Chrysler 2010 Annual Report Download - page 385

384
REPORTS
OF THE BOARD
OF STATUTORY
AUDITORS
Upon conclusion of the above process, the Statutory Auditors formulated a recommendation for appointment of the independent
auditors for the nine-year period 2012-2020, which has been presented to the Internal Control Committee and the Board of
Directors and will be submitted to Shareholders during this General Meeting.
Demerger
In relation to the demerger of Fiat S.p.A. in favor of Fiat Industrial S.p.A., on 23 June 2010, the Board of Statutory Auditors
received its first status report on the transaction from the Company’s management.
In particular, they provided details of the transaction through which Fiat S.p.A. (“Fiat”) would transfer a portion of its assets and
liabilities to a newly incorporated wholly-owned subsidiary (“Fiat Industrial”), consisting of the shareholdings in Fiat Netherlands
Holding N.V. (“FNH”), Nuove Iniziative Finanziarie Cinque S.p.A. (now Iveco S.p.A.), Nuova Immobiliare Nove S.p.A. (now FPT
Industrial S.p.A.) and Fiat Industrial Finance S.p.A., in addition to a portion of its net debt. A description was also provided of
how, prior to the Board’s approval of the demerger plan, the legal structure of Iveco and the “Industrial & Marine” business line
of FPT was reorganized. In addition, it was explained that, given the legal form of the demerger (scissione parziale proporziale
under the Italian Civil Code), the shareholder structure of Fiat Industrial S.p.A. would be substantially equivalent to the existing
structure of Fiat S.p.A. and that Fiat S.p.A. shareholders would be allotted, for no compensation, one share in Fiat Industrial for
every share of the same class held in Fiat at the time of the demerger.
It was then explained that the objective of the demerger was preeminently industrial and that execution of the deed of demerger
would be subject to admission of the shares in Fiat Industrial to listing and issue of the necessary approvals. The transaction
would have effect from 1 January 2011.
During the meetings, there were presentations on the planned reorganization of Iveco to separate the trucks and commercial
vehicles activities from the powertrain activities, as well as the establishment of a new group having an adequate financial
structure, including in terms of expected cash flows.
The Statutory Auditors were also appraised of the planned reorganization of the treasury activities post demerger, whose
principal objective was to separate the activities of the Treasury into two companies with operating autonomy to provide
centralized treasury services to Fiat Group and Fiat Industrial Group. The above to be executed while guaranteeing both
structures, along with the necessary separation, use of the current procedures, the existing levels of operating security,
automation and connectivity with the banking system and various legal entities within the Group.
The Statutory Auditors were also appraised of legal aspects and timing relating to the demerger, in particular in relation to
the treatment of ordinary, preference and savings shares so as to not prejudice the rights of any shareholders, either directly
or indirectly.
In addition, information was given to the Statutory Auditors on the impacts of the demerger on the statutory and consolidated
financial statements prepared in accordance with International Financial Reporting Standards (IFRS), with particular emphasis
on the treatment of the transaction as a “business combination under common control” and therefore with assets and liabilities
being transferred at their existing book value. In addition, the Statutory Auditors were informed that in the 2010 consolidated
financial statements, items relating to the future Fiat Industrial Group would be presented in a single line item as “discontinued
operations”, but with detail provided in the notes and that, for completeness, the report on operations would also include
consolidated data for the entire Fiat Group, with no separate evidence of discontinued operations.
During the second half of 2010, the Board of Statutory Auditors received periodic updates on formal activities related to the
future listing of Fiat Industrial Group and activities to finance the group independently from Fiat S.p.A., as well as on documents
filed with Borsa Italiana and Consob in relation to the application for admission of Fiat Industrial to listing, including the Business
Plan for Fiat Industrial Group and, lastly, on the sponsors for the listing and the transfer of lines of credit.