to approximately 1.8 billion euros. In connection with the above...

  • Page 38
    ... posted for the year, the increase in working capital and lower sales of trade receivables. For a more detailed analysis of the above items, and more specifically as regards bonds, please see the Notes to the Consolidated Financial Statements. Financial receivables and lease contracts receivable at...

  • Page 39
    ... insurance companies net of policy liabilities and accruals Other changes Total D) Cash flows provided by (used in) financing activities: Increase in borrowings Repayment of borrowings Net change in short-term borrowings Increase in capital stock Purchase/Sales of treasury stock Dividends paid Total...

  • Page 40
    ... loans for 713 million euros (1,134 million euros in 2003), reimbursements totaled 2,735 million euros (3,055 million euros in 2003) and refer, among others, to the repayment of bonds of approximately 1 billion euros issued by Fiat Finance & Trade and the bond exchangeable for General Motors shares...

  • Page 41
    ...automotive sectors. The improvement is mainly attributable to Fiat Auto and Iveco, whose income before taxes benefited: â- Industrial Activities The net revenues for Industrial Activities in 2004, including changes in contract work in progress, totaled 45,707 million euros, up by 5.4% with respect...

  • Page 42
    ... Property, plant and equipment Vehicles covered by operating leases Financial fixed assets Financial receivables held as fixed assets Deferred tax assets Total Non-Current Assets Net inventories (1) Trade receivables Other receivables Financial assets not held as fixed assets Finance lease contracts...

  • Page 43
    ...480 million euros, reflecting lower financing to the sales network of the Automobile Sector, the lower amount of financing provided to suppliers and the sale of the financial company of the Automobile Sector that operated in the United Kingdom. Financial Review of the Fiat Group and Fiat S.p.A. 41

  • Page 44
    ... of the capital stock of IHF - Internazionale Holding Fiat S.A. (reduction in its book value by 635 million euros) and writedowns of the previously analyzed investments. Working capital is comprised by inventories net of advances, trade, tax, and employee receivables/payables, and credits for tax...

  • Page 45
    ... by a pool of banks that falls due in September 2005. The improvement in the net financial position with respect to the previous year stems mainly from the cash received in consequence of the partial reimbursement of capital by the subsidiary IHF - Internazionale Holding Fiat S.A. The reader is...

  • Page 46
    ... a description of main differences between Italian GAAP and IFRS that will have effects on Fiat consolidated financial statements. â- A. DEVELOPMENT FIRST-TIME ADOPTION OF IFRS COSTS GENERAL PRINCIPLE The Group is required to apply the accounting standards in force at the reporting date for...

  • Page 47
    ... from sales of products at the time title passes to the customer, which is generally at the time of shipment. For contracts for vehicle sales and buy-backs at a specified price, a specific reserve for future risks and charges is set aside based on the difference between the guaranteed residual value...

  • Page 48
    ... purchase price plus direct attributable cost of bringing the assets up to working condition. Under Italian GAAP, Fiat revalued certain Property, Plant and Equipment to amounts in excess of historical cost, as permitted or required by specific laws of the countries in which the assets were located...

  • Page 49
    ... certain costs (mainly start-up and related charges). IFRS require these to be expensed when incurred. In particular, costs incurred in connection with share capital increases, which are also deferred and amortized under Italian GAAP, will be deducted directly from the proceeds of the increase and...

  • Page 50
    ...context, as mentioned in the Italian GAAP consolidated financial statements as of December 31, 2003, Fiat was party to a Total Return Equity Swap contract on General Motors shares, in order to hedge the risk implicit in the Exchangeable Bond on General Motors shares. This swap, despite being entered...

  • Page 51
    ..., with specific reference to the securitization of retail loans and leases originated by the financial services companies, the net present value of the interest flow implicit in the installments, net of related costs, has been recognized in the income statement. Under IFRS: â- SPE is controlled by...

  • Page 52
    ... as a model in the regulations issued by Borsa Italiana (Italian Stock Exchange) on corporate governance. Furthermore, as an issuer of financial instruments listed on various international markets, including the New York Stock Exchange, Fiat adopted a system of corporate governance in line with the...

  • Page 53
    ... Corporate Governance Code, the Board adopted the "Guidelines for the Internal Control System," which came into effect on January 1, 2003. Essential parts of the Internal Control System are the Code of Conduct that replaced the Code of Ethics in 2002, and the Compliance Program adopted by the Board...

  • Page 54
    ..." adopted in conformity with the Securities Exchange Act of 1934 and the Sarbanes Oxley Act of 2002. Periodic and extraordinary financial information and price sensitive information is disseminated on the basis of these Disclosures and Controls Procedures. BOARD OF STATUTORY AUDITORS The...

  • Page 55
    ...the exception of the controlling companies and subsidiaries of Fiat S.p.A. The members of the Board of Statutory Auditors are Cesare Ferrero, Chairman, and Giuseppe Camosci and Giorgio Ferrino. Their term expires on the date of the stockholders meeting that approves the financial statements for 2005...

  • Page 56
    ... the Financial Statements. Thus far, the Board has approved Stock Option Plans offered to about 900 managers of the Group's Italian and foreign companies who are qualified as "Direttore" or have been included in the Management Development Program for high-potential managers. Plan regulations share...

  • Page 57
    ... guarantees in connection with the issuance of billets de trésorerie (Fiat France S.A.), bonds and lines of credit (Fiat Finance and Trade Ltd and other Group companies), and to secure bank loans (Fiat Auto S.p.A., Teksid S.p.A., Fiat Partecipazioni S.p.A., Fiat Automoveis S.A., Banco CNH Capital...

  • Page 58
    ...of Fiat Powertrain Technologies, a new industrial unit that will integrate all the Group's innovation capabilities and expertise in engines and transmissions. The new company will operate in 12 countries with 26 plants and 16 research and development centers and will combine the resources, employees...

  • Page 59
    ... markets where the Group operates will produce a further increase in competitive pressures. Against this background, Fiat Auto will continue to pursue a strategy designed to improve the quality and profitability of its sales. The Company's efforts will be aided by the introduction of four new models...

  • Page 60
    01 REPORT ON OPERATIONS OPERATING PERFORMANCE SECTORS OF ACTIVITY

  • Page 61
    ... Equipment 69 Commercial Vehicles 73 Components 75 Metallurgical Products 77 Production Systems 79 Services 81 Publishing and Communications Automobiles Agricultural and Construction Equipment Commercial Vehicles Components Production Systems Services Publishing and Communications

  • Page 62
    ... 01 AUTOMOBILES - FIAT AUTO HIGHLIGHTS (in millions of euros) 2004 SALES 2003 2002 PERFORMANCE Net revenues Operating result EBIT (*) Net result before minority interest Cash flow (**) Capital expenditures Research and development Net invested capital Number of employees (**) Net result...

  • Page 63
    ... (+20%). Against this background, Fiat Auto sold 271,000 light commercial vehicles in 2004 (a gain of 9.8%) and confirmed the leadership position it has achieved in Italy and many of Europe's markets. In Western Europe, Fiat Auto's share of the automobile market was 7.2%, 0.2 percentage points less...

  • Page 64
    ... of old cars, which, coupled with easier access to credit between January and May, caused demand to explode. Because imports account for about 75% of the country, the government enacted in June measures canceling all incentives. Overall market demand for automobiles and light commercial vehicles...

  • Page 65
    ... of specially equipped commercial vehicles, which enabled it to strengthen its position as the leader of the Italian market for long-term rentals. Savarent continued to perform the function of a captive company operating through the Fiat Auto dealer network, and serving mainly private customers and...

  • Page 66
    .... As part of its marketing strategy, Maserati continued to expand its model line, introducing a total of four new models. In 2004, (*) It includes non-operating income and expenses. Ferrari S.p.A. - Car sales by geographical region Maserati S.p.A. - Car sales by geographical region 0 Italy...

  • Page 67
    ... The Ferrari sales network sold 4,850 cars. The United States, with 1,434 cars sold (+2.4%) was again the most important market for Ferrari, followed by Europe, where the cars sold totaled 2,557 units (+6.5%). Germany was the top market in Europe and the second largest country market in the world...

  • Page 68
    ... tractors. The market for construction equipment expanded at a rapid pace, with unit sales increasing by 28% in North America, 48% in Latin America, 16% in Western Europe and 14% in the rest of the world. All principal product lines contributed to this growth. In 2004, CNH benefited from the rising...

  • Page 69
    ... New Holland. This consolidation will allow CNH to provide better support to its dealers, strengthen its dealer network, and result in the availability of a greater range of products. More than 1,200 products were reviewed by "Construction Equipment" magazine in 2004: selections made on the basis...

  • Page 70
    ... Europe where, especially in the agricultural equipment segment, the competitive conditions did not allow for sufficient price increases to recover increased steel costs and other economics. The Sector formulated a plan to integrate the operations of the Case and New Holland businesses at the time...

  • Page 71
    ... (in millions of euros) 2004 SALES 2003 2002 PERFORMANCE Net revenues Operating result EBIT (*) Net result before minority interest Cash flow (**) Capital expenditures of which: Vehicles under long-term rentals Research and development Net invested capital Number of employees (**) Net result...

  • Page 72
    ...of the remaining markets. In Western Europe, the bus market expanded to 24,493 units, or 2.9% more than in 2003 (23,805 vehicles). This improvement is the net result of a positive trend in Italy (+19.2%) and Spain (+9.4%), offset in part by a contraction in Germany (-5.7%) and France (-2.4%). Demand...

  • Page 73
    ..., produced and sold about 15,000 light vehicles (+2.4%). In 2004, the finance companies of the Iveco Finance Group, which provide financing and leasing services to support the sales of Iveco products in Western Europe, signed 27,021 contracts to finance sales of new commercial vehicles (22,533 in...

  • Page 74
    ... future years. Major projects carried out in 2004 focused mainly on achieving compliance with the Euro 4-5 emissions standards and renovating all segments of the bus line (coach, long-distance and urban). The Sector's development work concerned primarily the restyling of the Light product line; the...

  • Page 75
    .... Engine Management Revenues at December 31, 2004 totaled 775 million euros, a 6.5% increase over the previous year's 742 million euros on a comparable exchange basis. Much of this increase stemmed from the introduction of the Diesel Buy system. In 2004, an agreement to develop a new Multijet...

  • Page 76
    ... THE YEAR Exhaust Systems Revenues at December 31, 2004 were 365 million euros, a 5.8% increase over 2003's 346 million euros on a comparable exchange basis. Strong sales of the Panda in Poland, where production of the new 1.3 SDE (small diesel engine) which equips Fiat and Opel passenger cars was...

  • Page 77
    ... plan, which involves both the Cast Iron Business Unit and the Magnesium Business Unit. The plan is aimed at bringing production structures and income generating capacity back into line in all production plants, even under current market conditions. The situation for the individual Business...

  • Page 78
    ... for light vehicles. At the sales level, Teksid further broadened its customer base in the automotive industry, acquiring contracts from Japanese manufacturers in China, increasing the volumes produced for General Motors in Brazil, and forging stronger links with Renault and PSA in Europe. RESULTS...

  • Page 79
    ... and Korean suppliers an advantage over their European counterparts in the emerging markets and the US. In 2004, new orders for contract work came to 1,463 million euros, an increase of 5% over 2003, or 10% on a comparable consolidation and exchange rate basis. Strong growth in the volume of orders...

  • Page 80
    ... 2004, maintenance service operations (Comau Service) received orders for an amount in line with the previous year, amounting to approximately 342 million euros net of the effects of business profile restructuring. Of these orders, 52% came from Fiat Group companies. RESULTS FOR THE YEAR Business...

  • Page 81
    ... by business unit 46% Human Resources Facility Management Administration and Procurement I.C.T. - Information and Communication Technology Diversified Services Human Resources: Services provided by this unit include payroll and human resource management (H.R.Services S.p.A.), training (Isvor...

  • Page 82
    ..." customers. I.C.T. - Information and Communication Technology: The main activity in this unit is Global Value, a joint venture with IBM. e-Spin, a competence center active in a number of specific areas of innovation, most notably in the online application and management of business processes, is...

  • Page 83
    ... newsstand price was introduced in September 2003) and successful brand extension efforts offset the dropoff in sales volumes. Advertising revenues amounted to 94 million euros, as against 92 million euros in the previous year. Revenues by business unit 0 Newspaper publishing 50% Advertising 100...

  • Page 84
    ... S.p.A. booked advertising billings of 330 million euros, compared with 307 million euros in 2003. This increase was partly due to new licensing agreements, and was achieved despite the termination of a major advertising arrangement which the publisher involved decided to manage independently...

  • Page 85
    ... Statements at December 31, 2004 show a loss of 949,100,522. We propose that these Financial Statements be approved and that this loss be carried forward. Turin, March 24, 2005 The Board of Directors By: Luca Cordero di Montezemolo CHAIRMAN Motion to Allocate the Loss for Fiscal 2004 83

  • Page 86
    02 FIAT GROUP CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2004

  • Page 87
    ... Consolidated Financial Statements 139 Annex to the Notes to the Consolidated Financial Statements 140 The Companies of the Fiat Group Fiat S.p.A. Corporate Headquarter: 250 Via Nizza, Turin, Italy Paid-in Capital: 4,918,113,540 euros Entered in the Turin Company Register Fiscal Code: 00469580013

  • Page 88
    ... within one year due beyond one year Total Receivables from others Total Receivables Other securities Treasury Stock Finance lease contracts receivable Total TOTAL FIXED ASSETS CURRENT ASSETS Inventories Raw materials and supplies Work in progress and semifinished products Contract work in progress...

  • Page 89
    ... beyond one year Total Financial receivables from associated companies Receivables from others: due within one year due beyond one year Total Financial receivables from others Total Financial receivables Total Cash Bank and post office accounts Checks Cash on hand Total TOTAL CURRENT ASSETS ACCRUED...

  • Page 90
    ... Insurance policy liabilities and accruals TOTAL RESERVES FOR RISKS AND CHARGES RESERVE FOR EMPLOYEE SEVERANCE INDEMNITIES PAYABLES Bonds: due within one year due beyond one year Total Bonds Convertible bonds: due within one year due beyond one year Total Convertible bonds Financial Payables from...

  • Page 91
    ...millions of euros) December 31, 2004 December 31, 2003 PAYABLES (continued) Payables to associated companies: due within one year Total Payables to associated companies Taxes payable: due within one year due beyond one year Total Taxes payable Social security payable: due within one year due beyond...

  • Page 92
    ... Secured guarantees TOTAL GUARANTEES GRANTED COMMITMENTS Commitments related to derivative financial instruments Commitments to purchase property, plant and equipment Other commitments TOTAL COMMITMENTS THIRD-PARTY ASSETS HELD BY THE GROUP GROUP ASSETS HELD BY THIRD PARTIES OTHER MEMORANDUM ACCOUNTS...

  • Page 93
    ... from sales and services Change in work in progress, semifinished and finished products inventories Change in contract work in progress Additions to internally produced fixed assets Other income and revenues: revenue grants other Total Other income and revenues TOTAL VALUE OF PRODUCTION COSTS OF...

  • Page 94
    ... associated companies others Total Interest and other financial expenses Foreign exchange gains and losses TOTAL FINANCIAL INCOME AND EXPENSES ADJUSTMENTS TO FINANCIAL ASSETS Revaluations of: equity investments financial fixed assets other than equity investments securities held in current assets...

  • Page 95
    ... and the Toro Group was deconsolidated as of that date. On May 27, 2003, Fiat and a pool of banks completed the sale of 51% of Fidis Retail Italia (FRI), a company which at that time controlled part of the European consumer credit business of Fiat Auto Holdings for retail automobile purchases...

  • Page 96
    ...within the Group. Exceptions are the gross margins on intercompany sales of plant and equipment produced and sold at prices in line with market conditions, in which case such eliminations would be effectively irrelevant and not cost-beneficial. Also subject to elimination are guarantees, commitments...

  • Page 97
    ..., semifinished products, finished goods and contract work in progress completed within the fiscal year are valued at the lower of cost or market, cost being determined on a First In-First-Out (FIFO) basis. The valuation of inventories includes the direct costs of materials, labor and indirect costs...

  • Page 98
    ... shares bought by Fiat; it is valued at the lower of cost or market, cost being determined on a Last-In First-Out (LIFO) basis or the exercise price of the stock options serviced by the treasury stock. A specific reserve for treasury stock is also recorded under the stockholders' equity of the Group...

  • Page 99
    ... is followed in recording derivative financial instruments to manage trading risks (for example equity swaps) that do not meet the conditions for hedge accounting treatment. time of shipment. Under contracts for vehicle sale and buyback at a specified price, a specific reserve for future risks and...

  • Page 100
    FIAT GROUP 02 Income taxes Income taxes currently payable are provided for in accordance with the existing legislation of the countries in which the Group operates. Deferred tax liabilities or deferred tax assets are determined for all of the temporary differences between the consolidated assets ...

  • Page 101
    ... and Other changes column. Start-up and expansion costs at December 31, 2004 consist of deferred plant start-up costs and corporate formation costs of 57 million euros (60 million euros at December 31, 2003) and capital increase costs of 58 million euros (84 million euros at December 31, 2003...

  • Page 102
    ...914 million euros at December 31, 2003), mainly relating to long-term leases. The depreciation rates used are determined on the basis of the estimated useful lives of the assets and are listed below: Depreciation rates Land and buildings Plant and machinery Industrial and commercial equipment Other...

  • Page 103
    ... include the Group's share of the income or the loss of companies accounted for using the equity method. With regard to the companies accounted for at cost, Equity in losses includes the loss in value recorded in the year. The negative Change in the scope of consolidation of 13 million euros, with...

  • Page 104
    ... and losses of the other companies accounted for using the equity method. Investments valued on a cost basis: the decrease (65 million euros) in listed companies is mainly due to the sale of Edison S.p.A. shares. The reduction in unlisted companies valued at cost (-31 million euros) is the result of...

  • Page 105
    ...Ziraat Makineleri A.S. CBC-Iveco Ltd. Immobiliare Novoli S.p.A. IPI S.p.A. LBX Company LLC Transolver Finance Establecimiento Financiero de Credito S.A. Global Value Services S.p.A. New Holland Trakmak Traktor A.S. Maire Engineering S.p.A. Al-Ghazi Tractors Ltd. Hua Dong Teksid Automotive Foundry Co...

  • Page 106
    ... of 2002, the Fiat Group sold a 14% holding to certain other stockholders of the company (Banca Intesa, IMI Investimenti and Capitalia, hereinafter the "Banks") for 548 million euros, realizing a gain of 189 million euros. The related sales contracts and the contemporaneous agreements with another...

  • Page 107
    ... that negotiations are underway between the Italian and French governments concerning the reciprocal opening of the electricity market. On March 21, 2005 Fiat exercised the Put option relating to 24.6% of the shares as well as the Put on the 14% holding sold to the three banks in 2002. Fidis Retail...

  • Page 108
    ... for 93 million euros (93 million euros in 2003). During 2004 Edison S.p.A. shares have been sold that had a carrying value of 65 million euros at December 31, 2003. Had the portfolio of the major listed stocks at December 31, 2004 been valued at fair value based on market prices, it would have...

  • Page 109
    ...advance payments received from customers, amount to 5,972 million euros (6,484 million euros at December 31, 2003). Advances to suppliers principally relate to the amounts paid by Fiat S.p.A. to the consortiums involved in the T.A.V. project. Contract work in progress decreased mainly as a result of...

  • Page 110
    ... to VAT and income taxes receivable from the Italian tax authorities and include the tax credit relating to the advance payments of income tax on employee severance indemnities paid by Italian companies. The portion of interest accrued on that receivable relating to the current year is recorded in...

  • Page 111
    ...short-term bonds and commercial paper for 703 million euros (1,480 million euros at December 31, 2003) and highly rated liquidity funds of leading international banks for 1,481 million euros (2,365 million euros at December 31, 2003) in which mainly the treasury management companies of the Group had...

  • Page 112
    ... 31, 2003) consist of financing granted to retail customers as well as dealer networks and suppliers. As regards the receivables from the dealer networks, reference can be made to the information provided in the Report on operations Financial Review of the Fiat Group and Fiat S.p.A., with regard to...

  • Page 113
    ... Balance at December 31, 2002 Capital stock increase as resolved on June 26, 2003 Fiat S.p.A. fiscal 2002 loss covered by Additional paid-in capital Allocation of the value of unopted rights sold on the market to Additional paid-in capital Foreign exchange translation adjustments Change in treasury...

  • Page 114
    ... form of ordinary shares of Fiat S.p.A. subscribed by the banks, with the obligation that they be offered as an option to all Fiat stockholders. â- 02 The resolutions for the capital increases servicing the stock option plans (28 million euros) have been revoked, as the Board of Directors decided...

  • Page 115
    ... to by Fiat Partecipazioni S.p.A. (the direct parent company of Fiat Auto Holdings B.V.) for 3 billion euros, whereas General Motors had not subscribed to its share of the capital increase, as described in Note 14. It should be pointed out that in accordance with the accounting policies described...

  • Page 116
    FIAT GROUP Reserve for pensions and similar obligations The reserve includes provisions for pensions and similar obligations determined on an actuarial basis, where applicable, and payable to employees and former employees according to contractual agreements or by law, where applicable. Income tax ...

  • Page 117
    As disclosed in the accounting policies, in recording Deferred tax assets, each company in the Group critically evaluated whether the conditions existed for the future recoverability of such assets on the basis of updated strategic plans, accompanied by the related tax plans. For this reason, the ...

  • Page 118
    ... Trade Financial Other At 12/31/2003 Total Bonds Convertible bonds Financial payables from stockholders Borrowings from banks Other financial payables Advances Trade payables Notes payable Payables to unconsolidated subsidiaries Payables to associated companies Taxes payable Social security payable...

  • Page 119
    ... of the launch of new car models, had increased production levels that during 2004 returned to normal levels. Financial payables decreased by 3,291 million euros mainly due to the repayment of bonds, including the bond for about 1 billion euros issued by Fiat Finance and Trade, repaid at the end...

  • Page 120
    ... million euros) and Fiat Finance Canada Ltd. (for an amount outstanding of 80 million euros). Convertible bonds: this represents the residual debt, after repayment, in July 2004, of the 5-year bond originally convertible into General Motors Corp. common stock ("Exchangeable"), at a conversion price...

  • Page 121
    ... General Motors Corp. common stock. The Fiat Group intends to repay the issued bonds in cash at maturity by utilizing available liquid resources. To this end, available liquidity at the end of 2004 totals approx. 5.3 billion euros. The Fiat Group also has available unused committed credit lines for...

  • Page 122
    ... value of 15.50 euros in accordance with the rules established by the AIAF - Italian Association of Financial Analysts - following the Fiat S.p.A. capital increase of July 2003) and the average stock market price in the last three or six months, depending on the case, preceding the repayment date...

  • Page 123
    ... expenses include interest expense on financial payables for the portion relating to the current year. Financial deferred income includes deferred interest income on the portfolio of the financial services companies. 14 Memorandum accounts Guarantees granted (in millions of euros) At 12/31/2004 At...

  • Page 124
    ... to securitization transactions involving accounts receivables from the final (retail) customers of the financial services companies. The accounting treatment for securitization transactions is disclosed in the Accounting Principles. The volume of receivables and bills discounted without recourse in...

  • Page 125
    ... matching of financing and investments by the financial services companies. The derivative financial instruments principally relate to foreign exchange forward contracts, currency swaps and currency options or, as regards interest rate risks, interest rate swaps, forward rate agreements and options...

  • Page 126
    ... 916 million euros, the notional amount of the equity swap stipulated in 2002 at the same time as the sale of the General Motors shares and which was put into place to hedge the risk, implicit in the Exchangeable bonds described previously, of an increase in the General Motors share price above the...

  • Page 127
    ... fourth year subsequent to signing the contract. Fiat holds a call option that allows it to repurchase the Ferrari shares at any time before June 30, 2006 (the original date of June 30, 2005 was extended by one year during the course of 2003, by virtue of the payment of a premium of 16 million euros...

  • Page 128
    ...for 6.5% of the capital stock of Teksid, the initial investment price increased pro rata temporis; for the remaining amount of capital stock of Teksid, the share of the accounting net equity at the exercise date. End-of-life vehicles In September 2000, the European Union issued Directive 2000/53/CE...

  • Page 129
    ...Maserati Agricultural and Construction Equipment Commercial Vehicles Components Metallurgical Products Production Systems Services Publishing and Communications Aviation (*) Insurance (**) Other companies Total Revenues from sales and services and Change in contract work in progress (*) The Aviation...

  • Page 130
    ... in connection with employee reduction plans, and partly to the change in the scope of consolidation principally in relation to the sale of FiatAvio S.p.A., the Toro Assicurazioni Group and the retail financing activities of the Automobile Sector. In 2004 and 2003, there are no companies accounted...

  • Page 131
    ... "Foreign exchange gains and losses" presents the amounts shown in the related captions on the statement of operations and also the amounts of income and expenses of the Group's financial companies presented in the captions on the statement of operations under "Revenues from sales and services" and...

  • Page 132
    ... subsidiaries associated companies others: bond interest bank interest interest on trade and other payables interest on notes payable interest on other financial payables discounts and other expenses expenses from derivative financial instruments losses on sale of securities Total Interest...

  • Page 133
    ...amount of income of approximately 300 million euros from the termination of the Equity Swap on General Motors stock) and lower average indebtedness during the year and generally more favorable market interest rates. Foreign exchange gains, net, of 25 million euros (foreign exchange gains, net, of 47...

  • Page 134
    ... expenses and provisions for risks in relation to corporate restructuring transactions of 658 million euros, other extraordinary writedowns of assets on the basis of changes in market prospects and the consequent new business plans of 215 million euros. They also included additional extraordinary...

  • Page 135
    Assicurazioni Group (37 million euros), incidental costs and other provisions connected with other sales which took place in 2003 and in prior years (102 million euros), damages caused by flooding at the Termoli factory (71 million euros) and, lastly, commissions paid to Mediobanca for the extension...

  • Page 136
    ... reduction in total assets of 5,468 million euros is mainly due to changes in the scope of consolidation principally in conjunction with the sale of the activities of Fiat Engineering S.p.A. and lower financial receivables due both to the reduction in loan activities and the change in the scope of...

  • Page 137
    ...and Amortization Capital expenditures Total Assets 2004 Automobiles Ferrari and Maserati Agricultural and Construction Equipment Commercial Vehicles Components Metallurgical Products Production Systems Services Publishing and communications Other companies and eliminations (****) Group total 2003...

  • Page 138
    ... incurred. In 2004 and 2003 direct research and development expenses were 1,810 million euros and 1,747 million euros, respectively. For the most important projects, the Group has applied for financing to the Italian government and the European Community under related legislation. At the end of 2004...

  • Page 139
    ...the scope of consolidation. The list of companies included in the consolidated financial statements (Article 38 and 39 of Legislative Decree 127/91) is attached Turin, March 24, 2005 The Board of Directors By: Luca Cordero di Montezemolo Chairman Consolidated Financial Statements at December 31...

  • Page 140

  • Page 141
    ANNEX TO THE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

  • Page 142
    ... Country Capital stock Currency % of Group consoli- Interest dation held by % interest held % of voting rights Controlling company Parent company Fiat S.p.A. â- Turin Italy 4,918,113,540 EUR - - - - Subsidiaries consolidated on a line-by-line basis Automobiles Fiat Auto Holdings...

  • Page 143
    ...line basis (continued) % of Group consoli- Interest dation held by % of voting rights Name Registered office Country Capital stock Currency % interest held Fiat Automobil GmbH Fiat Automobil Vertriebs GmbH Fiat Automobiler Danmark A/S Fiat Automoveis S.A. - FIASA Fiat Center Italia S.p.A. Fiat...

  • Page 144
    FIAT GROUP Subsidiaries consolidated on a line-by-line basis (continued) % of Group consoli- Interest dation held by % of voting rights 02 Name â- Registered office Country Capital stock Currency % interest held Agricultural and Construction Equipment Amsterdam Bundaberg Curitiba Wilmington ...

  • Page 145
    ... on a line-by-line basis (continued) % of Group consoli- Interest dation held by % of voting rights Name Registered office Country Capital stock Currency % interest held CNH Engine Corporation CNH Financial Services CNH Financial Services A/S CNH Financial Services GmbH CNH Financial Services...

  • Page 146
    ... consolidated on a line-by-line basis (continued) % of Group consoli- Interest dation held by % of voting rights 02 Name Registered office Country Capital stock Currency % interest held New Holland Mauritius (Private) Ltd. New Holland Tractor Ltd. N.V. New Holland Tractors (India) Private Ltd...

  • Page 147
    ... consolidated on a line-by-line basis (continued) % of Group consoli- Interest dation held by % of voting rights Name Registered office Country Capital stock Currency % interest held Iveco Contract Services Limited Iveco Danmark A/S Iveco Eurofire (Holding) GmbH Iveco Fiat Brasil Ltda Watford...

  • Page 148
    FIAT GROUP Subsidiaries consolidated on a line-by-line basis (continued) % of Group consoli- Interest dation held by % of voting rights 02 Name Registered office Country Capital stock Currency % interest held Iveco Sweden A.B. Iveco Trucks Australia Limited Iveco (UK) Ltd Iveco Ukraine Inc. ...

  • Page 149
    Subsidiaries consolidated on a line-by-line basis (continued) % of Group consoli- Interest dation held by % of voting rights Name â- Registered office Country Capital stock Currency % interest held Components Corbetta Italy Germany Austria Italy U.S.A. Russia Poland 254,324,998 7,270,000 11,...

  • Page 150
    FIAT GROUP Subsidiaries consolidated on a line-by-line basis (continued) % of Group consoli- Interest dation held by % of voting rights 02 Name Registered office Country Capital stock Currency % interest held Magneti Marelli Guangzhou Motor Vehicle Instruments Co. Limited Magneti Marelli ...

  • Page 151
    ...-line basis (continued) % of Group consoli- Interest dation held by % of voting rights Name Registered office Country Capital stock Currency % interest held Comau India Private Limited COMAU Ingest Sverige AB Pune Trollhattan India Sweden U.S.A. Poland Romenia South Africa South Africa South...

  • Page 152
    FIAT GROUP Subsidiaries consolidated on a line-by-line basis (continued) % of Group consoli- Interest dation held by % of voting rights 02 Name Registered office Country Capital stock Currency % interest held Fonderie du Poitou Fonte S.A.S. Funfrap-Fundicao Portuguesa S.A. Jutras Die Casting ...

  • Page 153
    ... consolidated on a line-by-line basis (continued) % of Group consoli- Interest dation held by % of voting rights Name Registered office Country Capital stock Currency % interest held Ingest Facility Polska Sp. z o.o. Ingest Facility S.p.A. Isvor Knowledge System S.p.A. Bielsko-Biala...

  • Page 154
    FIAT GROUP Subsidiaries consolidated on a line-by-line basis (continued) % of Group consoli- Interest dation held by % of voting rights 02 Name Registered office Country Capital stock Currency % interest held Fiat Ge.Va. S.p.A. Isvor Fiat Società consortile di sviluppo e addestramento ...

  • Page 155
    ... consolidated on a line-by-line basis (continued) % of Group consoli- Interest dation held by % of voting rights Name Registered office Country Capital stock Currency % interest held Elasis-Società Consortile per Azioni Pomigliano d'Arco Italy 20,000,000 EUR 91.12 Fiat Auto S.p.A. CNH...

  • Page 156
    FIAT GROUP Subsidiaries consolidated on a line-by-line basis (continued) % of Group consoli- Interest dation held by % of voting rights 02 Name Registered office Country Capital stock Currency % interest held Fiat Information & Communication Services società consortile per azioni Turin ...

  • Page 157
    ... a line-by-line basis (continued) % of Group consoli- Interest dation held by % of voting rights Name Registered office Country Capital stock Currency % interest held Fiat-Revisione Interna S.c.r.l. Turin Italy 300,000 EUR 93.28 Fiat Auto S.p.A. Fiat Partecipazioni S.p.A. Fiat S.p.A. CNH...

  • Page 158
    FIAT GROUP Subsidiaries valued by the equity method % of Group consoli- Interest dation held by % interest held % of voting rights Name â- 02 Registered office Country Capital stock Currency Automobiles Orlando Bangkok Jerez Erfurt Vienna Giza Buenos Aires Bangkok Casablanca Fiumicino Seville ...

  • Page 159
    ...of Group consoli- Interest dation held by % of voting rights Name â- Registered office Country Capital stock Currency % interest held Metallurgical Products Bardez-Goa India 403,713,830 INR 80.48 Teksid S.p.A. 100.000 Teksid of India Private Limited Company in liquidation â- Services Italy...

  • Page 160
    FIAT GROUP Subsidiaries valued at cost % of Group consoli- Interest dation held by % interest held % of voting rights Name â- 02 Registered office Country Capital stock Currency Automobiles Mexico City Mexico 50,000 MXN 90.00 Fiat Auto S.p.A. Fiat Automoveis S.A. - FIASA 99.998 0.002 95.000 80...

  • Page 161
    Subsidiaries valued at cost (continued) % of Group consoli- Interest dation held by % of voting rights Name â- Registered office Country Capital stock Currency % interest held Services Turin Turin Bursa Turin Italy Italy Turkey Italy 3,099 15,000 95,000,000,000 90,000 EUR EUR TRL EUR 86.63 60...

  • Page 162
    FIAT GROUP Subsidiaries valued at cost (continued) % of Group consoli- Interest dation held by % of voting rights 02 Name Registered office Country Capital stock Currency % interest held Nuova Immobiliare Cinque S.r.l. Nuova Immobiliare Tre S.p.A. Orione-Consorzio Industriale per la Sicurezza...

  • Page 163
    Associated companies valued by the equity method % of Group consoli- Interest dation held by % interest held % of voting rights Name â- Registered office Country Capital stock Currency Automobiles Amsterdam Vienna Turin Amsterdam Arese Nanjing Turin Atessa Netherlands Austria Italy Netherlands...

  • Page 164
    FIAT GROUP Associated companies valued by the equity method (continued) % of Group consoli- Interest dation held by % of voting rights 02 Name â- Registered office Country Capital stock Currency % interest held Ferrari and Maserati People's Rep.of China 3,000,000 USD 22.40 Ferrari S.p.A. 40....

  • Page 165
    Associated companies valued at cost % of Group consoli- Interest dation held by % interest held % of voting rights Name â- Registered office Country Capital stock Currency Automobiles Turin Arese Wilaya de Tiaret Frankfurt Paris Paris Chivasso Italy Italy Algeria Germany France France Italy ...

  • Page 166
    FIAT GROUP Associated companies valued at cost (continued) % of Group consoli- Interest dation held by % of voting rights 02 Name Registered office Country Capital stock Currency % interest held CONFORM - Consorzio Formazione Manageriale Consorzio Oto-BPD in liquidation Consorzio per lo ...

  • Page 167
    Other companies valued at cost % of Group consoli- Interest dation held by % interest held % of voting rights Name â- Registered office Country Capital stock Currency Agricultural and Construction Equipment Pikieliszki Lithuania 1,133,400 LTT 9.35 CNH Polska Sp. z o.o. 11.054 Polagris S.A. ...

  • Page 168
    03 FIAT S.P.A. FINANCIAL STATEMENTS AT DECEMBER 31, 2004

  • Page 169
    168 Balance Sheet 171 Statement of Operations 173 Notes to the Financial Statements Fiat S.p.A. Corporate Headquarters: 250 Via Nizza, Turin, Italy Paid-in Capital: 4,918,113,540 euros Entered in the Turin Company Register Fiscal Code: 00469580013

  • Page 170
    ... and equipment Land and buildings Plant and machinery Other assets Total Financial fixed assets Investments in: Subsidiaries Other companies Total investments Other securities Total TOTAL FIXED ASSETS CURRENT ASSETS Inventories Contract work in progress Advances to suppliers Total Receivables Trade...

  • Page 171
    ... FOR RISKS AND CHARGES RESERVE FOR EMPLOYEE SEVERANCE INDEMNITIES PAYABLES Borrowings from banks (*) Advances Trade payables Payables to subsidiaries Payables to controlling company Taxes payable Social security payable Other payables (**) TOTAL PAYABLES ACCRUED EXPENSES AND DEFERRED INCOME (note...

  • Page 172
    ... Suretyships on behalf of: Subsidiaries Others Other unsecured guarantees on behalf of: Subsidiaries Others TOTAL GUARANTEES GRANTED COMMITMENTS Commitments related to supply contracts Commitments related to derivative financial instruments Other commitments TOTAL COMMITMENTS â- 672,385,005...

  • Page 173
    ... euros) 2003 (in euros) VALUE OF PRODUCTION Revenues from sales and services Change in contract work in progress Other income and revenues TOTAL VALUE OF PRODUCTION COSTS OF PRODUCTION Raw materials, supplies and merchandise Services Leases and rentals Personnel Wages and salaries Social security...

  • Page 174
    ... euros) 2003 (in euros) ADJUSTMENTS TO FINANCIAL ASSETS Writedowns Equity investments Securities among current assets other than equity investments TOTAL ADJUSTMENTS EXTRAORDINARY INCOME AND EXPENSES Income Gains on disposals Other income Expenses Losses on disposals Taxes relating to prior years...

  • Page 175
    ... spot exchange rate on the closing date of the fiscal year, Financial Statements at December 31, 2004 - Notes to the Financial Statements 173 BALANCE SHEET Intangible fixed assets Start-up and expansion costs consist of costs incurred in connection with capital increases. They are capitalized on...

  • Page 176
    ... tax return; Fiat S.p.A. posts a credit in its favor for the IRES (corporate income tax) to be paid. In contrast, for those companies that contribute tax losses, Fiat S.p.A. posts a payable equal to the IRES on the portion of the loss that is actually set off at the group level. ACCOUNTS...

  • Page 177
    ... euros, and include costs (bank charges and other charges) incurred in connection with the 2002 and 2003 capital increases. The decrease of 15,190 thousand euros since December 31, 2003 is the result of amortization during the fiscal year. Concessions, licenses, trademarks and similar rights...

  • Page 178
    ... tables: Increases/(decreases) (in millions of euros) Company name and registered office % owned by Fiat S.p.A. 2003 Acquisitions Capital reimBook Capital bursements value increases Disposals Writedowns 2004 Book value Subsidiaries Ferrari S.p.A. - Modena Magneti Marelli Holding S.p.A. - Corbetta...

  • Page 179
    ... for publicly traded companies, a comparison between the book value and the market value. The purchases from and sales to Fiat Partecipazioni S.p.A. of the indicated investments were carried out as part of the ongoing program to streamline the corporate structure of the Group, aimed at focusing Fiat...

  • Page 180
    ... agreed gain on the indirect investment in Italenergia Bis S.p.A. that can be realized in 2005 upon exercise of the put option for sale to EDF was taken into account; in addition to the higher current value (represented by the stock market price at year end), with respect to the carrying value...

  • Page 181
    ...by the Italian companies participating in the national tax consolidation program (18,286 thousand euros). They show a net increase of 8,813 thousand euros with respect to December 31, 2003. At the end of 2004, tax credits totaled 288,902 thousand euros and included credits for consolidated Group VAT...

  • Page 182
    ... par value of 21,920 thousand euros. These shares are held to cover the commitments undertaken in connection with stock option plans for directors and employees. The decrease in treasury stock with respect to December 31, 2003 is due to its alignment to the stock option exercise price. Financial...

  • Page 183
    ...at a par value of 5 euros each on February 1, 2007, following exercise of the residual "FIAT ordinary share warrants 2007" issued as part of the capital increase of February 2002 and still outstanding. It should be recalled that Fiat reserved the right to pay the warrant holders in cash, starting on...

  • Page 184
    ... the form of ordinary shares of Fiat S.p.A. subscribed by the banks, with the obligation that they be offered as an option to all Fiat stockholders. â- The resolutions for the capital increases servicing the stock option plans (28 million euros) have been revoked, as the Board of Directors decided...

  • Page 185
    ... following writedown of treasury stock - Allocation to additional paid-in capital of the value of unexercised option rights sold on the stock market 4.5 Capital increase from 3,082.1 million euros to 4,918.1 million euros through issue of ordinary shares as resolved by the Board of Directors on June...

  • Page 186
    ... early retirement incentives Utilization for the fiscal year Net change 2,525 (3,130) (4,086) (4,691) Other reserves This item consists of contractually envisaged commissions owed for future listing of Ferrari S.p.A. shares (23,256 thousand euros) on the stock market, expenses for employee bonuses...

  • Page 187
    ...issue price per share will be the average of 14.4409 euros (in accordance with the rules of the Italian Association of Financial Analysts - AIAF - the value has been adjusted with respect to the original value of 15.50 euros following the capital increase of Fiat S.p.A.) and the average stock market...

  • Page 188
    ... the consolidated VAT filing system. Trade payables reflect the purchase of administrative and general services. The payables for consolidated IRES refer to the payables to the Italian subsidiaries for IRES calculated on the portion of the tax losses contributed by these companies as part of the...

  • Page 189
    ...-year increase of 7,486 thousand euros. A breakdown is provided below: (in thousands of euros) 12/31/04 12/31/03 Change Former Chief Executive Officer for retirement incentives to be paid in installments over 20 years Employees for fees to be paid Payables to employees who left the Company Payables...

  • Page 190
    ...Canada Ltd. 100,000 thousand euros), credit lines (New Holland Credit Company LLC 25,475 thousand euros, CNH Capital Australia Pty Ltd 18,799 thousand euros, Case Credit Ltd 61,052 thousand euros, Fiat Finance North America Inc. 1,468 thousand euros), VAT credit under the Group consolidation process...

  • Page 191
    ...872,123 thousand euros compared to December 31, 2003, is due mainly to fewer guarantees on behalf of subsidiaries following the reimbursement of bonds and reduced use of credit facilities. Upon sale of its controlling interest in the rolling stock activities, Fiat S.p.A. assumed certain obligations...

  • Page 192
    ... signing the contract. Fiat holds a call option that allows it to repurchase the Ferrari shares at any time before June 30, 2006 (the original date of June 30, 2005 was extended by one year during the course of 2003), except during the five months subsequent to the presentation of an IPO application...

  • Page 193
    ... office management, maintenance (9,922 thousand euros to Ingest Facility S.p.A.); personnel management and similar services (6,543 thousand euros to Fiat Se.p.In. S.c.p.A.); information technology services (3,045 thousand euros to Global Value S.p.A., 1,892 thousand euros to eSPIN S.p.A.); security...

  • Page 194
    ... S.p.A. Fiat Partecipazioni S.p.A. Business Solutions S.p.A. Itedi S.p.A. Toro Assicurazioni S.p.A. Total Tax credit on dividends paid Reimbursements of capital (portion in excess of the reduction of the book value) IHF - Internazionale Holding Fiat S.A. Total subsidiaries Other companies Dividends...

  • Page 195
    ... on behalf of the following Group companies: Fiat Finance and Trade Ltd Fiat Partecipazioni S.p.A. Fiat France S.A. Fiat Auto Financial Services Limited Banco CNH Capital S.A. Fiat Finance Luxembourg S.A. New Holland Credit Company LLC Fiat Auto S.p.A. Ingest Facility S.p.A. Miscellaneous Total...

  • Page 196
    ... thousand euros), and Fiat Revisione Interna S.c.r.l. (41 thousand euros). Writedowns of securities among current assets other than equity investments This item amounted to 1,631 thousand euros and consists of the adjustment of the book value of treasury stock to the stock option exercise price. In...

  • Page 197
    ... 278,442 thousand euros. In particular, they include current income taxes (IRES) (credit 1,442 thousand euros) stemming mainly from the income owed to Fiat S.p.A. for the tax loss used in connection with the consolidated tax return to set off taxable income contributed by other companies, as well as...

  • Page 198
    ... Upward cost adjustments Historical Upward cost adjustments Total Gross value at the end of fiscal year Intangible fixed assets Start-up and expansion costs: Cost of capital increase to 3,082.13 million euros (Board Resolution of 12/10/01) Cost of capital increase to 4,918.11 million euros (Board...

  • Page 199
    ...10/2001) Cost of capital increase to 4,918.11 million euros (Board Resolution of 06/26/2003) Leasehold improvements Concessions, licenses, trademarks and similar rights Other Intangible fixed assets Expenses connected to convertible facility Property, plant and equipment Land and buildings Plant and...

  • Page 200
    ...in euros) not subject to upward adjustments Historical cost subject to upward adjustments No. 74 of 2/11/52 Upward adjustments permitted by Law No. 72 of 3/19/83 No. 413 of 12/30/91 Upward adjustments included in book value at end of period Property, plant and equipment Land and buildings Plant and...

  • Page 201
    ... in the Consob communication of February 23, 1994 â- Subsidiaries included in financial fixed assets Company and registered office Capital (in euros) Result for the last fiscal year (in euros) Stockholders equity (in euros) % owned by Fiat S.p.A Number of shares Total book value (in euros) Ferrari...

  • Page 202
    03 FIAT S.P.A. List of investments (continued) Capital (in euros) Result for the last fiscal year (in euros) Stockholders equity (in euros) % owned by Fiat S.p.A Total book value (in euros) Company and registered office Number of shares Fiat Netherlands Holding N.V. - Amsterdam (Netherlands) At ...

  • Page 203
    List of investments in other companies and additional information specified in the Consob communication of February 23, 1994 â- Other companies included in financial fixed assets % owned by Fiat S.p.A. Number of shares Total book value (in euros) Company and registered office Mediobanca S.p.A. -...

  • Page 204
    ... at December 31, 2004 Book value % owned by Fiat S.p.A. Number of shares per share (in euros) total (in euros) per share (in euros) Par value total (in euros) Ordinary shares At 12/31/03 ❙ Alignment of the stock option exercise price At 12/31/04 °) Based on market prices on December 30, 2004...

  • Page 205
    ... which would be included in the Company's taxable income in the event of distribution (in euros) Total amount of equity reserves and other reserves which would not be included in the stockholders' taxable income in the event of distribution (in euros) Description Total amount of other reserves...

  • Page 206
    ... of distribution of Stockholders equity reserves Summary of the applications made during the last three years Amount (in euros) Possibility of use Available share (in euros) For coverage of losses (in euros) For other reasons (in euros) Nature/description Capital stock Capital stock reserves: Legal...

  • Page 207
    ... Holding Fiat S.p.A. Writedowns of equity investments Net change in reserve for employee severance indemnities and other reserves Changes in capital stock C. Cash flow - investing activities Investments in fixed assets Equity investments Other fixed assets Selling price, or redemption value...

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    03 FIAT S.P.A. Fees paid to Directors, Statutory Auditors and General Managers (in thousands of euros) (Article 78 of Consob Regulation No. 11971/99) First name and last name Office held in 2004 Term of office Expiration (*) Compensation for office held Non-cash Bonuses and Other benefits (**) ...

  • Page 209
    ... Options held at the end of the year Average exercise price Exercise period (mm/yy) First and last name Average Exercise Number Average market period of exercise price at (mm/yy) options price exercise date Paolo Fresco Giuseppe Morchio Chairman Chief Executive Officer 2,250,000 13,338,076 20...

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    ... dated April 8, 2004. In our opinion, the consolidated financial statements of Fiat Group as of and for the year ended December 31, 2004, comply with the Italian statutory provisions governing the criteria for their preparation; accordingly, they give a true and fair view of the financial position...

  • Page 212
    ... dated April 8, 2004. In our opinion, the financial statements of Fiat S.p.A. as of and for the year ended December 31, 2004 comply with the Italian statutory provisions governing the criteria for their preparation; accordingly, they give a true and fair view of the Company's financial position...

  • Page 213
    ... of the consolidated financial statements is technically correct and overall consistent with the pertinent legislation. In particular, it also includes the information required by Consob with registered letter DAC/RM/97002477 of March 14, 1997 concerning companies whose securities are listed both in...

  • Page 214
    ... are able to report specific information on the subjects listed below. We attended the meetings of the Board of Directors, where we received detailed information on the Company's operations and on the main operating, financial and asset transactions carried out or in the process of being carried out...

  • Page 215
    ... Governance of Italian listed companies and publishes an Annual Report on Corporate Governance that details its activities in this area. We have received confirmation from Deloitte & Touche S.p.A. that Fiat S.p.A. retained its services to perform, in addition to auditing the statutory financial...

  • Page 216
    ... statutes currently in force, the Board of Statutory Auditors has no jurisdiction over decisions to file liability actions. Based on the audits we performed in those areas that fall under our jurisdiction pursuant to Article 149 of Legislative Decree No. 58 of February 24, 1998 and the information...

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    OTHER ITEMS ON THE AGENDA AND RELATED REPORTS AND MOTIONS 215

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    ...or other relationships with the Company or other parties related to it in any way (details appended hereto). The currently growing focus by investors and market supervisory authorities on the structure of corporate governance manifests a clear preference for systems that guarantee a higher degree of...

  • Page 219
    ...any case once a year, independent directors shall disclose by means of an appropriate written communication addressed to the Board of Directors any relationship that currently exists or that is in the process of being set up and which is material pursuant to the above letters a, b, c, d, e, f, g and...

  • Page 220
    ... relations with the external auditors and the handling of complaints regarding accounting issues, internal audits, or external audits, as well as the right to retain external consultants at the Company's expense for the provision of services directly connected with the new functions of the Board...

  • Page 221
    ... the clauses found in Articles 2370 and 2371 of the Italian Civil Code and the new rules governing qualification for attendance at stockholders meetings that Consob recently imposed in Article 34 bis of the Market Regulation; â- Turin, May 10, 2005 The Chairman of the Board of Directors Luca...

  • Page 222
    ... for drafting minutes and the preparation of replies. The information presented at the Meeting by corporate bodies may be divulged through the Company's Internet site. 4.7. The Chairman shall state the number of those present and the shares represented, and ascertain that the Meeting is duly...

  • Page 223
    ...Meeting votes in favor with the majority specified by Article 2374 of the Italian Civil Code, fixing the day and the time of the new meeting for the continuation of business. 8. Replies and closure of discussion 8.1. The Chairman or, if he so requests, his assistant shall answer any questions raised...

  • Page 224
    ... offices. Turin, May 10, 2005 The Chairman of the Board of Directors 1 2 Report on Corporate Governance (March 2004) Consob - Comments made after consultation on amendments to the Market Regulation, where it is observed that it is currently difficult to reconcile the principle of "record date...

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    Graphic design and editorial coordination: Micrograf - Turin, Italy Printed by: Arti Grafiche Giacone - Turin, Italy Printed in Italy June 2005 01UK Printed on Fedrigoni Symbol Freelife recycled and environmentally friendly paper

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    Fiat S.p.A. Corporate Headquarters Via Nizza, 250 10126 Turin - Italy Corporate Press Department Contacts: Tel. +39 011 00.63088 Fax +39 011 00.63798 [email protected] www.fiatgroup.com