report of the board of directors of fiat s.p.a. on the … · 2014-09-19 · report of the board of...
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REPORT OF THE BOARD OF DIRECTORS OF FIAT S.p.A. ON THE PARTIAL AND PROPORTIONAL DEMERGER OF
FIAT S.p.A. TO FIAT INDUSTRIAL S.p.A.
21 July 2010
Fiat S.p.A. Registered Office: 250 Via Nizza, Turin (Italy)
Share Capital: €6,377,262,975 - Turin Companies Register/Tax Code: 00469580013
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1. BACKGROUND AND EXPLANATION OF THE TRANSACTION WITH SPECIFIC REFERENCE TO THE OPERATIONAL OBJECTIVES OF THE COMPANIES PARTY TO THE DEMERGER AND PLANS FOR ACHIEVEMENT OF THOSE OBJECTIVES ....................................................................... 3
1.1 DESCRIPTION OF THE PARTIES TO THE TRANSACTION .......................................................................... 3
1.2 DESCRIPTION OF THE ACTIVITIES OF FIAT ............................................................................................. 4
1.3 DESCRIPTION OF THE BENEFICIARY COMPANY ..................................................................................... 5
1.4 BACKGROUND AND REASONS FOR THE DEMERGER ............................................................................... 5 1.4.1 Reorganization of the corporate tree of Iveco S.p.A. ......................................................... 6
1.5 MAIN LEGAL ASPECTS OF THE TRANSACTION ........................................................................................ 8
1.6 BACKGROUND AND REASONS FOR THE DEMERGER – OPERATIONAL OBJECTIVES AND PLANS FOR IMPLEMENTATION ............................................................................................................................... 9
2. DESCRIPTION OF ASSETS AND LIABILITIES TO BE TRANSFERRED TO THE BENEFICIARY COMPANY ............................................................................................................................................... 10
2.1 ASSETS AND LIABILITIES TO BE TRANSFERRED .................................................................................... 10
2.2 CHANGE IN EQUITY FOR FIAT; INCREASE IN SHARE CAPITAL OF THE BENEFICIARY COMPANY ................. 11
2.3 EFFECTIVE VALUE OF NET ASSETS TRANSFERRED TO THE BENEFICIARY COMPANY AND NET ASSETS REMAINING WITH THE DEMERGING COMPANY .................................................................................... 13
3. RATIO FOR ALLOTMENT OF SHARES IN THE BENEFICIARY COMPANY AND PROCEDURE OF ALLOTMENT ........................................................................................................................................... 13
4. AMENDMENTS TO THE BY-LAWS ....................................................................................................... 14
4.1 FIAT BY-LAWS AND AMENDMENTS RESULTING FROM THE TRANSACTION AND OTHER AMENDMENTS ....... 14 4.1.1 Amendments to the By-laws resulting from the Transaction ........................................... 14 4.1.2 Other amendments to the By-laws .................................................................................. 16
4.2 FIAT INDUSTRIAL BY-LAWS AND AMENDMENTS RESULTING FROM THE TRANSACTION ............................ 18
5. RIGHT OF WITHDRAWAL (PURSUANT TO ARTICLES 2437 AND 2437-QUINQUIES OF THE ITALIAN CIVIL CODE) FOR FIAT SHAREHOLDERS ........................................................................... 19
6. SIGNIFICANT SHAREHOLDINGS IN AND CONTROL OF THE DEMERGING COMPANY AND THE BENEFICIARY COMPANY SUBSEQUENT TO THE TRANSACTION ................................................. 20
6.1 SHAREHOLDER STRUCTURE OF FIAT AND EFFECTS OF THE DEMERGER ............................................... 20
6.2 SHAREHOLDER STRUCTURE OF FIAT INDUSTRIAL AND EFFECTS OF THE DEMERGER ............................. 20
7. EFFECTS OF THE DEMERGER ON SHAREHOLDER AGREEMENTS RELATING TO THE DEMERGING COMPANY, DEEMED RELEVANT FOR THE PURPOSES OF ARTICLE 122 OF LEGISLATIVE DECREE NO. 58/98 ........................................................................................................ 20
8. EFFECTIVE DATE OF THE TRANSACTION AND DATE OF REGISTRATION IN THE ACCOUNTS OF THE BENEFICIARY COMPANY ....................................................................................................... 21
9. INCENTIVE PLANS ................................................................................................................................. 21
10. TAX IMPACTS OF THE TRANSACTION ............................................................................................... 23
11. DESCRIPTION OF RIGHTS ATTACHED TO THE SHARES TO BE ALLOTTED TO SHAREHOLDERS OF THE DEMERGING COMPANY .......................................................................... 24
12. COMPARISON TEXT WITH THE CURRENT BY-LAWS ....................................................................... 24
This document has been translated into English for the convenience of international readers. The original Italian document should be considered the authoritative version.
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Report of the Board of Directors of Fiat S.p.A. on the partial and proportional demerger plan of Fiat S.p.A. to Fiat Industrial S.p.A. pursuant to and for the purposes of Articles 2501-quinquies, 2506-ter of the Italian Civil Code and 70 (2) of the regulations adopted by Consob Resolution 11971 of 14 May 1999, as amended Dear Shareholders, We hereby present for your examination and approval the partial and proportional demerger plan of Fiat S.p.A. (“Fiat” or the “Demerging Company”) to Fiat Industrial S.p.A. (“Fiat Industrial” or the “Beneficiary Company”), prepared, filed and registered pursuant to applicable law and on the basis of the financial statements of Fiat at 30 June 2010 and Fiat Industrial at 20 July 2010 (the “Demerger Plan”). This report (the “Report”) is intended to provide an explanation of the Demerger Plan, pursuant to the requirements of Articles 2501-quinquies, 2506-ter of the Italian Civil Code and 70 (2) of the regulations adopted by Consob Resolution 11971 of 14 May 1999, as amended (the “Issuer Regulations”).
**** 1. BACKGROUND AND EXPLANATION OF THE TRANSACTION WITH SPECIFIC
REFERENCE TO THE OPERATIONAL OBJECTIVES OF THE COMPANIES PARTY TO THE DEMERGER AND PLANS FOR ACHIEVEMENT OF THOSE OBJECTIVES
1.1 Description of the Parties to the Transaction
Fiat S.p.A. has its registered office at 250 Via Nizza, Turin (Italy) and its tax code and registration number with the Companies Register of Turin is 00469580013. At the date of this Report, subscribed and paid-in capital was €6,377,262,975, consisting of 1,092,247,485 ordinary shares, 103,292,310 preference shares and 79,912,800 savings shares having a par value of €5.00 each. In addition, pursuant to the provisions of Article 5 of the By-laws, following the resolutions adopted by the Board of Directors on 3 November 2006, in execution of the powers delegated to it in the Extraordinary General Meeting of Shareholders held on 12 September 2002, the Company's share capital may be increased by a maximum of €50,000,000 through the issue of up to 10,000,000 new ordinary shares, through paid capital contributions, exclusively to executives employed by the Company and/or its subsidiaries in accordance with the relevant incentive plan. The Company’s ordinary, preference and savings shares are listed on the Mercato Telematico Azionario (MTA), organized and managed by Borsa Italiana S.p.A. (“Borsa Italiana”).
Fiat Industrial S.p.A., incorporated on 15 July 2010, has its registered office at 250 Via Nizza Turin (Italy) and its tax code and registration number with the Companies Register of Turin is 10352520018. At the date of the Demerger Plan, share capital subscribed and paid-in was €120,000, consisting of 80,000 ordinary shares having a par value of €1.50 each. At the date of this Report, the Beneficiary Company was wholly owned by Fiat.
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1.2 Description of the activities of Fiat
Fiat is the parent company of the Fiat Group and one of the founders of the European car industry. From the very beginning, Fiat has had a significant international dimension and strong propensity for innovation. Over more than a century of activity, the Group's vocation has been excellence in all forms of mobility for people and goods: from cars to trucks, agricultural tractors, marine engines, aeronautical engines and even space launchers. In 2003, the Group redefined the scope of its business, to focus on manufacturing and service activities in the automotive sector, and subsequently established a strategy of strengthening its industrial and commercial structure through targeted alliances, particularly in high-growth markets.
Today, the Group’s activities are concentrated in the following areas: Automobiles, Agricultural and Construction Equipment, Trucks and Commercial Vehicles, Components and Production Systems.
Automobiles: Fiat Group Automobiles produces and sells automobiles (Fiat, Abarth, Alfa Romeo and Lancia brands) and light commercial vehicles (Fiat Professional brand). The Sector's main financial services activities in Europe have been consolidated under FGA Capital, a 50/50 joint venture with Crédit Agricole established at the end of 2006. The Fiat Group also includes Maserati and Ferrari, both producers of luxury sport cars known for their exclusivity, technology and high performance.
Agricultural and Construction Equipment: CNH operates in the agricultural equipment sector through the Case IH Agriculture, New Holland Agriculture and Steyr brands, and in the construction equipment sector through the Case Construction, New Holland Construction and Kobelco brands. CNH also provides financial services to its end customers and dealers.
Trucks and Commercial Vehicles: Iveco designs, produces and sells a complete range of commercial vehicles under the Iveco brand, buses under the Iveco Irisbus brand, and fire-fighting and special purpose vehicles under the Iveco, Astra and Magirus brands. It also provides a wide range of financial services to its customers and dealers, principally through Iveco Finance Holdings Ltd, a company owned 51% by the Barclays Group and 49% by Iveco.
Components & Production Systems: FPT Powertrain Technologies is dedicated to the research, development and production of engines and transmissions for cars, light commercial vehicles, heavy transport, buses, industrial equipment, and marine and power generation applications. Magneti Marelli designs and produces high-tech systems and components for passenger vehicles in the following areas: lighting, electronics, engine control, suspensions and shock absorbers, exhaust systems and motorsport. It also distributes spare parts to the independent after market. Teksid supplies engine blocks, cylinder heads and other cast-iron components for engines; cast-iron components for transmissions, gearboxes and suspensions; and aluminum cylinder heads. Comau produces industrial automation systems for the automotive industry in the areas of product and process engineering, logistics and management, manufacturing, installation, production start-up and maintenance.
Other Businesses includes companies operating in the publishing and communications areas (La Stampa, a daily newspaper, and Publikompass, reseller of advertising space for multimedia customers); Centro Ricerche Fiat (CRF) and Elasis (both engaged in research and development); Fiat Services S.p.A. (provision of services exclusively to other Fiat Group companies); in addition to Holding and Other companies.
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1.3 Description of the Beneficiary Company The Beneficiary Company was incorporated on 15 July 2010 as a preliminary step to the Demerger and, at the date of this Report, it was wholly-owned by Fiat. Since incorporation, the Beneficiary Company's only activities have been those directly related to preparation for the Transaction.
1.4 Background and reasons for the Demerger The objective of the Transaction is primarily industrial and consists in separation of the agricultural and construction equipment, and truck and commercial vehicles activities, as well as the Industrial & Marine business line of the FPT Powertrain Technologies Sector from the automobile and automobile-related components and production systems activities, which include Fiat Group Automobiles, Ferrari, Maserati, Magneti Marelli, Teksid, Comau and the Passenger & Commercial Vehicles business line of FPT Powertrain Technologies. The transaction is grounded on the fundamentally different characteristics that the capital goods businesses (to be demerged) have with respect to the automobiles activities in terms of competitive environment, product requirements, level of R&D expenditure required and the profile of potential investors.
The Automobiles business, in particular, operates in a highly competitive market where price, quality, the level of choice and customization, style, safety, fuel economy and functionality are key competitive drivers. In that market, the purchasing decision of customers is also dependent on the overall level of consumer confidence and the availability of credit, with leadership varying significantly from market to market. In addition, this business requires significant investment in research and development to satisfy customer demand for continuous innovation in relation to new products and services, emission control systems, and driver and passenger safety solutions. The Capital Goods business, on the other hand, operates in a market where the key competitive drivers are brand reputation, an extensive distribution network, financial services and breadth of product range. In addition to the sophistication of the product offer, performance in this sector is also influenced by general economic conditions, demand for food, and climate conditions. The requirement for investment in research and development is lower for companies operating in this business due to the lower relative dependence on aesthetic design of the models offered.
The Transaction will create two distinct groups, each focused on its core business with targets that are well-defined and clear to the market. The Board believes that, once equipped with the necessary level of independence and efficiency, they will have greater potential for strategic development including, in particular, complete freedom of movement and a more targeted operating profile, enabling them to fully achieve value that might otherwise only be partially realized. On one side, Fiat and the Automobiles business, as a result of the alliance with Chrysler and the international collaboration in brand development, has achieved sufficient critical mass to operate independently and on an equal footing with its competitors, attaining the necessary strategic flexibility to pursue further growth opportunities, including the creation of alliances, and enhancing the level of independence and efficiency. Fiat Industrial, on the other, will have the opportunity to take its rightful place as a global player in the Capital Goods sector, leveraging off a stable worldwide industrial presence. The capital goods businesses currently consist of: CNH Global N.V. and subsidiaries, constituting
the agricultural and construction equipment activities, Iveco S.p.A. and subsidiaries, constituting both the truck and commercial vehicles activities and the industrial & marine business line of the FPT Powertrain Technologies Sector. At the same time, following the Transaction, Fiat shareholders will, in place of each existing Fiat share, hold two shares representing the two distinct areas of business (Automobiles and Capital Goods) that make up the Group today. This will provide current Fiat shareholders and prospective investors the choice between investing in both areas of business and focusing their investment in only one of them.
Fiat
Shareholders
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1.4.1 Reorganization of the corporate tree of Iveco S.p.A. Prior to the Demerger, a reorganization of the corporate tree of the industrial activities of Iveco S.p.A. has been enacted. That reorganization is directly linked to the Transaction and has the ultimate objective of transferring to the Beneficiary Company, by means of the Demerger, all component parts of the truck and commercial vehicles business and the industrial & marine powertrain business line, while at the same time establishing distinctly separate legal entities for the two businesses and concentrating the related foreign shareholdings within a single legal entity. The separation of the industrial & marine powertrain business, which is already engaged in non-captive supply activities, out of the Fiat Group, will also strengthen the potential for development on the non-captive market while at the same time will provide Fiat Industrial with
Fiat SpA
3 share classes Fiat
Industrial SpA
CNH Iveco FPT Automobiles Components Other Assets
~90%
I&M P&CV
Fiat Shareholders
Fiat Industrial
SpA
3 share classes
CNH Iveco FPT I&M
~90%
Fiat SpA
3 share classes
Automobiles FPT P&CV
Components
Fiat Industrial Finance
Fiat Industrial Finance
Other Assets
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a corporate structure similar to those adopted by leading international groups operating in the capital goods business.
The reorganization of the corporate tree of the industrial activities of Iveco S.p.A. was undertaken through two separate transactions, with completion of both contingent upon Borsa Italiana admitting the shares in the Beneficiary Company to listing on the MTA. The first was the transfer of groups of activities and shareholdings representing the Italian operations and certain joint ventures of the businesses referred to previously (i.e., trucks and commercial vehicles and the industrial & marine business line of FPT Powertrain Technologies) to two inactive companies, Nuove Iniziative Finanziarie Cinque S.p.A. and Nuova Immobiliare Nove S.p.A., both wholly owned by Fiat. The second was the transfer of shareholdings in foreign entities to Fiat Netherlands Holding N.V., also wholly owned by Fiat.
On 29 June 2010, Nuove Iniziative Finanziarie Cinque S.p.A. and Nuova Immobiliare Nove S.p.A. acquired from Iveco S.p.A., conditional upon Borsa Italiana admitting the shares in the Beneficiary Company to listing on the MTA by 31 December 2010, groups of activities relating, respectively, to the truck and commercial vehicles business and the industrial & marine powertrain business. Nuove Iniziative Finanziarie Cinque S.p.A. acquired, from Iveco S.p.A., the group of activities relating to the truck and commercial vehicles business in Italy and the shareholdings, including in several joint ventures, listed in Annex C to the Demerger Plan. Nuova Immobiliare Nove S.p.A. acquired, from Iveco S.p.A., the group of activities in Italy and shareholdings relating to the industrial & marine powertrain business (also listed in Annex C) and it is intended that it will also acquire the interest in SAIC Fiat Powertrain Hongyan Co. Ltd. Chongqing held by Fiat Powertrain Technologies S.p.A. (which is to remain within the group headed by the Demerging Company). The price at which both groups of activities were transferred as part of the reorganization was based on a valuation prepared by PriceWaterhouseCoopers Advisory, leading independent experts mandated jointly by the selling company and the acquiring companies. Once those acquisitions become effective, Nuove Iniziative Finanziarie Cinque S.p.A. will acquire the denomination of Iveco S.p.A. and the former Iveco S.p.A. – which will continue to hold certain non-core assets (e.g., equity investments, used vehicle inventories, other non-current assets, trade receivables, misc. payables/receivables, etc.) not pertaining to the group of activities to be transferred and planned to remain within the scope of activities of the Demerging Company – will also be renamed. Nuova Immobiliare Nove S.p.A. will acquire the denomination of FPT Industrial S.p.A. At the same time, Fiat Netherlands Holding N.V., which already holds approximately 90% of the share capital of CNH Global N.V. and interests in some of the foreign operating companies part of the truck and commercial vehicles business, has acquired from Iveco S.p.A. – also conditional upon Borsa Italiana admitting the shares in the Beneficiary Company to listing on the MTA – shareholdings in the remaining foreign entities operating in the areas of business referred to above (trucks and commercial vehicles and industrial & marine powertrain).
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1.5 Main legal aspects of the transaction
The Demerger, if approved, will consist in the transfer by Fiat of a portion of its assets and liabilities to the Beneficiary Company in the form of a scissione parziale proporzionale (Article 2506 and following of the Italian Civil Code). More specifically, the assets and liabilities to be transferred to the Beneficiary Company include shareholdings, listed below, as well as certain other assets and liabilities (financial receivables and payables), also listed below, representing a portion of the net debt of Fiat. The shareholdings consist of a 100% interest in Fiat Netherlands Holding N.V., Nuove Iniziative Finanziarie Cinque S.p.A. and Nuova Immobiliare Nove S.p.A. (which, as described above, will hold the truck and commercial vehicles and the industrial & marine powertrain activities). In addition, a 100% interest in Fiat Industrial Finance S.p.A., a company incorporated on 7 June 2010 whose scope is to provide centralized treasury services to the new Fiat Industrial Group, will be transferred to the Beneficiary Company. The Transaction will be executed in accordance with the requirements of Articles 2506 and following of the Italian Civil Code and in the manner described in the Demerger Plan. In consideration for the assets and liabilities transferred, the shareholders of Fiat will be granted without consideration, one share in the Beneficiary Company for each share of the same class they hold in the Demerging Company. The Demerger Plan was approved by the Boards of the Directors of Fiat and Fiat Industrial on 21 July 2010. As the Demerger entails a transfer of assets and liabilities to a company that, at the date of the Demerger Plan, is wholly owned by the Demerging Company and will continue to be at the effective date of the Transaction, the Demerger will not result in any change in the value of shareholdings for shareholders of the Demerging Company and, therefore, the conditions exist – in accordance also with the opinion expressed by the Milan Council of Notaries in Massima No. 23 of 18 March 2004, issued by the Commissione Società del Consiglio Notarile di Milano – for exemption pursuant to Article 2506-ter (3) of the Italian Civil Code from the requirement for a report from an independent expert under Article 2501-sexies of the Italian Civil Code. As a result of the Transaction, the share capital and reserves of the Demerging Company will be reduced by an amount equivalent to the net value of the assets and liabilities transferred. Share capital will be reduced through a pro rata reduction in par value per share for all classes of shares and, to ensure not prejudicial treatment to any class of shareholders, either directly or indirectly, and full compliance with the provisions of Article 20 of the By-laws, the entitlements attached to each class of shares will be adjusted pro rata to the new par value per share such that the existing entitlements attached to each class of shares remain unchanged as a percentage of par value. The sum of the entitlements attached to each share class for both the Demerging and Beneficiary Company will, therefore, be equivalent to the entitlements attributable under the current By-laws of the Demerging Company. In addition, to further ensure that the Transaction is not prejudicial to any shareholder class and in consideration of the fact that it will take effect after 31 December 2010, the allocation of the result for 2010 will be based on the entitlement for each share class under the current By-laws.
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Accordingly, the pro rata reduction in the entitlement for each share class of the Demerging Company with respect to the allocation of profit (Articles 6 and 20 of the By-laws) shall have effect the day after the approval of the allocation of the 2010 result. Fiat Industrial will apply to the regulatory authorities and other relevant bodies for admission of its ordinary, preference and savings shares to listing on the MTA. The Demerger is conditional upon Borsa Italiana admitting the shares in the Beneficiary Company to listing on the MTA. In addition to the applicable provisions of the Italian Civil Code, execution of the Deed of Demerger is, therefore, conditional upon:
(i) admission by Borsa Italiana of all classes of shares in the Beneficiary Company to listing on the MTA; and
(ii) a decision from Consob, pursuant to Article 57 (1.d) of Consob Regulation No.
11971/1999, as to the equivalence to a listing prospectus of the information provided by the Information Document and subsequent amendments, pursuant to Article 57 (namely, a “giudizio di equivalenza”).
Further to the Deed of Demerger being filed with the relevant Companies Register, but prior to the effective date of the Transaction, Borsa Italiana will provide formal notification of the date for the start of trading of shares in the Beneficiary Company on the MTA. Subject to satisfaction of the conditions indicated above, the Transaction is expected to have effect from 1 January 2011.
1.6 Background and reasons for the Demerger – Operational objectives and plans for implementation
As explained to the financial community during presentation of the Fiat Group 2010-2014 Business Plan on April 21st, the purpose of the transaction is to separate the capital goods activities – consisting of the design, production and distribution of trucks and commercial vehicles, buses, special vehicles, tractors, agricultural equipment, construction equipment and related powertrain systems – from the other activities currently carried out by the Fiat Group. Those activities consist of: the design, production and distribution of mass market automobiles and light commercial vehicles under Fiat Group Automobiles (including the shareholding in Chrysler Group LLC); the design, production and distribution of luxury cars (Ferrari and Maserati brands); activities related to engines, transmissions, automobile-related components and production systems (consisting of the FPT-Passenger & Commercial Vehicles, Magneti Marelli, Teksid and Comau Sectors); as well as other activities in publishing (La Stampa, Publikompass and the interest held in RCS) and services (Fiat Services). The demerger, whose objective is primarily industrial, is motivated by the fact that the capital goods businesses have fundamentally different characteristics to the automobile and automobile-related businesses making up the remainder of the Group's activities, in terms of product offer, technology, level of R&D expenditure required for product range renewal, distribution system, structure of supply and demand, and profile of potential investors. Through the demerger, an industrial group will be created which, taken as a whole, will be a global capital goods player capable of competing successfully with other multinational groups operating in that sector. At the same time, the Beneficiary Company will hold interests in specific industrial sectors (agricultural and construction equipment, trucks and commercial vehicles, buses and special vehicles, engines and transmissions for the above activities as well as marine applications) which, even taken individually, already have characteristics that
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represent significant value and growth potential in terms of size, products, technology and markets. The redefined Fiat Group will have a clear strategic focus in the automobiles sector, a solid financial structure and in the near future is expected to benefit positively from results achieved by Chrysler Group LLC. The Group will then have the size and capability necessary to take advantage of opportunities that may arise from a consolidation of the automobile sector. During the presentation of the 2010-2014 Business Plan on 21 April 2010, the content of which is publicly available, plans for achievement of the above operational objectives for the individual sectors of activity of both groups were also presented. The Demerger will have no impact on the overall 2010 outlook announced on 21 July 2010 for the Fiat Group, in its current configuration.
2. DESCRIPTION OF ASSETS AND LIABILITIES TO BE TRANSFERRED TO THE BENEFICIARY COMPANY
2.1 Assets and liabilities to be transferred In accordance with the combined provisions of Articles 2506-ter and 2501-quater of the Italian
Civil Code, the Demerger will be based on: (i) the financial statements for Fiat S.p.A. as at 30 June 2010 and (ii) the financial statements for the Beneficiary Company as at 20 July 2010, approved by the respective Boards of Directors on 21 July 2010.
Pursuant to the Transaction, the shareholdings and other assets and liabilities of the Demerging Company listed below will be transferred to the Beneficiary Company.
Company name Registered Office
Tax Code/Companies
Register
Share capital Subscribed/
Paid-in (€)
% held No. of Shares Held
Carrying Value for Fiat
at 30 June 2010 (€)
Fiat Netherlands Holding N.V.
Amsterdam 003324436 33142210
2,610,397,295 100 94,923,538 4,577,346,053
Nuove Iniziative Finanziarie Cinque S.p.A. (to be renamed Iveco S.p.A)
Turin 09709770011 200,000,000 100 200,000,000 200,000,000
Nuova Immobiliare Nove S.p.A. (to be renamed FPT Industrial S.p.A.)
Turin 09397710014 100,000,000 100 100,000,000 100,000,000
Fiat Industrial Finance S.p.A.
Turin 10331120013 100,000,000 100 100,000,000 100,000,000
Total shareholdings (A) 4,977,346,053
Carrying Value for Fiat at 30 June
2010 (€) Additional items: Net debt
Financial receivables from Fiat Finance S.p.A 213,000,000
Financial payables to Fiat Finance S.p.A. (1,440,000,000)
Net financial debt, total (B) (1,227,000,000) Net assets to be transferred, total (A)+(B) 3,750,346,053
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Following is a brief description of the companies whose shares are to be transferred: Fiat Netherlands Holding N.V. (FNH) holds a controlling interest in CNH-Case New
Holland, which operates in the agricultural equipment sector through the Case IH Agriculture, New Holland Agriculture and Steyr brands, and in the construction equipment industry through the Case Construction, New Holland Construction and Kobelco brands. CNH also provides financial services to its end customers and dealers. Additionally, subsequent to completion of the transactions preliminary to the Demerger described above, Fiat Netherlands Holding N.V., which already held interests in certain foreign entities forming part of the trucks and commercial vehicles business, acquired additional interests in foreign operating entities of the trucks and commercial vehicles and industrial & marine powertrain businesses from the former Iveco S.p.A.
Iveco S.p.A. is active, including through its subsidiaries and the subsidiaries of FNH, in the trucks and commercial vehicles business and offers a complete range of commercial vehicles under the Iveco brand, buses under the Iveco Irisbus brand, and fire-fighting and special purpose vehicles under the Iveco, Astra and Magirus brands. It also provides a wide range of financial services to its customers and dealers, principally through Iveco Finance Holdings Ltd, a company 51% owned by the Barclays Group and 49% by FNH.
FPT Industrial S.p.A. produces, including through its subsidiaries and subsidiaries of FNH, engines and transmissions for commercial vehicles, industrial applications, agricultural and construction equipment, and marine applications.
Fiat Industrial Finance S.p.A. will, commencing from the effective date of the Transaction, carry out centralized treasury activities for the new Fiat Industrial Group, including through its foreign subsidiaries.
The net assets to be transferred, amounting to €3,750,346,053 at 30 June 2010, represent the difference between (i) the value of the above shareholdings, as recognized in the books of Fiat for €4,977,346,053, and (ii) the value of the additional items, consisting of assets of €213,000,000 and liabilities of €1,440,000,000, representing a net debt position with Fiat Finance S.p.A. (the Fiat Group's central treasury), that will be repaid subsequent to the Demerger with funding acquired directly by Fiat Industrial Finance S.p.A. The net amount to be transferred will remain unchanged, as any net change in the book value of the assets and liabilities to be transferred will be compensated for in cash. The Demerging Company will transfer the above assets and liabilities to the Beneficiary Company at book value.
2.2 Change in equity for Fiat; increase in share capital of the Beneficiary Company
As a consequence of the Transaction, the equity of the Demerging Company will be proportionally reduced in the amount of €3,750,346,053, through a reduction in share capital in the amount of €1,913,178,892.50 and reserves in the amount of €1,837,167,160.50. More specifically, the legal reserve will be reduced in the amount of €214,937,498 to €501,520,828; the share premium reserve will be reduced in the amount of €462,265,468 to €1,078,619,424; the reserve for the purchase of own shares will, pursuant to the shareholder resolution detailed below, be reduced in the amount of €599,292,923 to €543,446,846; the retained profit reserve, that was increased from €2,284,840,679 to €2,884,133,602 in relation to the €599,292,923 decrease in the reserve for the purchase of own shares, will be reduced in the amount of €1,159,964,194.50 to €1,724,169,407.50.
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The reduction in share capital of the Demerging Company will take place through a reduction in par value per share for all share classes, rather than through the cancellation of shares. The par value of €5.00 per share for all classes of shares in the Demerging Company prior to the Transaction will be reduced to €3.50 per share.
The reduction of €1.50 per share in the par value of shares in the Demerging Company (corresponding to the pro rata reduction in net assets resulting from the Transaction) will be fully offset by the issue of new shares in the Beneficiary Company, with a par value of €1.50 each, equivalent in number to the shares outstanding in each class in the Demerging Company at the date of the Transaction, having identical rights and privileges and in a one-to-one ratio between shares of the Demerging Company and the Beneficiary.
Pursuant to the Transaction, the equity of the Beneficiary Company will be increased in the amount of €3,750,346,053, through: a) an increase in share capital of €1,913,178,892.50, from the current €120,000 to a total of €1,913,298,892.50 through the issue of 1,275,452,595 new shares, consisting of 1,092,247,485 ordinary shares, 103,292,310 preference shares and 79,912,800 savings shares, having a par value of €1.50 each; and, b) a further increase of €1,837,167,160.50 in reserves to be recognized commensurate with the reduction in equity of the Demerging Company. More specifically, the legal reserve will amount to €214,937,498, the share premium reserve to €462,265,468 and the retained profit reserve to €1,159,964,194.50. Following is a summary of the impacts on equity of both the Demerging and Beneficiary Company. The first column reports values for the share capital and equity reserves of the Demerging Company at 30 June 2010. The second and third columns show the composition of those items for the Beneficiary Company and the Demerging Company, respectively, as a consequence of the completion of the Transaction. (amounts in €) Fiat S.p.A.
pre-demerger Fiat Industrial S.p.A.
post-demerger Fiat S.p.A.
post-demerger Share capital 6,377,262,975 *1,913,178,892.5 4,464,084,082.5Legal reserve 716,458,326 214,937,498 501,520,828Share premium reserve 1,540,884,892 462,265,468 1,078,619,424Reserve for the purchase of own shares 543,446,846 543,446,846Reserve for treasury shares held 656,553,154 656,553,154Treasury shares in portfolio (656,553,154) (656,553,154)Retained profit/(loss) 2,884,133,602 1,159,964,194.5 1,724,169,407.5Stock option reserve 103,789,900 103,789,900Other reserves 86,887,735 86,887,735Net profit/(loss) at 30 June 2010 47,319,921 47,319,921 12,300,184,197 3,750,346,053 8,549,838,144
* Additional to the €120,000 in capital existing pre-demerger. The reserve for the purchase of own shares and the retained profit reserve have already been adjusted to reflect the limit of the share buyback authorization. At 30 June 2010, the equity of the Demerging Company included a reserve for the purchase of own shares totaling €1,142,739,769. That reserve was established by virtue of the resolution passed by the shareholders of the Demerging Company on 26 March 2010 authorizing the purchase of a maximum of shares for all three classes not to exceed either 10% of share capital or an aggregate purchase value of €1.8 billion, including the existing reserve of €656.6 million.
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In consideration of the reduction in the par value of each share in the Demerging Company, we consider it appropriate to submit for your approval that purchases of own shares be limited to a maximum aggregate value of €1.2 billion. The condition that the total number of shares, in all three classes, may not exceed 10% of share capital and all other provisions approved by Shareholders on 26 March 2010 shall continue to apply.
If approved, this proposal, that as described above is directly connected to the Transaction, would result in a reduction in the reserve for the purchase of own shares to €543,446,846 and a corresponding increase in the retained profit reserve from €2,284,840,679 to €2,884,133,602.
2.3 Effective value of net assets transferred to the Beneficiary Company and net assets remaining with the Demerging Company In accordance with Article 2506-ter (2) of the Italian Civil Code, the Board hereby declares that: (i) the effective value of net assets transferred to the Beneficiary Company subsequent to the Demerger shall be not less than the book value (which at 30 June 2010 amounted to €3,750,346,053); (ii) the effective value of net assets retained by the Demerging Company subsequent to the Demerger shall be not less than the book value (which at 30 June 2010 amounted to €8,549,838,144).
3. RATIO FOR ALLOTMENT OF SHARES IN THE BENEFICIARY COMPANY AND PROCEDURE OF ALLOTMENT Pursuant to the Transaction, holders of Fiat ordinary, preference and savings shares will be granted without consideration, an equivalent number of shares in the Beneficiary Company of the same class and with the same characteristics as those held in the Demerging Company. As such, there will be no cash adjustment. Shares in the Beneficiary Company will be allotted to those having entitlement, through authorized intermediaries and in dematerialized form, from the effective date of the Demerger, within the period and in the manner to be announced in the appropriate notice. At the time of allotment, the ordinary, preference and savings shares of the Beneficiary Company will already be listed on the MTA, organized and managed by Borsa Italiana. The date for the start of trading of the shares on the MTA will be set by Borsa Italiana in the relevant notice of authorization. In relation to the 38,568,458 own shares currently held, which will not be transferred, Fiat will also be allotted an equivalent number of shares in the Beneficiary Company (additional to the 80,000 shares already held by Fiat in the Beneficiary Company prior to the Transaction), representing 3.02% of the Beneficiary Company's share capital. The allotted shares will primarily be allocated to servicing incentive plans.
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4. AMENDMENTS TO THE BY-LAWS
4.1 Fiat By-laws and amendments resulting from the Transaction and other amendments
4.1.1 Amendments to the By-laws resulting from the Transaction
As a result of the Transaction, the following amendments will be made to the By-laws of the Demerging Company and, with the exception of Articles 6 and 20, will have effect from the effective date of the Transaction. Article 5 Share Capital
Article 5 currently states that the issued share capital of Fiat is €6,377,262,975 divided into 1,092,247,485 ordinary shares, 103,292,310 preference shares and 79,912,800 savings shares having a par value of €5.00 each. It also specifies that pursuant to the resolutions adopted by the Board of Directors on 3 November 2006, in execution of the powers delegated to it in the Extraordinary General Meeting of Shareholders held on 12 September 2002, Fiat's share capital may be increased by a maximum of €50,000,000 through the issue of up to 10,000,000 new ordinary shares, through paid capital contributions, exclusively to executives employed by Fiat and/or its subsidiaries in accordance with the relevant incentive plan. Pursuant to the Transaction, the share capital of the Demerging Company will be reduced in the amount of €1,913,178,892.50 to €4,464,084,082.50 through a reduction in par value of shares in all classes, such as to ensure no prejudicial treatment, either direct or indirect, for the shareholders of any class. The par value per share for all classes of shares in the Demerging Company, which was €5.00 at the date of the Demerger Plan, will be reduced in the amount of €1.50 to €3.50 per share. Accordingly, the maximum permitted increase in share capital in service of the incentive plan approved on 3 November 2006 will be reduced to €35,000,000, while the maximum number of shares that can be issued for that purpose will remain at 10,000,000.
Article 6 Classes of Shares and Common Representative Article 6 currently states that in the event the savings shares are delisted, any bearer shares shall be converted into registered shares and shall be entitled to a dividend that is €0.175, rather than €0.155, higher per share than the dividend paid on ordinary and preference shares. That article also requires that in the event the ordinary shares are delisted, the savings shares shall be entitled to a dividend that is €0.200 per share higher than the dividend paid on ordinary and preference shares. Therefore, in the event of a delisting of the savings shares, holders of those shares shall be entitled to a dividend higher than the dividend paid on ordinary and preference shares by an amount equivalent to 3.5% of their par value. In the event of a delisting of the ordinary shares, the dividend payable on savings shares shall be higher than the dividend paid on ordinary and preference shares by an amount equivalent to 4.0% of their par value.
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Pursuant to the Transaction, the above amounts will be adjusted, with effect from the day after the approval of the allocation of the 2010 result, pro rata to the reduction in par value per share for all classes of shares in the Demerging Company. Therefore, in the event of a delisting of the savings shares, holders of those shares shall be entitled to a dividend that is higher than the dividend paid on ordinary and preference shares in the amount of €0.1225, equal to 3.5% of the adjusted par value of €3.50. Similarly, in the event of a delisting of the ordinary shares, the dividend payable on savings shares shall be higher than the dividend paid on ordinary and preference shares in the amount of €0.140, or 4.0% of the adjusted par value of €3.50. Article 20 Allocation of Profit Article 20 establishes the entitlements of the various classes of shares in relation to allocation of profit and paragraph 3 states that in the event of a change in par value of the shares, dividend entitlements will be adjusted on a pro rata basis. For the purposes of clarity, the current wording of Article 20 paragraphs 1, 2 and 3 of the By-laws is provided below:
Net profit reported in the annual statutory financial statements shall be allocated as follows:
(i) to the legal reserve, 5% of net profit until the amount of such reserve is equivalent to one-fifth of share capital;
(ii) to savings shares, a dividend of up to €0.31 per share;
(iii) further allocations to the legal reserve, allocations to the extraordinary reserve and/or retained profit reserve as may be resolved by Shareholders;
(iv) to preference shares, a dividend of up to €0.31 per share;
(v) to ordinary shares, a dividend of up to €0.155 per share;
(vi) to savings shares and ordinary shares, in equal amounts, an additional dividend of up to €0.155 per share; and,
(vii) to each ordinary, preference and savings share, in equal amounts, any remaining net profit which Shareholders may resolve to distribute.
When the dividend paid to savings shares in any year amounts to less than €0.31, the difference shall be added to the preferred dividend to which they are entitled in the following two years.
In the event of a change in the par value of shares, the amounts stated above will be adjusted on a pro rata basis. As a result of the reduction in par value per share, from €5.00 to €3.50, for all share classes as a consequence of the Demerger, the amounts stated in points (ii), (iv), (v) and (vi) will be adjusted on a pro rata basis so that the current dividend entitlement attached to each class of shares remains unchanged as a percentage of par value. This will ensure that there is no prejudicial treatment for shareholders of any class, either direct or indirect. The existing dividend entitlement for each share class will remain unchanged as a percentage of par value both for shareholders of the Demerging Company and, as described below, for shareholders of the Beneficiary Company.
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The sum of the entitlements attached to each share class for both the Demerging and Beneficiary Company will, therefore, be equivalent to the entitlements attributable under the current By-laws of the Demerging Company.
Pursuant to the By-laws of the Demerging Company, the amount of €0.31 attributable to savings shares, as stated in point (ii) above, which corresponds to 6.2% of the par value per share of €5.00, will become €0.217, equal to 6.2% of the new par value per share of €3.50.
The amount of €0.31 attributable to preference shares, as stated in point (iv) above, which corresponds to 6.2% of the par value per share of €5.00, will become €0.217, equal to 6.2% of the new par value per share of €3.50.
The amount of €0.155 attributable to ordinary shares, as stated in point (v) above, which corresponds to 3.1% of the par value per share of €5.00, will become €0.1085, equal to 3.1% of the new par value per share of €3.50.
The amount of €0.155 attributable in equal amounts to ordinary and savings shares, as stated in point (vi) above, which corresponds to 3.1% of the par value per share of €5.00, will become €0.1085, equal to 3.1% of the new par value per share of €3.50.
Finally, the amount of €0.31, which corresponds to 6.2% of the par value per share of €5.00, as stated in paragraph 2, will become €0.217, equal to 6.2% of the new par value per share of €3.50.
The above entitlements are summarized in the following table. (amounts in €)
Allocation of profit as reported in the annual
statutory financial statements
By-laws of Fiat S.p.A. (current)
par value €5/share
By-laws of Fiat S.p.A.
(post-demerger) par value
€3.50/share
By-laws of Fiat Industrial S.p.A.
(post-demerger) par value €1.50/share
Total Fiat S.p.A. and Fiat Industrial
S.p.A. (post-demerger)
(ii) savings shares 0.31 (6.2%) 0.217 (6.2%) 0.093 (6.2%) 0.31 (iv) preference shares 0.31 (6.2%) 0.217 (6.2%) 0.093 (6.2%) 0.31 (v) ordinary shares 0.155 (3.1%) 0.1085 (3.1%) 0.0465 (3.1%) 0.155 (vi) savings and ord. shares 0.155 (3.1%) 0.1085 (3.1%) 0.0465 (3.1%) 0.155 Paragraph 2 0.31 (6.2%) 0.217 (6.2%) 0.093 (6.2%) 0.31
As stated previously, the pro rata reductions in the dividend entitlement for each share class (Articles 6 and 20 of the By-laws) shall have effect the day after approval of the allocation of the result for 2010.
4.1.2 Other amendments to the By-laws
In connection with the Transaction, we are proposing that you approve amendments to the By-laws resulting, in particular, from the introduction of Legislative Decree No. 27 of 27 January 2010, relating to the exercise of certain rights by shareholders of listed companies, and Legislative Decree No. 39 of 27 January 2010, relating to the audit of the accounts.
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The majority of those changes are mandatory in order to comply with new legal and regulatory requirements. Others enable Fiat to introduce new rules and mechanisms allowed by the new corporate legislation.
Following is a summary of the amendments which relate to the recently enacted corporate legislation referred to above.
To avoid the introduction of different versions of the By-laws at different times and to ensure consistency between the provisions adopted by the Demerging Company and those adopted by the Beneficiary Company, the following amendments and those resulting directly from the Demerger will be made at the same time.
For the sake of clarity, the following description lists separately those amendments to be introduced for compliance with legislative changes from those being proposed to benefit from opportunities provided by recently introduced legislation. Amendments to the By-laws required to comply with changes in the law relate to: - procedures for calling general meetings and publication of the notice of the meeting
(Article 7 - General Meetings); - introduction of the principle of record date, with consequent change to the documentation
required to attend general meetings and establishment of procedures for electronic notification of proxy representation (Article 8 - Attendance and Representation at General Meetings);
- change in the time limits for deposit and disclosure of the list of candidates for the appointment of the Board of Directors and the appointment of the Board of Statutory Auditors; introduction of a time limit for certifying ownership of the minimum percentage of voting shares required to submit such lists; introduction, in relation to the independence of candidates appearing first on the list of nominees for director, of the requirements established in the corporate governance code adhered to by Fiat (Article 11 - Board of Directors and Article 17 - Election and Qualifications of the Statutory Auditors);
- adoption of the new wording “revisione legale dei conti” in place of “controllo contabile” and assignment to the Board of Statutory Auditors of responsibility for making recommendations to shareholders in relation to the granting or revocation of the engagement for the audit of the accounts (Article 18 - Independent Audits).
Other amendments being proposed to Shareholders, that enable adoption of mechanisms introduced by the above legislation, are as follows: - introduction of the option for the Board of Directors to call a general meeting for a single
date only (“single call”), in place of the current first, second and third call. Given the large, diversified shareholder base and the significant presence of international shareholders, this option will help to improve clarity for communication of the corporate calendar to the market and streamline procedures for calling and holding general meetings (Article 7 - General Meetings). Introduction of the single call mechanism also requires amendment of the voting and meeting quorums for ordinary and extraordinary general meetings with a single call (Article 9 - Calling of General Meetings and Validity of Resolutions);
- extension of the period for the calling of the Shareholders’ Meeting (within which the annual general meeting must be held) to 180 days after the close of the financial year (Article 7 - General Meetings);
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- introduction of the option to designate one or more individuals for each general meeting to whom shareholders can confer proxy and give instructions to vote on one or more items on the agenda (Article 8 - Attendance and Representation at General Meetings);
- introduction of the option for the Board of Directors to institute a procedure for electronic voting at general meetings, as well as the conferment of proxy by electronic means (Article 8 - Attendance and Representation at General Meetings);
- simplification of procedures for Board of Directors meetings held by teleconference (Article 13 - Meetings and Duties of the Board of Directors);
- introduction of the option for Fiat, and consequently also for shareholders, to request details of the identity of shareholders from intermediaries (Article 22 - Domicile and Identification of Shareholders).
Finally, an amendment to Article 15 (Powers of the Board of Directors) is also being proposed in order to restore powers, held directly by the Company until 30 June 2010, concerning defensive measures against hostile takeovers. In fact, following amendments to Article 104 of Legislative Decree No. 58/98 that came into effect on 1 July 2010, it is now required that such powers be granted expressly by a company’s by-laws, enabling the board of directors and any body they may delegate to adopt such defense measures without prior shareholders’ approval.
4.2 Fiat Industrial By-laws and amendments resulting from the Transaction
As stated previously, an essential pre-condition to the Transaction is that all classes of shares in the Beneficiary Company (i.e., ordinary, preference and savings) are listed on the MTA at the time of their allotment to Fiat shareholders.
Consequently, at the Extraordinary General Meeting of Fiat Industrial called to approve the Transaction, Shareholders will also be asked vote on the adoption, with effect from the effective date of the Transaction, of By-laws that conform to the requirements for listed companies established by Legislative Decree No. 58/98 and related implementing regulations. The text of the By-laws, which is annexed to the Demerger Plan, replicates the By-laws of Fiat post-Demerger with the exception of Article 1 (Company Name) and the following provisions of Articles 5 (Share Capital), 6 (Classes of Shares and Common Representative) and 20 (Allocation of Profit), the latter being a direct result of the Transaction. Article 5 Share Capital Share capital is currently €120,000, consisting of 80,000 ordinary shares with a par value of €1.50 each. As a result of the Transaction, share capital will be increased in the amount of €1,913,178,892.50, through the issue of 1,092,247,485 ordinary shares, 103,292,310 preference shares and 79,912,800 savings shares having a par value of €1.50 each. Upon the Transaction taking effect, share capital will be equal to €1,913,298,892.50, consisting of 1,092,327,485 ordinary shares, 103,292,310 preference shares and 79,912,800 savings shares, having a par value of €1.50 each.
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Article 6 Classes of Shares and Common Representative The additional entitlements attributable to the savings shares of the Demerging Company in the event the savings shares or the ordinary shares are delisted, as described above, will be attributable to the savings shares of the Beneficiary Company on the same pro rata basis in order to ensure that the entitlement remains unchanged as a percentage of par value.
Accordingly, in the event of a delisting of the savings shares, the dividend payable on those shares shall be higher than the dividend paid on ordinary and preference shares in the amount of €0.0525, equal to 3.5% of their par value of €1.50.
In the event of a delisting of the ordinary shares, the dividend payable on savings shares shall be higher than the dividend paid on ordinary and preference shares in the amount of €0.06, equal to 4.0% of their par value of €1.50.
Article 20 Allocation of Profit The distribution entitlement of each class of shares in the Demerging Company will also be reallocated, on a pro rata basis, to the corresponding class of shares of the Beneficiary Company such as to ensure that the priority and level of entitlement, as a percentage of par value, remain unchanged.
The distribution entitlements are shown in the table in Section 4.1. The sum of the entitlements attached to each class of shares in both the Demerging and Beneficiary Company will, therefore, be equivalent to the entitlements attributable under the current By-laws of the Demerging Company.
5. RIGHT OF WITHDRAWAL (PURSUANT TO ARTICLES 2437 AND 2437-QUINQUIES OF
THE ITALIAN CIVIL CODE) FOR FIAT SHAREHOLDERS
A pre-condition for execution of the Demerger is the listing of the Beneficiary Company's shares on the MTA to ensure liquidity for those shares. The Transaction is, in fact, subject inter alia to admission of the ordinary, preference and savings shares of the Beneficiary Company to listing on the MTA. As such, the pre-conditions necessary for Fiat S.p.A. shareholders to exercise the right of withdrawal stipulated under Article 2437-quinquies of the Italian Civil Code do not exist.
Neither do the pre-conditions for the right of withdrawal stipulated under Article 2437 of the Italian Civil Code exist. In reference to Article 2437 (1)(a) of the Italian Civil Code, in particular, it should be noted that, subsequent to the Demerger, the company objects for the Demerging Company will remain unchanged and the Beneficiary Company will adopt the same company objects. In addition, with reference to Article 2437 (1)(g) of the Italian Civil Code, it should be noted that, at the Effective Date, each shareholder in the Demerging Company will receive shares of the same class in the Beneficiary Company and allotment of those shares will take place on a pro rata basis, thereby guaranteeing that the rights and privileges of the various classes of shareholders remain unaltered.
Finally, as the Transaction does not in any manner prejudice the rights of holders of ordinary, preference and savings shares, it is not subject to approval in any special meeting as provided under Article 2376 of the Italian Civil Code or Article 146 (1)(b) of Legislative Decree No. 58/98.
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6. SIGNIFICANT SHAREHOLDINGS IN AND CONTROL OF THE DEMERGING COMPANY AND THE BENEFICIARY COMPANY SUBSEQUENT TO THE TRANSACTION
6.1 Shareholder structure of Fiat and effects of the Demerger
As defined in Article 93 of Legislative Decree No. 58/98, control of the Company is exercised by Giovanni Agnelli & C. S.a.p.az. indirectly through its subsidiary EXOR S.p.A., which holds 30.45% of Fiat ordinary shares and 30.09% of Fiat preference shares (together representing 30.42% of voting rights).
Those additional shareholders who, according to the shareholder register, notifications received and other information available to Fiat at the date of the Report, directly or indirectly held shares in the Demerging Company representing 2% or more of shares with voting rights were:
Capital Research and Management Company: 4.77% (or 5.22% of ordinary shares);
BlackRock Inc: 2.83% (or 3.10% of ordinary shares);
FMR LLC: 2.01% (or 2.20% of ordinary shares).
At the date of this Report, Fiat S.p.A. held 38,568,458 of its own ordinary shares, representing 3.02% of share capital. No other Group company held Fiat shares.
Fiat has approximately 250,000 shareholders.
As the Transaction consists of a demerger to a new entity and proportional allotment of shares in that entity to existing shareholders, it will not result in any change to the shareholder structure of Fiat S.p.A.
6.2 Shareholder structure of Fiat Industrial and effects of the Demerger At the date of this Report, the Beneficiary Company was wholly owned by Fiat S.p.A.
Pursuant to the Transaction, holders of Fiat ordinary, preference and savings shares will be granted without consideration an equivalent of number of shares in the Beneficiary Company of the same class and with the same characteristics as those held in the Demerging Company. Therefore, assuming no changes in the shareholder structure of the Demerging Company in the intervening period, and with the exception of the existing shareholding (equivalent to the share capital initially subscribed) in the Beneficiary Company, at the effective date of the Transaction the shareholder structure of the Beneficiary Company will be identical to that reported above for the Demerging Company.
7. EFFECTS OF THE DEMERGER ON SHAREHOLDER AGREEMENTS RELATING TO THE
DEMERGING COMPANY, DEEMED RELEVANT FOR THE PURPOSES OF ARTICLE 122 OF LEGISLATIVE DECREE NO. 58/98
As of the date of this Report, to the knowledge of the Demerging Company no shareholder agreements deemed relevant for the purposes of Article 122 of Legislative Decree No. 58/98 existed.
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8. EFFECTIVE DATE OF THE TRANSACTION AND DATE OF REGISTRATION IN THE ACCOUNTS OF THE BENEFICIARY COMPANY
Pursuant to Article 2506-quater of the Italian Civil Code, the Transaction will have effect from the date stated in the Deed of Demerger, which will follow to the date of the last registration of the Deed with the Companies Register of Turin. In consideration of the preceding paragraph, the effective date of the Transaction is expected to be 1 January 2011.
In any event, the effects of the Transaction pursuant to Article 2501-ter (6) of the Italian Civil Code, also referred to in Article 2506-quater of the Italian Civil Code (recognition of the transactions in the financial statements of the Beneficiary Company), will apply from 1 January 2011.
Similarly, the shares of the Beneficiary Company allotted to shareholders of the Demerging Company shall have the right to share in the profits of the Beneficiary Company from 1 January 2011.
However, the pro rata reduction in dividend entitlement for each share class of the Demerging Company (Article 20 of the By-laws) will have effect from the day after the approval of the allocation of the result for 2010. Consequently, allocation of the 2010 profit with respect to the Demerging Company, will be based on the current provisions of the By-laws.
9. INCENTIVE PLANS
The Company has various share-based incentive plans (stock option and stock grant) in place that grant participants the right to receive, either at a pre-determined price or allocated freely, Fiat ordinary shares over a pre-established time period (i.e., the exercise period for stock option plans or vesting date for stock grants) and subject to the achievement of performance objectives and/or continuation of the professional relationship.
Those plans were approved by the Company, in conformity with applicable law, at the approval of the Board of Directors and, beginning with the 2006 Plan, the further approval of Shareholders as required under Article 114-bis of Legislative Decree No. 58/98. On 27 March 2009, Shareholder approval was also obtained for amendments to the 2004 Plan.
All of the plans were established to maximize the retention and incentivization of management, while aligning their interests with those of shareholders, and are based on Fiat ordinary shares.
In consideration of the proposed extraordinary transaction (the Demerger) the Board of Directors, which met on 21 July 2010, confirmed the continuation of the share-based incentive plans the Group has in place, and voted to adopt, subject to the Demerger becoming effective and on the basis of the powers delegated to it by Shareholders, the appropriate amendments necessary to ensure that these plans can fulfill the objectives for which they were adopted, even subsequent to the Demerger, while at the same time avoiding a more comprehensive revision to those plans that, even though fully legitimate, could appear to dilute the intended alignment of the interests of management with those of the company and its shareholders.
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In application of the rules of the respective plans, the Board has, in particular, approved to realign the plans with respect to the shares underlying the stock options and stock grants in strict relation to the allotment ratio applicable for the Demerger and to allow employees leaving the Group headed by the Demerging Company and joining the Group headed by the Beneficiary Company to retain their existing rights.
Those entitled to stock options or stock grants will, therefore, receive one ordinary Fiat share and one ordinary Fiat Industrial share for each right they hold, with the option exercise price (for stock option plans) and the free grant of shares (for the stock grant plan) remaining unchanged.
For the stock option plans, vesting conditions for each plan, whether continuation of a professional relationship with the Group or achievement of specific performance objectives, will expire on 31 December 2010, prior to the effective date of the Transaction.
Similarly, under the stock grant plan participants will be entitled receive one Fiat ordinary share and one Fiat Industrial ordinary share for each right held, subject to the original conditions of continuation of a professional relationship with the Group and/or achievement of specific performance objectives for 2010 and 2011, in line with the 2010-2014 Business Plan. The 2011 performance objectives for Fiat Group post-demerger will be based on the portion attributable to Fiat Group post-demerger of the objectives originally established and included in the 2010-2014 Business Plan for the Fiat Group pre-demerger.
All stock option and stock grant plans, with the exception of the portion of the 2006 Plan relating to managers in relation to which a capital increase was approved, will be serviced with the treasury shares already held by the Demerging Company and Fiat Industrial ordinary shares that will be allotted by the Beneficiary Company to the Demerging Company, without consideration, as a result of the Demerger.
Following is a list of the incentive plans currently in place. The 2002 Plan, which expires on 12 September 2010, will not be subject to the amendments described above.
Plan Expiry DateStrike Price
(€)N° of Options
Granted Vesting date Portion vestingStock Option July 2004, for the CEO (amended 27 March 2009)
1 January 2016 6.583 10,670,000 31 December 2010 100%
Stock Option November 2006, for the CEO
3 November 2014 13.37 5,000,000 November 2007 November 2008 November 2009 November 2010
25%25%25%25%
Stock Option November 2006, for the CEO
3 November 2014 13.37 5,000,000 1st Quarter 2008 (*) 1st Quarter 2009 (*) 1st Quarter 2010 (*) 1st Quarter 2011 (*)
25%*NMC25%*NMC25%*NMC25%*NMC
Stock Option November 2006, for Managers
3 November 2014 13.37 10,000,000 1st Quarter 2008 (*) 1st Quarter 2009 (*) 1st Quarter 2010 (*) 1st Quarter 2011 (*)
25%*NMC25%*NMC25%*NMC25%*NMC
Stock Option July 2008, for Managers
3 November 2014 10.24 1,418,500 1st Quarter 2009 (*) 1st Quarter 2010 (*) 1st Quarter 2011 (*)
18%*NMC41%*NMC41%*NMC
(*) Upon approval of the prior year’s consolidated financial statements and subject to continuation of the professional relationship.
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10. TAX IMPACTS OF THE TRANSACTION
For the purposes of direct taxation, the Transaction is tax neutral as, pursuant to Article 173 of Presidential Decree No. 917/86 (the Italian Tax Code), it does not generate taxable income or tax deductible costs for the parties involved in the transaction.
For the Demerging Company, no gains or losses will arise from the partial transfer of its assets and liabilities to the Beneficiary Company. Similarly, assets and/or liabilities received by the Beneficiary Company are recognized, for tax purposes, at the tax value existing prior to the Transaction. Any difference between the book value and relative tax value of those assets and/or liabilities is to be reported in the appropriate tax reconciliation schedule.
All tax positions of the Demerging Company and associated commitments are attributed to the Beneficiary Company and Demerging Company pro rata to the respective portion of equity transferred or retained, except where they specifically relate to a transferred asset or liability or group of assets and/or liabilities, in which case they are to be transferred to the Beneficiary Company.
Where the latest financial statements of the Demerging Company include taxable reserves, those reserves are reduced – for the Demerging Company – pro rata to the reduction in equity. The amount subtracted in the accounts of the Demerging Company must be recognized in the accounts of the Beneficiary Company pro rata to the respective portion of equity transferred by the Demerging Company. Where taxation is dependent on events relating to specific assets or liabilities, the taxable reserves are to be recognized by the company receiving, or retaining, those assets or liabilities. Similarly, taxable reserves that – prior to the Demerger – were utilized to increase the share capital of the Demerging Company, are reallocated pro rata to the Beneficiary Company as share capital originating from taxable reserves and are taxable in the event of a reduction in share capital.
The share capital reported in the latest financial statements of the Demerging Company, includes amounts transferred from taxable reserves. Accordingly, following the Demerger those taxable reserves will be deemed as having been transferred to the share capital of the Beneficiary Company pro rata to the portion of equity transferred to it, except where such reserves relate to specific assets existing at the time of the demerger, in which case the reserves shall remain associated with those assets.
Tax losses generated by the Demerging Company prior to creation of the domestic tax consolidation group may be utilized to offset taxable income of the Beneficiary Company pro rata to the portion of equity transferred to it and in accordance with the rules and limitations established under Article 173 (10) of the Italian Tax Code.
Pursuant to Article 2(3)(f) of Presidential Decree No. 633/1972, the Transaction is exempt from value added tax (VAT).
The Deed of Demerger is, however, subject to a fixed stamp duty of €168.00 as per part one of Article 4(b) of the schedule of tariffs attached to Presidential Decree No. 131/1986.
Finally, in relation to the effects of the Demerger for shareholders of the Demerging Company, a change in composition of their original shareholding does not constitute either a realized or distributed gain or loss. The tax value of the shares in the Demerging Company will be reallocated between the shares of the Demerging Company and of the Beneficiary Company pro rata to the portion of equity retained or transferred. Shareholders of the Demerging Company that are not tax residents in Italy should verify their status with their own tax advisors.
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11. DESCRIPTION OF RIGHTS ATTACHED TO THE SHARES TO BE ALLOTTED TO SHAREHOLDERS OF THE DEMERGING COMPANY
Each shareholder in the Demerging Company will receive shares of the same class in the Beneficiary Company and allotment of those shares will take place on a pro rata basis, thereby guaranteeing that the rights and privileges of the various classes of shareholders remain unaltered.
Similarly, the shares of the Beneficiary Company allotted to shareholders of the Demerging Company shall, in any event, have the right to share in the profits of the Beneficiary Company from 1 January 2011.
12. COMPARISON TEXT WITH THE CURRENT BY-LAWS
A comparison text for the proposed amendments to the By-laws is provided below.
Current text Proposed amendments Article 5 – Share Capital The issued share capital of the Company is €6,377,262,975 divided into 1,092,247,485 ordinary shares, 103,292,310 preference shares and 79,912,800 savings shares having a par value of €5.00 each. Pursuant to the resolutions adopted by the Board of Directors on 3 November 2006, in execution of the powers delegated to it in the Extraordinary General Meeting of Shareholders held on 12 September 2002, the Company’s share capital may be increased by a maximum of €50,000,000 through the issue of up to 10,000,000 new ordinary shares, through paid capital contributions, exclusively to executives employed by the Company and/or its subsidiaries in accordance with the relevant incentive plan.
Article 5 – Share Capital The issued share capital of the Company is €6,377,262,975 €4,464,084,082.50, divided into 1,092,247,485 ordinary shares, 103,292,310 preference shares and 79,912,800 savings shares having a par value of €5.00 €3.50 each. Pursuant to the resolutions adopted by the Board of Directors on 3 November 2006 in execution of the powers delegated to it in the Extraordinary General Meeting of Shareholders held on 12 September 2002, and subsequent to the demerger to Fiat Industrial S.p.A., share capital may be increased by a maximum of €50,000,000 €35,000,000 through the issue of up to 10,000,000 new ordinary shares, through paid capital contributions, exclusively to executives employed by the Company and/or its subsidiaries in accordance with the relevant incentive plan.
Article 6 – Classes of Shares and Common Representative Ordinary and preference shares are registered shares. Savings shares may be either registered or bearer shares, at the option of the holder or as required by law. All shares are issued in dematerialized form. Each share confers the right to share pro rata in any earnings allocated for distribution and any surplus assets remaining upon a winding-up, subject to the right of priority of preference and savings shares, as set out in Articles 20 and 23 below. Each ordinary share confers the right to vote without any restrictions whatsoever. Each preference share confers the right to vote only on matters which are
Article 6 – Classes of Shares and Common Representative unchanged unchanged unchanged
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reserved for an Extraordinary Meeting of Shareholders and on resolutions concerning Procedures for General Meetings. No voting rights are attached to savings shares. In the event of an increase in share capital, the holders of each class of shares are entitled to receive newly issued shares in the same class pro rata to the number of shares already held, or of another class (or classes) if shares of the class already held are not offered or the number offered is insufficient. The Company’s share capital may also be increased by issuing ordinary and/or preference and/or savings shares in exchange for contributions in kind or receivables. Resolutions authorizing the issuance of new preference or savings shares having the same characteristics as those already in issue for the purposes of a capital increase or the conversion of shares of another class do not require the further approval in a Special Meeting of Shareholders of either of those classes. In the event that the savings shares are delisted, any bearer shares shall be converted into registered shares and shall have the right to a higher dividend increased by €0.175, rather than €0.155, with respect to the dividend received by the ordinary and preference shares. In the event that the ordinary shares are delisted, the higher dividend received by the savings shares with respect to the dividend received by ordinary and preference shares shall be increased by €0.200 per share. Any expenditure required for the safeguarding of the common interests of the holders of preference and savings shares, in relation to which dedicated funds are approved in the respective Special Meetings of Shareholders, shall be borne by the Company up to a maximum annual amount of €30,000 for each class. In order to ensure that the Common Representatives of the holders of preference and savings shares have adequate information on transactions which could influence the market price of those shares, the Company’s legal representatives must provide the Common Representatives with any such information in a timely manner.
unchanged unchanged unchanged unchanged unchanged From the date subsequent to the date of approval of the allocation of the result for 2010, the previous amounts of €0.175, €0.155 and €0.200 will be adjusted pro rata, to €0.1225, €0.1085 and €0.140, respectively. unchanged unchanged
Article 7 – General Meetings General Meetings of Shareholders may be called where the Company has its registered office, or elsewhere in Italy, by means of a notice published, on or before the statutory deadline, in La Stampa and Il Sole 24 Ore or, in the event that neither of those daily newspapers is published, in the Official Gazette of the Republic of Italy. The notice may also provide for a
Article 7 – General Meetings General Meetings of Shareholders may be called where the Company has its registered office, or elsewhere in Italy, by means of a notice published, on or before the statutory deadline, in La Stampa and Il Sole 24 Ore or, in the event that neither of those daily newspapers is published, in the Official Gazette of the Republic of Italy on the Company’s internet site, as
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second call and, for Extraordinary General Meetings only, a third call. An Ordinary General Meeting of Shareholders must be convened within 120 days after the close of the Company’s financial year. A General Meeting may also be called whenever the Board of Directors deems it appropriate and must be convened when required by law.
well as in any other manner required by law. The notice may also provide for a single call only or a first, second and, for Extraordinary General Meetings only, a third call. As the Company is required to prepare consolidated financial statements, an Ordinary General Meeting of Shareholders must be convened within 120 180 days after the close of the Company’s financial year. unchanged
Article 8 – Attendance and Representation at General Meetings Holders of voting rights who have obtained documentary evidence from an authorized intermediary certifying that their dematerialized shares were deposited at least two business days prior to the date of the meeting, with the Company being notified in the manner required by law, are entitled to attend a General Meeting or be represented by proxy. A General Meeting may be held with attendees being in multiple adjacent or remote locations that are linked by a telecommunications system, provided that the correct procedures and the principles of good faith and equal treatment of all shareholders are observed. In such cases: ■ Notice of the General Meeting must state the audio/video link-up locations provided by the Company at which the Meeting may be attended and the Meeting will be deemed held at the location where the Chairman and the individual taking the Minutes of the Meeting are present; ■ The Chairman of the Meeting must, in his office as Chairman and/or through his delegated representatives present at the various link-up locations, be able to ensure that the Meeting is regularly convened, ascertain the identity of the attendees and their right to attend the Meeting, direct the proceedings and verify the result of any votes; ■ The individual taking the Minutes of the Meeting must be able to adequately follow any elements of the Meeting which are to be included in the Minutes; ■ All attendees must be able to participate in any discussion and vote simultaneously on the items on the Agenda.
Article 8 – Attendance and Representation at General Meetings Holders of voting rights who have obtained the appropriate documentary evidence from an authorized intermediary certifying that their dematerialized shares were deposited at least two business days before the date of the meeting are entitled to attend a General Meeting or be represented by proxy. Communication thereof must be made to the Company in accordance with applicable law. At each General Meeting, the Company may designate one or more representatives upon whom holders of voting rights may confer proxy, giving instructions to vote on one or more motions on the agenda. Details of the designated representative(s) and the procedure and deadline for conferment of the proxy are to be provided in the notice of the general meeting. unchanged unchanged The Board of Directors may institute a procedure
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for voting to be conducted electronically. Proxies may be conferred electronically in conformity with applicable law. Electronic notification of proxies may be given, in accordance with the procedures stated in the meeting notice, on the relevant section of the Company's internet site or by message sent to the certified electronic mail address provided in the meeting notice.
Article 9 – Calling of General Meetings and Validity of Resolutions Resolutions adopted in a General Meeting in accordance with the requirements of law and the Company By-laws are binding on all shareholders, including those who are absent or dissenting. An Ordinary General Meeting shall be considered regularly convened when: at first call, shareholders representing at least one-half of shares with voting rights are present; at second call, shareholders representing any portion of shares with voting rights are present. Resolutions are adopted by an absolute majority of votes cast, except for the election of Directors and Statutory Auditors for which the provisions of Articles 11 and 17 shall apply. An Extraordinary Meeting of Shareholders shall be considered regularly convened when: at the first call, shareholders representing at least one-half of shares with voting rights are present; or, at the second call and third call, shareholders representing respectively at least one-third and one-fifth of shares with the right to vote are present. In an Extraordinary Meeting of Shareholders, resolutions are adopted on the first, second or third call, with the favorable vote of at least two-thirds of shares represented at the Meeting. The foregoing shall be without prejudice to any special majorities required by law or provisions governing Special Meetings for holders of shares of a particular class.
Article 9 – Calling of General Meetings and Validity of Resolutions unchanged An Ordinary General Meeting shall be considered regularly convened when: at first call, shareholders representing at least one-half of shares with voting rights are represented; at a single or second call, shareholders representing any portion of shares with voting rights are represented. unchanged An Extraordinary Meeting of Shareholders shall be considered regularly convened when: at first call, shareholders representing at least one-half of shares with voting rights are represented; at second call, more than one-third of shares with voting rights are represented; or, at the second call and a single or third call, shareholders representing respectively at least one third and one-fifth of shares with voting rights are represented. In an Extraordinary Meeting of Shareholders, resolutions are adopted on the first, second or third call, with the favorable vote of at least two-thirds of shares represented at the Meeting. unchanged
Article 11 – Board of Directors The Company is managed by a Board of Directors consisting of a number varying from nine to fifteen members, as determined by Shareholders in a General Meeting. No one aged 75 or over shall be appointed as a Director. The Board of Directors is appointed by using lists of candidates. If several lists are submitted, one of the members of the Board of Directors shall be chosen from the list that obtained the second highest number of votes. Lists may be submitted only by those
Article 11 – Board of Directors unchanged unchanged The Board of Directors is appointed by using lists of candidates filed at the company’s registered office at least 25 days prior to the date of the meeting. If several lists are submitted, one of the members of the Board of Directors shall be chosen from the list that
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shareholders who, individually or together with others, own voting shares representing a percentage no lower than the percentage which is mandatory under the applicable laws. No single shareholder, nor shareholders that are controlled by or associated with the company pursuant to the Italian Civil Code, can present or vote, even by means of third parties or a trustee company, more than one list of candidates. Each candidate can be present in one list only, otherwise he will be considered ineligible. The candidates included on the lists must be indicated in numerical order and satisfy the requirements of integrity imposed by law. The candidate who is indicated at number one on the list must also satisfy the legal requirements of independence. The lists presented must be deposited at the Company’s offices at least fifteen days prior to the date set for the Meeting on first call, and mention of such term must be made in the document calling the Meeting. Together with each list and within the time limit indicated above, the following shall be deposited: a certificate attesting the ownership of the equity interest, comprehensive information on the personal and professional characteristics of the candidates and declarations in which the single candidates accept the candidature and, on their own responsibility, state that they satisfy the envisaged requirements. The candidates who do not comply with these rules are ineligible. Once Shareholders have, in a General Meeting, determined the number of directors to be elected, the following procedure shall be applied: 1. all the directors except one shall be elected from the list that has obtained the highest number of votes, on the basis of the numerical order under which they appear on the list; 2. in accordance with the law, one director shall be elected from the list that has obtained the second highest number of votes, on the basis of the numerical order under which the candidates appear on the list. Lists that received a percentage of votes at the General Meeting that is less than half of the number required pursuant to the third paragraph of this article shall not be counted. The foregoing rules for appointment of the Board of Directors do not apply if at least two lists are not submitted or voted on, or at General Meetings that
obtained the second highest number of votes. Lists may be submitted only by those shareholders who, individually or together with others, own voting shares representing a percentage no lower than the percentage which is mandatory under applicable law. Certification of that percentage must, if not presented at the time the lists are filed, be provided at least 21 days prior to the date of the meeting. All of the above shall be stated in the meeting notice. unchanged The candidates included on the lists must be indicated in numerical order and satisfy the requirements of integrity imposed by law. The candidate who is indicated at number one on the list must also satisfy the legal requirements of independence, in addition to the requirements of the corporate governance code adhered to by the Company. The lists presented must be deposited at the Company’s offices at least fifteen days prior to the date set for the Meeting on first call, and mention of such term must be made in the document calling the Meeting. Together with each list and within the time limit indicated above, the following shall also be deposited: a certificate attesting the ownership of the equity interest, comprehensive information on the personal and professional characteristics of the candidates and declarations in which the single candidates accept the candidature and, on their own responsibility, state that they satisfy the envisaged requirements. The candidates who do not comply with these rules are ineligible. unchanged unchanged unchanged
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must replace directors during their terms. In these cases, Shareholders shall decide in a General Meeting on the basis of a relative majority. Without prejudice to what is set forth in this article, the appointment, revocation, expiration of the term of office, replacement or lapsing of Directors is governed by the applicable laws. However, if as a result of resignations or other reasons the majority of the Directors elected by Shareholders is no longer in office, the term of office of the entire Board of Directors will be deemed to have expired, and a General Meeting of Shareholders will be convened on an urgent basis by the Directors still in office for the purpose of electing a new Board of Directors.
unchanged
Article 13 – Meetings and Duties of the Board of Directors Meetings of the Board of Directors, called by the Chairman, are convened at least once each quarter and at any other time the Chairman deems appropriate or when requested by three or more Directors or a Director to whom powers have been delegated. A meeting of the Board of Directors can also be called, after first notifying the Chairman, by one or more of the Statutory Auditors. Meetings are called through written notice, accompanied by all materials pertinent to the discussion, to be sent at least five days prior to the date of the meeting, except in cases of urgency. Meetings are presided over by the Chairman or, in his absence, by the Vice Chairman, if appointed. In the absence of both, another Director designated by the Board shall assume the chair. Directors to whom powers have been delegated must report to the Board of Directors and the Board of Statutory Auditors at least once each quarter on general operating performance and expected future developments, as well as on transactions carried out by the Company or its subsidiaries that are particularly significant in terms of their size or other characteristics, and each Director is required to disclose any interest that they may have, either directly or on behalf of third parties, in any transaction to which the Company is a party. On the basis of the information received, the Board of Directors: evaluates the adequacy of the Company’s organizational and administrative structure and accounting systems; reviews the Company’s strategic, industrial and financial plans; and, based on reports from the bodies with delegated powers, assesses the Company’s overall operating performance. Directors and Statutory Auditors may participate in meetings through the use of a telecommunications system. In such cases, the meeting is deemed held at the location where both the chair and secretary of the meeting are present. In addition, it must be possible to identify the individual participants and they must be able to follow the proceedings, participate in real time in discussion of the items on the agenda and receive,
Article 13 – Meetings and Duties of the Board of Directors unchanged unchanged unchanged unchanged unchanged unchanged Directors and Statutory Auditors may participate in meetings through the use of a telecommunications system. In such cases, the meeting is deemed held at the location where both the chair and secretary of the meeting are present. In addition, it must be possible to identify the individual participants and they must be able to follow the proceedings, participate in real time in discussion of the items on the agenda and receive,
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send or view documents.
send or view documents.
Article 15 – Powers of the Board of Directors The Board is vested, without limitation, with the fullest powers for the ordinary and extraordinary management of the Company and has the authority to carry out any act, including acts of disposition, deemed appropriate to achievement of the Company’s purposes – including registration, subrogation, postponement or cancellation of mortgages, liens or priorities, in whole or in part, as well as effecting or cancelling registrations or notes of any kind, independently of the payment of debts to which such registrations or notes relate – without exclusion or exception other than those acts where the approval of Shareholders is required by law. In addition to the power to issue non-convertible bonds, the Board of Directors is also authorized to adopt resolutions relating to: ■ merger and demerger of companies, where specifically allowed by law; ■ establishment or closure of branch offices; ■ designation of Directors empowered to represent the Company; ■ reduction of share capital in the event of shareholders exercising their right of withdrawal; ■ amendment of the By-laws to reflect changes in the law; ■ transfer of the Company’s registered office to another location in Italy.
Article 15 – Powers of the Board of Directors unchanged unchanged The Board of Directors, and any individual or bodies it may delegate, shall also have the power to carry out, without the requirement for specific shareholder approval, all acts and transactions necessary to defend against a public tender or exchange offer, from the time of the public announcement of the decision or obligation to make the offer until expiry or withdrawal of the offer itself. The Board of Directors, and any individual or bodies it may delegate, shall also have the power to implement those decisions, not yet fully implemented either in whole or in part and that do not constitute the normal activities of the company, taken prior to the communication referred to hereinabove, the implementation of which may counter the achievement of the objectives of the offer.
Article 17 – Election and Qualifications of the Statutory Auditors The Board of Statutory Auditors is composed of 3 regular members and 3 alternate members. The minority has the right to appoint one regular and one alternate auditor.
Article 17 – Election and Qualifications of the Statutory Auditors unchanged
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All statutory auditors must be entered in the register of auditors and possess at least three years’ experience as a statutory account auditor. The Board of Statutory Auditors is appointed on the basis of lists presented by shareholders in which candidates, whose number shall not exceed the number of statutory auditors to be appointed, are listed in numerical order. The list consists of two sections: one for candidates to the office of regular auditor, the other for candidates to the office of alternate auditor. Only those shareholders who, alone or with others, hold in total voting shares representing a percentage no lower than that required by applicable laws for the submission of lists of candidates for the appointment of the company’s Board of Directors have the right to present lists of candidates. No single shareholder, nor shareholders belonging to the same group, nor shareholders who are parties of shareholders’ agreements whose object is the company’s shares, can present or vote, even by means of third parties or a trustee company, more than one list. Each candidate can be present in one list only, otherwise he will be considered ineligible. Candidates who are within the legally applicable limit for the number of concurrent offices held and meet the requirements of integrity, professionalism and independence set forth in the law and this article may be included in lists of candidates. Statutory auditors whose term of office has expired may be re-elected. The lists presented must be deposited at the company’s offices at least fifteen days prior to the date set for the Meeting on first call, and mention of such term must be made in the document calling the Meeting. In the event that on the expiry of this term only one list has been submitted, or if the only lists submitted are those of shareholders linked amongst themselves as defined by applicable law, lists may be presented up to five days after that date. In this case, the percentage provided in the fourth paragraph of this article is halved. The lists must be accompanied by the following: ■ information as to the identity of the shareholders submitting the lists, with an indication of the total percentage equity interest, as well as a certificate attesting the ownership of this interest; ■ a statement by shareholders other than those having a controlling interest or relative majority interest, including jointly, in which they declare that they have no relation to such latter shareholders as provided in applicable law;
unchanged The Board of Statutory Auditors is appointed on the basis of lists, presented by shareholders filed at the Company’s registered office at least 25 days prior to the date of the meeting, in which candidates, whose number shall not exceed the number of statutory auditors to be appointed, are listed in numerical order. The list consists of two sections: one for candidates to the office of regular auditor, the other for candidates to the office of alternate auditor. unchanged Certification of that percentage must, if not presented at the time the lists are filed, be provided at least 21 days prior to the date of the meeting. All of the above shall be stated in the meeting notice. unchanged unchanged The lists presented must be deposited at the company’s offices at least fifteen days prior to the date set for the Meeting on first call, and mention of such term must be made in the document calling the Meeting. In the event that on the expiry of this term only one list has been submitted, or if the only lists submitted are those of shareholders linked amongst themselves as defined by applicable law, lists may be presented up to five days after that date. In this case, the percentage provided in the fourth paragraph of this article is halved. The lists must also be accompanied by the following: ■ information as to the identity of the shareholders submitting the lists, with an indication of the total percentage equity interest held as well as a certificate attesting the ownership of this interest; ■ a statement by shareholders other than those having a controlling interest or relative majority interest, including jointly, in which they declare that they have no relation to such latter shareholders as provided in applicable law;
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■ exhaustive information on the personal and professional characteristics of the candidates and a declaration in which the single candidates accept the candidature and state, on their own responsibility, that they satisfy the requirements laid down by law and by the company’s By-laws for the position in question; ■ a list of the positions as director or statutory auditor held by candidates in other companies and their undertaking that they will update said list at the date of the General Meeting. Any candidate for which the above rules are not observed will be considered as ineligible. The statutory auditors are elected as follows: 1. two regular auditors and two alternate auditors are elected from the list that has obtained the highest number of votes from Shareholders, on the basis of the numerical order under which they appear in each section of the list; 2. in compliance with the provisions of applicable law, the remaining regular auditor and the other alternate auditor are elected from the list that has obtained the second highest number of votes from Shareholders, on the basis of the numerical order under which they appear in each section of the list. In the case of a tied vote between lists, the candidates are appointed from the list submitted by the shareholders having the greater equity interest or, subordinately, by the greatest number of shareholders. The chairmanship of the Board of Statutory Auditors will go to the first candidate from the list that has obtained the second highest number of votes as determined pursuant to preceding point 2. Should it be impossible to proceed with the appointment according to the above described system, Shareholders shall resolve by relative majority in a General Meeting. Where the requirements of the law or company articles are not met, the statutory auditor forfeits his office. In the event of a statutory auditor being replaced, the first alternate auditor belonging to the same list as the auditor being substituted and after having confirmed the existence of the prescribed requirements, will join the Board for the remainder of the auditors’ term of office. In the event of a replacement of the Chairman, the office will be taken over by the statutory auditor that replaces him. Prior rules in matters of the appointment of statutory auditors do not apply to General Meetings that have to appoint regular and/or alternate auditors to return the number of members of the Board to its original level. In such cases, Shareholders resolve by relative majority in a General Meeting, basing the decision on the principle that minority shareholders shall be represented. Meetings of the Statutory Auditors may be held by means of telecommunication systems. In such cases, the meeting is deemed to have been held at the
■ exhaustive information on the personal and professional characteristics of the candidates and a declaration in which the single candidates accept the candidature and state, on their own responsibility, that they satisfy the requirements laid down by law and by the company’s By-laws for the position in question; ■ a list of the positions as director or statutory auditor held by candidates in other companies and their undertaking that they will update said list at the date of the General Meeting. unchanged unchanged unchanged unchanged unchanged unchanged unchanged unchanged
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location where it was convened and where at least one Statutory Auditor was present. In addition, it must be possible to identify the attendees, and they must be able to follow the proceedings, intervene in real time in the discussion of the topics on the Agenda and receive, send or view documents. Article 18 – Independent Audits Accounting audits shall be performed by a firm of independent auditors which satisfies the statutory requirements. Appointment and removal of the independent auditors and determination of their compensation is at the discretion of Shareholders. The duration of the appointment, as well as the rights, duties and prerogatives of the independent auditors are subject to the provisions of law.
Art. 18 – Independent Audits unchanged Appointment and removal of the independent certified auditors and determination of their compensation is at the discretion of Shareholders upon recommendation from the Board of Statutory Auditors. unchanged
Article 20 – Allocation of Profit Net profit reported in the annual financial statements shall be allocated as follows: ■ to the legal reserve, 5% of net profit until the amount of such reserve is equivalent to one-fifth of share capital; ■ to savings shares, a dividend of up to €0.31 per share; ■ further allocations to the legal reserve, allocations to the extraordinary reserve and/or retained profit reserve as may be resolved by Shareholders; ■ to preference shares, a dividend of up to €0.31 per share; ■ to ordinary shares, a dividend of up to €0.155 per share; ■ to savings shares and ordinary shares, in equal amounts, an additional dividend of up to €0.155 per share; ■ to each ordinary, preference and savings share, in equal amounts, any remaining net profit which Shareholders may resolve to distribute. When the dividend paid to savings shares in any year amounts to less than €0.31, the difference shall be added to the preferred dividend to which they are entitled in the following two years.
Article 20 – Allocation of Profit unchanged unchanged From the date subsequent to the date of approval of the allocation of the result for 2010, reported net profit for each financial year shall be allocated as follows:
■ to the legal reserve, 5% of net profit until the amount of the reserve is equal to one-fifth of share capital;
■ to savings shares, a dividend of up to €0.217 per share;
■ further allocations to the legal reserve,
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In the event of a change to the par value of shares, the amounts stated above shall be adjusted on a pro rata basis. Where the Board of Directors sees fit in relation to the Company’s operating results and within the conditions established by law, it may authorize the payment of interim dividends during the year. Any dividends unclaimed within five years of the date they become payable shall be forfeited and shall revert to the Company.
allocations to the extraordinary reserve and/or retained profit reserve as may be resolved by Shareholders;
■ to preference shares, a dividend of up to €0.217 per share;
■ to ordinary shares, a dividend of up to €0.1085 per share;
■ to savings shares and ordinary shares, in equal amounts, an additional dividend of up to €0.1085 per share;
■ to each ordinary, preference and savings share, in equal amounts, any remaining net profit which Shareholders may resolve to distribute.
When the dividend paid to savings shares in any year amounts to less than €0.217, the difference shall be added to the preferred dividend to which they are entitled in the following two years.
unchanged unchanged unchanged
Article 22 – Domicile of Shareholders For all matters regarding the relationship of Shareholders with the Company, their domicile shall be considered that recorded in the Shareholder Register.
Art. 22 – Domicile and Identification of Shareholders unchanged The Company may, through the centralized share administration service, request that intermediaries provide details of the identity of shareholders and the number of shares registered to them on a particular date.
The managers responsible for preparing the Company's financial reports, Alessandro Baldi and Camillo Rossotto, declare, pursuant to paragraph 2 of Article 154-bis of the Consolidated Law on Finance, that the accounting information contained in this Report corresponds to the results documented in the books, accounting and other records of the company.
21 July 2010
On behalf of the Board of Directors
John Elkann
Chairman