Article 153 of Legislative Decree 58/1998 requires that the Board of Statutory Auditors report to shareholders on its activities at the General Meeting called for approval of the statutory financial statements, indicating any omissions or improper transactions that have come to its attention, and grants it the authority to submit proposals to shareholders relating to the financial statements, their approval and other matters for which it has responsibility.
This Report fulfills those requirements and the provisions of Article 2429 (2) of the Civil Code and is based on the activities carried out during the year in fulfillment of our responsibilities under Article 149 of Legislative Decree 58/1998.
We attended meetings of the Board of Directors at which we were informed on activities and transactions approved by the Board and carried out by the Company and/or its subsidiaries that had a significant impact on the financial statements.
On the basis of the information received, we ascertained that those transactions complied with the applicable provisions of law and the By-laws, were not in conflict with any resolutions adopted by shareholders and were consistent with management best practice.
The organizational structure appears to us to be adequate in relation to the size of the Company and we had extensive access to information, including meetings with heads of various central functions and representatives of the Independent Auditors, enabling us to confirm the application of management best practice.
A group-wide internal control system, which is subject to constant revision, is in place both for Fiat S.p.A. and subsidiaries.
We evaluated and monitored the adequacy of the internal control system and the administrative and accounting system, as well as the reliability of the latter in providing a fair presentation of operations, through: i) examination of the Compliance Officer’s reports on the Internal Control System; ii) an examination of the reports from Internal Audit, in addition to information on its monitoring of the implementation of corrective measures resulting from the audit activities; iii) information from the heads of the respective functions; iv) an examination of corporate documents and results of the audit work carried out by the Independent Auditors; v) interaction with management and the statutory and independent auditors of the principal and most significant subsidiaries, pursuant to Article 151 (1) & (2) of Legislative Decree 58/1998; vi) participation in the activities of the Internal Control and Risk Committee, a Board Committee composed of three independent directors. Participation in those activities also enabled the Statutory Auditors to coordinate with the Committee in relation to their role as committee for Internal Control and Audit, pursuant to Article 19 of Legislative Decree 39/2010, entailing, in particular, oversight of:
- the financial reporting process
- the effectiveness of the systems of internal control, internal audit and risk management
- the independent audits of the annual statutory and consolidated financial statements
- aspects relative to the independence of the audit firm, with particular reference to non-audit services provided to the audited entity. Accordingly, we note that on 28 February 2014, we received a communication from Reconta Ernst & Young S.p.A. – with whom there was a regular exchange of information – stating that, in addition to the audit of the statutory and consolidated financial statements, limited audits of the half-year financial report, and agreed upon procedures for audit of the quarterly reports, Fiat had also engaged the firm to provide the following services:
- audit of the system of internal control over Fiat Group’s financial reporting (“ICFR”) for the 2013 financial year – fees totaling €680,000
- procedures relating to analysis of the system of internal control over financial reporting as it relates to the new GRC system – fees totaling €175,000
- verification procedures relative to Available Liquidity reported at 30 September 2012 – fees totaling €100,000
- analysis of accounting solutions under consideration by the Company in relation to intended investment transactions – fees totaling €43,000
No other work was performed or fee charged to Fiat S.p.A. by Reconta Ernst & Young S.p.A. or other entities in the Ernst & Young network.
On 4 March 2014, Reconta Ernst & Young S.p.A. presented a report pursuant to Article 19 (3) of Legislative Decree 39/2010 in which it communicated that no material issues had emerged during the audit process and no significant failings had been identified in the system of internal control over financial reporting.
On the basis of activities carried out, the Statutory Auditors found Fiat’s internal control system to be adequate overall and noted, in their role as committee for Internal Control and Audit, that no issues had arisen requiring notification to shareholders.
The guidelines provided by Fiat S.p.A. to its subsidiaries pursuant to Article 114 (2) of Legislative Decree 58/1998 also appear to be adequate.
With reference to Article 36 of the Market Regulations issued by Consob, which relates to material subsidiaries incorporated in and subject to the laws of a non-EU member state, we report that at 31 December 2013 the companies to which that provision applies are included among those companies considered relevant for the purposes of Fiat’s system of internal control over financial reporting, in relation to which no failings were reported.
The Board of Directors provided us with its report on operations for the first half of the year by the statutory deadline and published it in accordance with the Consob requirements. It also complied with the legal requirement for quarterly reports. With regard to Consob communications, for those matters under our responsibility, we confirm that:
- the information provided by Directors in the report on operations is comprehensive and complete
- as required by Legislative Decree 58/1998, we have been informed on a constant basis on matters under our responsibility
- no third party, related party or intercompany transactions which were atypical and/or unusual, as defined in the Consob Communication of 28 July 2006, emerged in the course of our periodic checks and audits
- with regard to intercompany transactions, in the Notes to the Financial Statements the Board of Directors reports that there were numerous transactions involving the sale of goods and services between the Company and other Group companies and related parties, and confirms that they took place at standard market terms for the nature of goods and services concerned. We confirm that from 1 January 2011 the Company implemented the “Procedures for Transactions with Related Parties”, pursuant to Consob Regulation 17221 of 12 March 2010 (as amended) and the Consob Communication of 24 September 2010, whose guidelines were adopted by the Board of Directors on 21 October 2010
- no issues requiring mention arose from meetings conducted with management and the statutory and independent auditors of the principal subsidiaries
- we have reviewed and obtained information on the organizational and procedural measures implemented pursuant to and for the effects of Legislative Decree 231/2001, as amended, and on the liability of legal persons for the offenses addressed therein. No significant issues requiring mention arose from the reports of the Compliance Program Supervisory Body on activities carried out during 2013 or meetings conducted between that body and the Board of Statutory Auditors
- no significant issues arose during meetings held with the Independent Auditors pursuant to Article 150 of Legislative Decree 58/1998
- the report of the Independent Auditors Reconta Ernst & Young S.p.A, issued on 4 March 2014, contains no qualifications or emphasis paragraphs
- in compliance with Article 149 (1)(c-bis) of Legislative Decree 58/1998, we acknowledge the affirmation of the Directors in the Annual Report on Corporate Governance, as confirmed by the Board resolution of 22 February 2012, that:
“Fiat Group adheres to the Corporate Governance Code for Italian Listed Companies issued in December 2011, with modifications that take into account the specific characteristics of the Group.” The above is discussed in detail in the Annual Report on Corporate Governance (February 2014) prepared by the Board of Directors, which is available for your review.
During the year, the Board of Statutory Auditors actively followed the activities carried out by Reconta Ernst & Young S.p.A. in relation to monitoring the Group’s liquidity.
The Board of Statutory Auditors focused on the most significant aspects of the Fiat-Chrysler agreements, including reviewing the Master Transaction Agreement with the support of Fiat’s legal department. In particular, the Board of Statutory Auditors was briefed on the procedures, terms and conditions for exercise of the various call options contained within those agreements.
During the year, the Board of Statutory Auditors received several complaints from shareholder Marco Bava, which he asserts are within the scope of “Article 2408 of the Civil Code”.
- during the Annual General Meeting on 9 April 2013, generic reference was made to an alleged mis-presentation of Net Financial Position in Fiat Group’s 2012 consolidated financial statements. Irrespective of whether such complaint was within its remit, the Board of Statutory Auditors examined the facts and found no censurable acts, pursuant to Article 2408 of the Civil Code, or legal or regulatory violations.
- the exclusion (removal) of Mr. Bava from events organized by subsidiary companies which were by invitation only (29 October 2012: inauguration of new offices and museum for the newspaper La Stampa).
In relation to that complaint, the Statutory Auditors responded in their report to shareholders at the General Meeting called for approval of the 2012 financial statements that, irrespective of whether that complaint was within its remit, they found no existence of censurable acts (Article 2408 of the Civil Code) or legal or regulatory violations.
In conclusion, we note that during the year, the Company verified the effective independence of the independent directors, and we confirm that the principles and procedures for verification were fairly applied in accordance with Article 3.c.5 of the Corporate Governance Code. We also confirmed our own continued independence as required under Article 8.c.1 of the Corporate Governance Code.
Based on the audits we performed in the areas under our responsibility, pursuant to Article 149 of Legislative Decree 58/1998, and in consideration of the information received from the Independent Auditors, we have verified that the statutory financial statements for the year ended 31 December 2013, which report a loss of €226,697,618, have been prepared and are presented in accordance with the applicable provisions of law.
In particular, we verified that none of the exemptions permitted under Article 2423 (4) of the Civil Code were exercised.
As part of the oversight activities described above, the Board of Statutory Auditors met a total of 18 times during 2013. In addition, the Board of Statutory Auditors was present at the 6 meetings of the Board of Directors and the 8 meetings of the Internal Control and Risk Committee, at which it also participated in its role as Internal Control and Audit Committee pursuant to Article 19 of Legislative Decree 39/2010.
On the basis of the control and oversight activities carried out during the year, we find nothing that would prevent approval of the statutory financial statements for the year ended 31 December 2013 or the motions put forward by the Board of Directors.
Turin, 4 March 2014
The Statutory Auditors
Ignazio Carbone /s/ Ignazio Carbone
Lionello Jona Celesia /s/ Lionello Jona Celesia
Piero Locatelli /s/ Piero Locatelli