2006 Annual Report - Fiat SpA

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The contractual terms of these plans are as follows: Strike price Number of Vesting Plan Recipient Grant date Expiry date (euros) options granted Vesting date portion Stock Options 1999 Managers March 30, 1999 March 31, 2007 26.120 1,248,000 April 1, 2001 50% April 1, 2002 50% Stock Options 2000 Managers February 18, 2000 February 18, 2008 28.122 5,158,000 February 18, 2001 25% February 18, 2002 25% February 18, 2003 25% February 18, 2004 25% Stock Options Chairman July 25, 2000 July 25, 2008 25.459 250,000 July 25, 2001 50% July 2000 of Fiat S.p.A. May 14, 2002 50% Stock Options Managers February 27, 2001 February 27, 2009 24.853 785,000 February 27, 2002 25% February 2001 February 27, 2003 25% February 27, 2004 25% February 27, 2005 25% Stock Options Chairman March 29, 2001 October 30, 2008 23.708 1,000,000 July 1, 2002 100% March 2001 of Fiat S.p.A. Stock Options Managers October 31, 2001 October 31, 2009 16.526 5,417,500 October 31, 2002 25% October 2001 October 31, 2003 25% October 31, 2004 25% October 31, 2005 25% Stock Options Chairman May 14, 2002 January 1, 2010 12.699 1,000,000 January 1, 2005 100% May 2002 of Fiat S.p.A. Stock Options Managers September 12, 2002 September 12, 2010 10.397 6,100,000 September 12, 2003 25% September 2002 September 12, 2004 25% September 12, 2005 25% September 12, 2006 25% On July 26, 2004, the Board of Directors granted to Sergio Marchionne as a part of his compensation as Chief Executive Officer options for the purchase of 10,670,000 Fiat S.p.A. ordinary shares at the price of 6.583 euros, exercisable from June 1, 2008 to January 1, 2011. In each of the first three years following the grant date, the Officer accrues the right to purchase, from June 1, 2008, an annual maximum of 2,370,000 shares. From June 1, 2008, he will have the right to exercise, effective at that date, the residual portion of the options on 3,560,000 shares. Vesting of the last block of stock options is subject to certain pre-determined profitability targets (Non-Market Conditions or “NMC”). 148 Fiat Group Consolidated Financial Statements at December 31, 2006 - Notes Contractual terms of the plan are as follows: Strike price Plan Grant date Expiry date (euros) N° of options vested Vesting date Vesting portion Stock Options July 26, 2004 January 1, 2011 6.583 10,670,000 June 1, 2005 22.2% July 2004 June 1, 2006 22.2% June 1, 2007 22.2% June 1, 2008 33.4%*NMC On November 3, 2006 the Fiat S.p.A. Board of Directors approved an eight year stock option plan, which provides certain managers of the Group and the Fiat S.p.A. Chief Executive Officer with the right to purchase a determined number of Fiat S.p.A. ordinary shares at the fixed price of 13.37 euros per share. In particular, the 10,000,000 options granted to employees and the 5,000,000 options granted to the Chief Executive Officer have a vesting period of four years, with a quarter of the number vesting each year, are subject to achieving certain pre-determined profitability targets (Non-Market Conditions or “NMC”) in the reference period and may be exercised from the date on which the 2010 financial statements are approved. The remaining 5,000,000 options granted to the Chief Executive Officer of Fiat S.p.A. also have a vesting period of four years with a quarter of the number vesting each year and may be exercised from November 2010. The ability to exercise the options is additionally subject to specific restrictions regarding the duration of the employment relationship or the continuation of the position held. The stock option plan will become effective after approval by stockholders in general meeting and once all its conditions have been satisfied. The contractual terms of 2006 plan proposed by Board of Directors are as follows: Strike price N° of options Plan Recipient Expiry date (euros) vested Vesting date Vesting portion Stock Option Chief Executive November 3, 2014 13.37 5,000,000 November 2007 25% November 2006 Officer November 2008 25% November 2009 25% November 2010 25% Stock Option Chief Executive November 3, 2014 13.37 5,000,000 Spring 2008 (*) 25%*NMC November 2006 Officer Spring 2009 (*) 25%*NMC Spring 2010 (*) 25%*NMC Spring 2011 (*) 25%*NMC Stock Option Managers November 3, 2014 13.37 10,000,000 Spring 2008 (*) 25%*NMC November 2006 Spring 2009 (*) 25%*NMC Spring 2010 (*) 25%*NMC Spring 2011 (*) 25%*NMC (*) On approval of the prior year’s Financial Statements. Fiat Group Consolidated Financial Statements at December 31, 2006 - Notes 149
A summary of outstanding stock options at December 31, 2006 is as follows: Managers compensation Compensation as member of the Board Average remaining Average remaining Options Options contractual life Options Options contractual life outstanding at outstanding at (in years) at outstanding at outstanding at (in years) at Exercise price (in euros) December 31, 2006 December 31, 2005 December 31, 2006 December 31, 2006 December 31, 2005 December 31, 2006 6.583 – – – 10,670,000 10,670,000 4.0 10.397 2,117,000 3,046,500 3.7 – – – 12.699 – – – 1,000,000 1,000,000 3.0 13.37 (*) 10,000,000 – 7.8 10,000,000 – 7.8 16.526 1,943,500 2,299,000 2.8 – – – 23.708 – – – 1,000,000 1,000,000 1.8 24.853 80,000 300,000 2.2 – – – 25.459 – – – 250.000 250.000 1.6 26.120 241,900 316,000 0.3 – – – 28.122 1,051,500 1,788,000 1.1 – – – Total (*) 15,433,900 7,749,500 22,920,000 12,920,000 (*) The granting of 20,000,000 stock options (of which 10,000,000 to managers and 10,000,000 to the Chief Executive officer), approved by the Board of Directors on November 3, 2006, is subject to the approval of shareholders in general meeting pursuant to law. Changes during the year are as follows: Managers compensation Compensation as member of the Board Average Average exercise price exercise price Number of shares (in euros) Number of shares (in euros) Outstanding at the beginning of the year 7,749,500 17.51 12,920,000 8.75 Granted (*) 10,000,000 13.37 10,000,000 13.37 Forfeited – – – – Exercised (558,250) 10.397 – – Expired (1,757,350) 21.54 – – Outstanding at December 31, 2006 (*) 15,433,900 14.62 22,920,000 10.76 Exercisable at December 31, 2006 5,433,900 16.93 2,250,000 19.01 Exercisable at December 31, 2005 6,987,875 18.28 2,250,000 19.01 (*) The granting of 20,000,000 stock options (of which 10,000,000 to managers and 10,000,000 to the Chief Executive officer), approved by the Board of Directors on November 3, 2006, is subject to the approval of shareholders in general meeting pursuant to law. 150 Fiat Group Consolidated Financial Statements at December 31, 2006 - Notes The majority of options that had been granted to managers were exercised during the fourth quarter of the year. The average price of Fiat S.p.A. ordinary shares during this period was 14.14 euros per share. As discussed under Significant accounting policies, in the case of share-based payments the Group applies IFRS 2 to all stock options granted after November 7, 2002, which had not yet vested at January 1, 2005, namely the July 2004 and November 2006 stock option plans. For these stock options plans, the fair value calculated at the grant date used to determine the compensation expense to be accrued, based on a binomial pricing model is based on the following assumptions: Plan July 2004 Plan November 2006 Fair value at the grant date (euros) 2.440 3.99 Price of Fiat S.p.A. ordinary shares (euros) 6.466 14.425 Historical volatility of Fiat S.p.A ordinary shares (%) 29.37 28,33 Risk free interest rate 4.021 – In addition, it is recalled that the dividend payment rate used in the determination of the fair value at the plan grant date in July 2004 was assumed to be zero, based on the experience in the period from 2003 to 2005. In determining the fair value of the November 2006 plan the recent statements made on future dividend prospects of approximately 25% of the consolidated Net result have been considered instead. In addition, the interest rate yield used in the option-pricing model for the 2006 plan is in line with that referred to in Note 19. The total cost recognised in the income statement for share-based payments linked to Fiat S.p.A. ordinary shares amounts to 11 million euros in 2006 (10 million euros in 2005). Stock Option plans linked to CNH Global N.V. ordinary shares In the Agricultural and Construction Equipment Sector, CNH Global N.V. (“CNH”) has granted share-based compensation to directors officers and employees which are linked to shares and which have the following terms: ■ The CNH Global N.V. Outside Directors’ Compensation Plan (“CNH Directors’ Plan”), as amended on April 28, 2006, provides for the payment of the following to independent outside members of the CNH Global N.V. Board in the form of cash, and/or common shares of CNH, and/or options to purchase common shares of CNH. – an annual retainer fee of 65,000 USD; – a committee membership fee of 25,000 USD; and – a committee chair fee of 10,000 USD (collectively, the “Fees”). In addition, on April 7, 2006, outside directors received a one-time grant of 4,000 options to purchase common shares of CNH Global N.V. that vest on the third anniversary of the grant date. Each quarter the outside directors elect the form of payment of 1/4 of their Fees. If the elected form is options, the outside director will receive as many options as the amount of Fees that the director elects to forego, multiplied by four and divided by the fair market value of a common share, such fair market value being equal to the average of the highest and lowest sale price of a CNH Global N.V. common share on the last trading day of the New York Stock Exchange preceding the start of each quarter. Stock options granted as a result of such an election vest immediately upon grant, but shares purchased under options cannot be sold for six months following the date of grant. Fiat Group Consolidated Financial Statements at December 31, 2006 - Notes 151
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Annual Report Consolidated and Stat
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But it does move. Galileo Galilei
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Letter from the Chairman and the Ch
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The Fiat Group The Fiat Group perfo
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Stockholders Financial communicatio
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in 2003, and now the Panda Hydrogen
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The meeting with the EWC Selected C
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Revenues by Business Area (in milli
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The breakdown of trading profit by
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Investment income was 156 million e
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If working capital is restated to i
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Financial Services Revenues (in mil
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Page 27 and 28: strategic consistency, economic fea
Page 29 and 30: The Board of Directors, at its meet
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Page 33 and 34: Fiat Auto - Fiat, Alfa Romeo, Lanci
Page 35 and 36: Maserati Operating Performance In 2
Page 37 and 38: Trucks and Commercial Vehicles Ivec
Page 39 and 40: Fiat Powertrain Technologies Operat
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Page 43 and 44: Motion for Approval of the Financia
Page 45 and 46: Consolidated Income Statement (*) (
Page 47 and 48: Statement of Changes in Stockholder
Page 49 and 50: partially from the market: the rema
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Page 53 and 54: charges for risk provisions and wri
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Page 57 and 58: Composition and principal changes I
Page 59 and 60: Net financial expenses in 2006 (exc
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Page 67 and 68: In 2005 Changes in accumulated depr
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Page 79 and 80: Under the CNH EIP, performance-base
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Page 89 and 90: Fidis Retail Italia (FRI) All the r
Page 91 and 92: Other and Magneti Business elimina-
Page 93 and 94: Credit risk The maximum credit risk
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Provisions The company recognises p
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4. Other operating income Other ope
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Net income from derivative financia
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12. Property, plant and equipment T
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15. Other non-current assets At Dec
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Regarding changes in 2005, the Mand
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A summary of outstanding stock opti
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The amounts recognised in the Incom
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The item Payables to Group companie
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These relate to: ■ guarantees of
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Counterparty Other Current Other No
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32. Significant non-recurring trans
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Fees paid to Members of the Board o
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Financial statement format Fiat S.p
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Deferred tax assets Reclassificatio
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Reconciliation of net profit (loss)
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B. Employee benefits The employees
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Auditors’ Reports Auditors’ Rep
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Reports of the Board of Statutory A
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that numerous transactions involvin
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Motion for Approval of the Financia
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Motion to amend Articles 9, 11, 12,
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Stockholders Meeting and will be ef
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Graphic design Atelier Roger Pfund,
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2006 Annual Report - Fiat SpA

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