Spyker - C8 Aileron - Sales Brochure - (2010)

A N N U A L R E P O R T 2 0 0 9 2 Heritage Design Craftsmanship 3 Performance Exclusivity July 1907: Spyker 14/18 HP on its way from Peking to Paris 5 Index Annual Report 2009 Foreword by the CEO Board members of Spyker Cars Members of the Supervisory Board per 7 April 2010 Members of the Management Board per 7 April 2010 Five Year overview of the key figures Information for shareholders Key financial dates Listing Development share price from 27 May 2004 up to 31 March 2010 Increase of share capital during 2009 Substantial holdings in Spyker Cars Overview of publications in the period 1 April 2009 – 1 April 2010 The Company Profile Group mission and values Strategy History Supervisory Board’s report Corporate Governance Meetings of the Supervisory Board and topics discussed 2009 Audit committee 2009 Remuneration & Nomination Committee 2009 Strategy committee Composition of the Supervisory Board Remuneration report Management Board’s report Global automotive market and premium sports car segment Branding and marketing Investment policy, product research and product development Financial results and funding Production and suppliers Dealer network/Sales development GT Racing Merchandise, accessories & market supporting activities Human resources Legal proceedings and other legal matters Control systems and processes Environmental and social aspects Recent events Outlook for 2010 Risk management Corporate governance Financial statements Additional information Statutory rules concerning appropriation of result Proposed allocation of the result for the financial year 2009 Appointment of members of the Management Board and Supervisory Board Priority share Auditors’ report Page 9 14 14 16 19 20 20 20 20 21 21 23 26 26 26 26 26 32 32 33 34 35 36 36 36 40 40 40 41 42 43 44 44 44 45 46 47 47 49 52 54 65 79 148 148 148 148 149 150 Heritage Design Craftsmanship 7 Performance Exclusivity Spyker C8 Aileron (chassis number 250) 8 August 14, 2010: Spyker C8 Aileron (chassis number 255) in Scottsdale, Arizona, USA F O R E W O R D B Y T H E C E O Dear stakeholders, In March last year, I could not imagine what the world would look like today. In 2009 the global automotive industry continued to suffer severely from the economic downturn and liquidations, governmental bail outs and scrap car measures were common practice in many countries. Spyker managed to withstand this storm and survived the crisis: sales volume was maintained and losses reduced slightly without benefiting from any of these support measures. On the contrary, Spyker took advantage of the “perfect storm” that raged in this industry by making an acquisition which under normal market circumstances would have been unthinkable: Saab Automobile AB. Spyker thereby took a major step up towards the world stage of niche market car manufacturers. Let me start, however, at the beginning of 2009. We terminated our production contract for the Spyker Short Wheel Base automobiles with Wilhelm Karmann GmbH, Osnabruck early 2009, just prior to this century old supplier going bankrupt. In view of the current market circumstances we felt the necessity to rationalize the production process and improve inefficiencies in the organisation. We decided to bring assembly and body-in-white production basically under one roof by subcontracting both to our very first partner back in 2000, CPP in Coventry (UK). Consequently, we embarked on the painful process of shutting down the assembly facility in Zeewolde in the second half of the year. This major restructuring project was carried out and regretfully 44 fte’s had to be made redundant. Although we prepared for the Aileron launch in the production and marketing areas, by November no one, not in the least I, could foresee what lay ahead that very month. After an intended transaction for the sale of Saab fell apart on November 24, 2009, the unexpected announcement came that Saab was up for sale again. By November 30th, we had put in our first bid with General Motors (GM). What then entailed would easily translate into an exciting Ludlum thriller. Intensive negotiations followed, bids were declined, amended and re-submitted. Our small team worked literally day and night to make the transaction happen. On January 26th, 2010 we proudly announced that we had reached an agreement to acquire the iconic Saab company, thereby saving it from liquidation. We closed the deal on February 23rd, changing the face of Spyker totally: from a few million in sales to a few billion, from 85 employees to 3,600 employees, from less than 50 cars produced to over 100,000 as achieved in the years before 2009. In 2009, Spyker has clearly lived up to its motto since 1914: “nulla tenaci invia est via” (for the tenacious no road is impassable). 9 10 We are very proud of having saved an iconic brand with very similar origins in the aviation industry. Although Spyker will be less than 0.5% of total sales of the combination and its results will be fairly marginal on the totality, we will definitely not take our eye of the ball and push ahead with Spyker’s development unabatedly, but now within the framework of the exciting possibilities created by the infrastructure and resources made available to it through its sister company Saab. State of the art engineering facilities and access to Saab’s supplier base are now at its disposal. Of no less than 1,100 Saab dealers worldwide, a certain number will start to carry the Spyker brand, thereby massively increasing the Spyker distribution network. Many people ask us why Spyker thinks that it can make Saab profitable by 2012, when Saab was perceived to be loosing money under GM’s stewardship for almost two decades. First of all Saab did not lose money in all of those years. On the contrary, many of its profitable divisions where not consolidated in Saab, but directly in GM. Moreover, Saab contributed considerably to large group overheads and projects that it not benefited from, yet was held to execute. When one would reconstruct and clean up Saab’s historic figures including the above elements, a completely different picture appears. Secondly Saab’s business plan, reviewed by many experts in the industry, clearly demonstrates that at very realistic production levels - not higher than those achieved as recent as 2007 (120,000 units) - Saab can be profitable. Thirdly, Spyker will not manage Saab. It would be presumptuous to think that a small exotic car manufacturer could tell Saab how to run its business better. But what Spyker will bring to Saab, and it will, is entrepreneurship, a quality Saab will definitely require now that is has to start operating as a stand alone manufacturer. Moreover, Spyker is good at branding and marketing and has developed solid know how on the premium market segment, of which know how we hope Saab will benefit. Saab’s capable management, headed by CEO Jan-Ake Jonsson, will lead the company and I have taken up the role of chairman of the Board. The “perfect storm” I described is clearly not all bad. Not only did it allow Spyker to acquire Saab, a once in a lifetime opportunity, it also brought the undeniable reality home with which every board room of every OEM will now be filled: how do we reduce our break-even point so as to ensure that we are prepared in the event we see a recurrence of the 2007-2009 down turn? One of the most effective ways of doing that is by sharing technologies and hence large OEMs, which until now had never been inclined to do so, are willing to partner with smaller players such as Saab. In that sense, Spyker could not have acquired Saab at a better moment in time. 11 Having built up Spyker during the past ten years, the Saab acquisition is the somewhat unexpected crown on our work. We will use all of our resources to make the Saab and Spyker businesses a resounding success. Finally a word of thanks to our employees, management and supervisory board members for their support in the past year. In particular I would like to extend our gratitude to Vladimir Antonov without whose efforts Spyker would not be where it is today, let alone Saab. And a word of welcome to Jan-Ake Jonsson and his team as well as 3,500 highly motivated Saab employees! Victor R. Muller Chief Executive Officer and Founder Zeewolde, 7 April 2010 The new generation Saab 9-5 went into production on March 22, 2010 Craftsmanship B O A R D M E M B E R S O F S P Y K E R C A R S 14 Members of the Supervisory Board per 7 April 2010 Hans (J.)B.Th. Hugenholtz (1950, male, Dutch), Chairman Mr. Hugenholtz is chief executive officer and owner of the following companies: (i) Hugenholtz Property Group, a group with affiliated companies in the Netherlands, Belgium (HPG Belgium N.V.), France (Groupe Franco-Hollandaise) and Germany (HPG Projektgesellschaft Aachen) which develop real estate, (ii) Nerons Holding B.V., a holding company with three affiliated companies that import and distribute helmets, motorcycle clothing, accessories and scooters in Holland, Belgium and Turkey. Mr. Hugenholtz is a member of the Advisory Board of ic/holding and has held positions in venture capital related organisations; prior to his current activities, he was co-owner and Member of the Board of Zadelhoff Makelaars (now DTZ) and various property development companies. Mr. Hugenholtz studied mechanical engineering at Delft University and holds a degree in Business Financing from Erasmus University. Racing motor cars since 1971, Mr. Hugenholtz is a former Dutch Touring Car Champion, European Historic GT Champion and has participated 7 times in the Le Mans 24 Hours. Mr. Hugenholtz was reappointed Supervisory Board member of Spyker Cars in the General Meeting of 2007 for a term of four years until the Annual General Meeting of 2011. Per 7 April 2010, Mr. Hugenholtz, mostly through his personal holding company Milestone Beheer B.V., held 314,767 ordinary shares in Spyker Cars. Maurizio La Noce (1957, male, American) Maurizio La Noce is the CEO of Mubadala Oil & Gas as well as the Executive Director for the Energy & Industry Unit, responsible for the development of viable businesses and investment opportunities in the utilities, industrial, petroleum services and renewable energy sectors. Mr. La Noce has over 25 years of experience in the energy industry with the last 12 years primarily devoted to the management and development of multi-billion dollar projects in the Middle East. He began his career in 1983 and held various commercial and managerial positions with Atlantic Richfield (ARCO) and ENRON International with on job assignments in Milan, London, Dallas and the UAE. After joining the UAE Offsets Group in 2001, Mr. La Noce was responsible for the commercial development of the Dolphin Energy project and for the sale by Offsets of a 24.5% equity interest to Occidental Petroleum Corporation. Mr. La Noce currently represents Mubadala on several Boards of Directors: MASDAR (Abu Dhabi Future Energy Company), Emirates Aluminium (EMAL), Pearl Energy, GlobalFoundries, Azaliya Mubadala Petroleum Services Company (MPSC), Spyker Cars NV, Dolphin PRC, Rusail PC, SMN Barka and SMN Holdings. Mr. La Noce completed his degree in Industrial Electronics in Italy and his “hydrocarbon” education at the College of Petroleum Studies in Oxford. Mr. La Noce was reappointed Supervisory Board member on 23 April 2009 for a term of four years and will retire in the Annual General Meeting of 2013. Per 7 April 2010, Mr. La Noce held no shares in Spyker Cars. Mubadala Development Company, through MDC-SC Holdings Sarl, holds 20-25% of Spyker Cars’ shares. Former members of the Supervisory Board who were in function during 2009 Vladimir Antonov (1975, male, Russian), Chairman Vladimir Antonov was appointed Supervisory Board member on 21 January 2008 and became chairman per 17 April 2008. During his Supervisory Board membership, Mr. Antonov - through Snoras - held the Priority share in Spyker Cars as well as 4,643,750 shares, first through Snoras and later through RMC Convers Group Holdings Limited. He stepped down on 23 February 2010 when he sold all of these shares. Messrs Bondars and Stancikas retired at the same time. During his term with Spyker Cars, Mr. Antonov also held the position of Chairman of the Supervisory Boards of UAB “SNORO turto valdymas” of Vilnius, Lithuania (“Snoras”) and Conversbank Ltd., Russia. Mr. Antonov is main shareholder of Snoras and of Conversbank Ltd. Martins Bondars (1971, male, Latvian) Martins Bondars was appointed Supervisory Board member on 21 January 2008 and retired on 23 February 2010. Also, Mr. Bondars was president and chairman of the board of JSC Latvijas Krajbanka in Latvia, a subsidiary of Snoras. During his Supervisory Board membership, Mr. Bondars held no shares in Spyker Cars. Naglis Stancikas (1968, male, Lithuanian) Naglis Stancikas was member of the Supervisory Board from 23 April 2009 until 23 February 2010. During his term with Spyker Cars he worked for Snoras in the position of first Vice President, Deputy Head of Administration of Snoras as well as Director of Snoras’ Investment Business Division. During his Supervisory Board membership, Mr. Stancikas held no shares in Spyker Cars. Dmitrijus Apockinas (1974, male, Lithuanian) Dmitrijus Apockinas was member of the Supervisory Board from 21 January 2008 until 23 April 2009. Furthermore, Mr. Apockinas was managing director and CEO of Griffon Bank Ltd., established in the Commonwealth of Dominica, West Indies. He was also shareholder and member of the board of UAB JT Investiciju Valdymas Mutual Fund Company (Lithuania) and CFO of West Indies Power Holdings B.V. (St. Maarten, Netherlands Antilles). During his Supervisory Board membership, Mr. Apockinas held no shares in Spyker Cars. Candidates for appointment as new members of the Supervisory Board, nominated by the Supervisory Board Pieter H. Heerema (1951, male, Dutch) Pieter Heerema is owner and President of the Heerema group of companies, mostly involved in design, engineering, fabrication, transport and installation of (marine) structures for offshore 15 energy projects as well as for infrastructural projects worldwide. 16 Mr. Heerema has held and holds Board positions in various non- quoted companies of the Heerema Group as well as Geveke bv, Amsterdam. He holds a bachelor’s degree in business administration from Nijenrode Business School, the Netherlands and an MBA from Interfaculteit Bedrijfskunde (Delft/Rotterdam). Through a special purpose investment vehicle Mr. Heerema has made available to Spyker Cars a convertible loan of US$ 25 million, with a two year term and a conversion price of € 4 per share. Per 7 April 2010, Mr. Heerema held no shares in Spyker Cars. Alexander J. Roepers, (1959, male, American) Alexander Roepers is the President and CIO of Atlantic Investment Management, Inc. (“Atlantic”), which he founded in 1988. Atlantic, a SEC Registered Investment Advisor with offices in New York and Tokyo, manages $1.6 billion from institutional and high net worth investors and deploys a concentrated value approach to investing in the public markets. As a result of his work at Atlantic, Mr. Roepers has been an actively engaged shareholder of many publicly-traded industrial and consumer products and services companies around the world. Prior to forming Atlantic, Mr. Roepers was Director of Corporate Development, involved in M&A activities, at the Thyssen-Bornemisza Group in New York from 1984 until 1988. From 1980 to 1982, he worked at Dover Corporation in New York. Mr. Roepers has an MBA from Harvard Business School (1984) and holds a BBA degree from Nijenrode University, the Netherlands School of Business (1980). Born and raised in The Hague, The Netherlands, Mr. Roepers has lived in New York City since 1984. He is married and has three children. Per 7 April 2010, Mr. Roepers held no shares in Spyker Cars. Members of the Management Board per 7 April 2010 Victor R. Muller (1959, male Dutch), Chief Executive Officer Victor Muller is the founder of Spyker Cars. As Chief Executive Officer he is responsible for implementing the overall strategy of Spyker. Victor Muller started his career in 1984 as a lawyer at Caron & Stevens/Baker & McKenzie, Amsterdam. In 1989, he became a member of the management team for the offshore company Heerema in Leiden and was involved in several acquisitions. He became partial owner of Wijsmuller Salvage and Towage, IJmuiden, as a member of a consortium through a management buy-out. From 1992, he has managed and restructured several companies including Emergo Fashions Group B.V. that went public under the name McGregor Fashion Group N.V. in April 1999. Victor Muller was appointed Management Board member for an indefinite period of time. On February 23rd, 2010, Mr. Muller was appointed as chairman of the Board of Saab Automobile AB, a 100% subsidiary of Spyker Cars. Per 7 April 2010, through his personal holding companies Investeringsmaatschappij Helvetia B.V. and Tenaci Capital B.V., Mr. Muller held 4,643,750 ordinary shares in Spyker Cars, a right to acquire 2,375,000 shares under the € 9.5 million convertible loan and 1,455,711 option rights. He has a right to acquire 59,782 shares through his management company under the ESOP if all ESOP 17 requirements are fulfilled.* D. Hans (J.)C.Y.S. Go (1962, male, Dutch) Before joining Spyker Cars on 15 March 2009, Hans Go was Director Investment Banking at AB Capital Dubai, a subsidiary of the Arab Bank. Previously, he worked seven years for private investors, mainly in the function of CFO. As co-founder of the IMRA Network he worked as independent financial advisor in several assignments. Up to 2000, Mr. Go worked for Unilever where he had management positions in finance, logistics, ICT and business development and was stationed in the Netherlands, China and Vietnam. Mr. Go holds a Master in Business Economics and graduated in Accountancy at the University of Amsterdam. Mr. Go was appointed statutory member of the Management Board on 23 April 2009. The key focus areas of Hans Go concern finance & control, risk management and organizational improvement. Per 7 April 2010, Mr. Go held no shares in Spyker Cars. He has a right to acquire 59,782 shares under the ESOP if all ESOP requirements are fulfilled.* Former members of the Management Board who were in function during 2009 Alexander A. Roukens (1963, male, Dutch) Lex Roukens joined Spyker Cars per 2 April 2008 as Chief Financial Officer. He was appointed (statutory) member of the Management Board by the annual General Meeting of Shareholders on 17 April 2008. Mr. Roukens announced his resignation on 28 November 2008, effective per 31 January 2009. Per 1 April 2008, Mr. Roukens was granted the right to acquire 59,782 shares in Spyker Cars under the ESOP. Since the ESOP requirements for 2008 are not fulfilled all option rights expired per the date Mr. Roukens left Spyker Cars. Frans J.M. Liebregts (1946, male, Dutch), Chief Operating Officer Frans Liebregts was appointed (statutory) member of the Management Board of Spyker Cars per 1 July 2008. He fulfilled the position of Chief Operating Officer. Having prepared his team for his departure, Mr. Liebregts retired on 31 December 2009. Until 30 June 2008, Mr Liebregts was vice-president technology of Cogent-Power Ltd., a company specialised in electrical steel and laminations. Before that, he worked as vice-president at Polynorm N.V., an engineering and production company, producing car body panels and structures. He has been working in the car industry for more than 30 years. Furthermore, Frans Liebregts was a Supervisory Board member of Spyker Cars from 27 May 2004 until 21 January 2008, when he retired as a result of the investment by Snoras Bank and the subsequent change of composition of the Supervisory Board. In the period from 27 May 2004 until 31 December 2009, Mr. Liebregts held no shares in Spyker Cars. Per 1 July 2008, Mr. Liebregts was granted the right to acquire 59,782 shares in Spyker Cars under the ESOP. Since the ESOP requirements for 2008 and 2009 are not fulfilled all option rights expired per 31 December 2009. * For further details about option rights, see the Remuneration chapter in this annual report. 19 F I V E - Y E A R O V E R V I E W Key Figures 2009 2008 2007 20061) 2005 € (‘000) € (‘000) € (‘000) € (‘000) € (‘000) Based on IFRS Revenues 6,604 7,852 5,141 19,692 8,275 Operating result -19,237 -21,797 -29,689 -3,620 -3,175 Result before taxes -22,953 -23,840 -32,332 -3,942 -3,644 Result from continued operations -22,953 -23,840 -36,337 -3,818 -1,930 0 0 -35,738 2,477 n/a -22,953 -24,767 -71,306 -1,409 -1,930 Result from discontinued operations 2) Result attributable to equity holders of the Company Production and sales (in units) Production output 31 43 26 94 48 Sales 36 37 21 74 26 131 132 166 126 71 50,037 44,011 43,273 131,137 31,250 2,613 24,913 25,657 82,987 28,396 64,183 60,542 68,012 186,044 48,615 -17,941 -19,518 -44,179 -10,679 -7,065 Outstanding shares as at 31 December with a par value of € 0.04 15,825,992 15,572,476 9,747,476 6,210,378 3,667,782 Weighted average number of shares diluted 16,908,690 16,714,321 7,122,869 4,679,963 2,989,458 Weighted average number of shares 15,671,799 15,295,962 6,929,401 4,563,658 2,739,681 Group equity per share € 0.17 € 1.63 € 3.70 € 18.66 € 10.36 Result from continued operations per share € -1.46 € -1.62 € -5.13 € -0.85 € -0.70 Result from discontinued operations per share € 0.00 € 0.00 € -5.16 € 0.54 € n/a Result per share € -1.46 € -1.62 € -10.29 € -0.31 € -0.70 Cash flow from operating activities per share € -1.14 € -1.28 € -6.38 € -2.34 € -2.58 Average number of employees (in FTE) 3) Balance sheet data Non-current assets Equity attributable to equity holders of the Company Balance sheet total Cash flow from operating activities Shares of Spyker Cars N.V. 1) 2006 comparative figures have been adjusted due to the finalization of the PPA and the presentation of Formula One Racing as discontinued operations. 2) Discontinued operations relate to Formula One Racing activities. 3) Only relates to the continued operations. I N F O R M A T I O N F O R 20 S H A R E H O L D E R S Key financial dates 22 April 2010 General Meeting of Shareholders 2010 23 April 2010 Trading update Q1, 2010 27 August 2010 Results first half year 2010 29 October 2010 Trading update Q3, 2010 These dates might be subject to change. Listing Spyker Cars N.V. (“Spyker Cars”) is listed on the Official Market of the NYSE Euronext Amsterdam Stock Exchange (ticker symbol SPYKR, fund code 38083, ISIN-code NL 0000380830). From 2 September 2008 until 2 March 2009, Spyker shares were included in the AScX index (Smallcap Index). Apart from the year and half year results, listed companies are required to publish two interim statements, one in the first and one in the second half year. Spyker Cars combines these statements with its trading update at the end of the first and of the third quarter of the year. Q4 trading updates are no longer published. Development share price from 27 May 2004 up to 31 March 2010 Spyker 25 20 15 10 5 27-2-10 27-11-09 27-8-09 27-5-09 27-2-09 27-11-08 27-8-08 27-5-08 27-2-08 27-11-07 27-8-07 27-5-07 27-2-07 27-11-06 27-8-06 27-5-06 27-2-06 27-11-05 27-8-05 27-5-05 27-2-05 27-11-04 27-8-04 27-5-04 0 21 Increase of share capital during 2009 Spyker Cars’ issued share capital consists of ordinary shares, shares class A and one priority share. The nominal value of each share in Spyker Cars is € 0.04. Shares class A are registered shares and cannot be listed. Shares class A can be converted into ordinary shares if the shareholder so requires by means of an application to that effect to the Management Board. In 2009, 253,516 ordinary shares were issued to Affaires Financières SA / Bank Sarasin & Cie upon conversion of 500,000 bonds under the 7% subordinated convertible loan 2005-2009, at a price of € 1.97 per share. During 2009, RMC Convers Group Holding Ltd. required conversion of 4,643,750 shares class A into ordinary shares. At year end, 15,825,992 shares were in issue, divided by 15,559,476 ordinary shares, 266,515 shares class A and 1 (one) priority share. Issued shares per 1 January 2009 Converted from class A to ordinary shares Conversions convertible bond 2005-2009 Issued shares per 31 December 2009 Ordinary Priority Class A Total shares shares shares shares 10,662,210 1 4,910,265 15,572,476 4,643,750 0 -4,643,750 0 253,516 0 0 253,516 15,559,476 1 266,515 15,825,992 Substantial holdings in Spyker Cars Under Dutch law, substantial holdings (equalling or exceeding 5% and multiples of 5%) have to be reported to the Dutch Authority for the Financial Markets (“AFM”). The overview hereunder shows the holding percentages (excluding option rights) in Spyker Cars per the end of 2008, per the end of 2009 and per the date of this annual report: 07.04.2010 31.12.2009 31.12.2008 - 25-30% 25-30% Oplanchuk, V. and Antonov, V. (RMC Convers Group Holding Limited) Gemini Investment Fund Ltd. 10-15% 10-15% 10-15% Mubadala Development Company 20-25% 20-25% 20-25% 25-30% 5-10% 5-10% 5-10% - - Muller, V.R. (Investeringsmaatschappij Helvetia B.V. and Tenaci Capital B.V.)** B.`O Toole (Dorwing Solution Limited) * Mr. Antonov is a major shareholder of Snoras. Per 25 December 2008, Snoras transferred all of its shares class A to Desolery Holdings Limited. This company’s name was changed to RMC Convers Group Holding Limited (“RMC”). Mr. V. Oplanchuk is a major shareholder of the Cyprus company and a family relation of Mr. V. Antonov. Per 6 November 2009, Mr. Antonov acquired RMC. ** Per 22 February 2010, Mr. Muller, through Tenaci Capital B.V., acquired all shares of Mr. Antonov. Overview of publications in the period 1 April 2009 – 1 April 2010 Art. 5: 25f of the Financial Market Supervision Act (Wft) requires listed companies to publish an overview of all press releases or a reference to these press releases once a year, regarding the press releases of the last twelve months. The press releases mentioned hereunder can be found on Spyker cars’ website www.spykercars.com under the heading investors. • 26 March 2010 Spyker Cars N.V. reports 2009 full year results • 24 March 2010 Spyker CEO reduces his voting interest to below 30 percent • 23 February 2010 Closure Saab • 12 February 2010 Statement Saab EIB • 8 February 2010 Spyker secures further financing Saab deal • 2 February 2010 Latest Statement Saab • 1 February 2010 Spyker provides further details on Saab acquisition • 26 January 2010 General Motors and Spyker Cars reach agreement on Saab • 25 January 2010 Reaction on press speculation on Saab • 7 January 2010 Spyker Cars submits offer on Saab • 21 December 2009 Spyker Cars extends its offer for Saab • 18 December 2009 Spyker Cars and GM end discussions on Saab • 2 December 2009 Statement Spyker Cars on interest in Saab • 20 November 2009 Spyker Cars Relocate Assembly to UK • 23 October 2009 Spyker Cars Trading Update Third Quarter 2009 • 28 September 2009 Change in Management Board • 31 August 2009 Press release Spyker Cars NV semi-annual report 2009 full • 28 August 2009 Press release Spyker half year results 2009 • 24 April 2009 Dutch Supreme Court rules in favor of Spyker Cars N.V. • 23 April 2009 Spyker announces changes in Management Board and Supervisory Board • 23 April 2009 Spyker Trading Update First Quarter 2009 • 8 April 2009 Press Release Karmann • 7 April 2009 Press Release Spyker Cars reports 2008 full year results 23 June 12, 2009: Spyker C8 Laviolette (chassis number 218) at the start-finish line one day before the 24 Hours of Le Mans Heritage Design Craftsmanship Performance Exclusivity T H E C O M P A N Y 26 Profile Spyker Cars is a public limited liability company incorporated under the laws of the Netherlands with its statutory seat in Zeewolde, the Netherlands. It has been listed at the NYSE Euronext Amsterdam Stock Exchange since 27 May 2004. Under the Spyker brand the Spyker group of companies (“Spyker” or the “Group”) designs, engineers, manufactures, markets and distributes high-end sports cars and aims to do so in the near future for super sports utility vehicles. In addition, the Group operates a GT race team participating in the Le Mans series and other endurance races. Spyker Cars has built its brand by clearly and consistently communicating its values, enforced through active engagement in racing in the international race arena and through marketing of personal luxury items, all supporting the overall brand image. Spyker Cars’ distribution network includes high-end multi franchised dealers and dedicated Spyker dealerships in Europe, North and South America, the Middle East, South East Asia, China and Northern Africa. Spyker Cars is the top-holding company of a group of companies and associates, consisting of: • Three wholly owned subsidiaries in the Netherlands: Spyker Automobielen B.V., Spyker Squadron B.V. and Spyker Events & Branding B.V.; • A 100% subsidiary in the United States of America: Spyker of North America, LLC; • A 100% subsidiary in the United Kingdom: Spyker Cars UK Ltd.; • A 51% interest in Spyker of China Ltd., established in Hong Kong, Peoples Republic of China; • A 45% interest in Tenaci Engineering Pvt Ltd. in India. Group mission and values The mission of Spyker is to become a leading and durable European car manufacturer in the premium sports segment of the market with a powerful brand. Strategy The strategy of Spyker Cars focuses on the following objectives: • To position Spyker as a premium brand for exclusive and hand built sports and super sports utility cars and related products in the premium super sports and super sports utility car market with a high-end distribution network to match; and • To create a distinctive, custom-made, premium product incorporating aviation and racing styling elements derived from the original Spyker brand in the period 1898-1925 in the form of a high-tech package with state-of-the-art underpinnings; and • To prove reliability and quality, and to create credibility and global brand recognition, by engaging in active racing in the international GT race arena. History At the dawn of motoring, a Dutch car company was building cars that became a benchmark for their foreign counterparts. Combining technological innovation with a drive for engineering perfection and superb quality, Spykers won gruelling races, set speed records and became known as the most 27 prestigious cars of their time. In 1898, two brothers, Jacobus and Hendrik- Jan Spijker, coach builders in Amsterdam, built their first Benz-engined motor car that won them immediate acclaim for the craftsmanship of their bodywork. In the same year Spijker built the famous golden state coach, still in use today, to commemorate the forthcoming coronation of Queen Wilhelmina. This was the turning point in their business career: from that moment on the Spijker brothers dedicated their company entirely to the manufacture of motor cars. The business name was changed from “Spijker” to “Spyker”, for easier recognition in foreign markets. S.F. Edge broke the Brooklands double-twelve speed record in july 1922 with a Spyker C4. The car is pictured in the ‘Scheveningen’ version. Oil on canvas, artist Araun Gordijn, 2010. Collection John Mulder. In 1903 Spyker introduced the extremely advanced 60/80 HP. It was the first car with a six-cylinder 28 engine as well as permanent four-wheel drive and four-wheel brakes. In the same period Spyker introduced its patented ‘dust shield chassis,’ a chassis fitted with a streamlined under tray that prevented the car from making dust on unpaved roads. It was innovations such as these that characterized the Spykers, which quickly became famous for their quality and the ruggedness of their engineering. The Spyker models, with their characteristic circular radiators, were especially successful in the Dutch East Indies and in Britain, where Spyker became known as ‘the Rolls Royce of the continent’. Spyker’s reputation reached further heights when in 1907 a privately entered standard model Spyker 14/18HP Tourer became legendary after successfully competing in the famous gruelling Peking to Paris Raid, arriving in second place behind Prince Borghese’s Itala. In the period prior to World War I, a worldwide slump in the luxury car market meant that Spyker had to diversify its production, and so it merged with the Dutch Aircraft Factory N.V. in 1914. The company started developing and building aircrafts. During the war, Spyker built around 100 fighter aircrafts and 200 aircraft engines. In 1914 the company introduced the axiom that is still used today: ‘Nulla 29 tenaci invia est via:’ ‘For the tenacious no road is impassable’. Along with the axiom came a new logo, featuring a wire wheel with a horizontal propeller across. After the war Spyker resumed its car production. True to its axiom, Spyker continued building record-breaking cars. Most famous of these is the Spyker C4 with a 6-cylinder engine built by the famous German engineer Wilhelm Maybach. It had a double ignition system with Bosch hightension magneto and battery-coil ignition with two spark plugs per cylinder. The C4 was a powerful, dependable and luxurious car; in 1921, a standard C4 called “Tenax” set a new endurance record, driving continuously for 36 days and covering a distance of not less than 30,000 kilometres. A year later, the famous British driver Selwyn Edge broke the Brookland’s Double Twelve speed record, clocking an average speed of 119 km/h. In 1925, the Spyker company ceased trading, but its name was never forgotten. Spyker became an icon, a brand name that stands for technologically advanced, exotic and dependable cars. That heritage has been passed on to the new Spyker and its cars. Spyker 14/18 in Gobi-desert during the motor race Peking-to-Paris in 1907. Oil on canvas, artist Araun Gordijn, 2007. Collection John Mulder Exclusivity S U P E R V I S O R Y B O A R D ’ S R E P O R T 32 Dear shareholders, The financial statements prepared by the Management Board for the annual report 2009 have been audited by Ernst & Young Accountants LLP. Ernst & Young discussed their findings on the financial statements with our Board. We concur with the financial statements and recommend to the General Meeting of Shareholders: 1 To accordingly adopt the 2009 financial statements; 2 To deduct the net result over 2009 from the other reserves; 3 Not to declare any dividend. The Supervisory Board is charged with the supervision of the Management Board, the general course of affairs of the Group and the business connected to it. We supervise and advise the Management Board in performing its management tasks, including (a) achievement of the objectives of the company, (b) corporate strategy and the risks inherent in the business activities, (c) the structure and operation of the internal risk management and control systems, (d) the financial reporting process, (e) compliance with primary and secondary legislation, (f) the company-shareholder relationship, and – as from the fiscal year 2010 - (g) corporate social responsibility issues that are relevant to the enterprise. Major management decisions and the Group’s strategy are to be discussed with and approved by the Supervisory Board. According to the company’s articles of association, the Management Board shall submit to the Supervisory Board for its approval (a) the operational and financial targets of the company, (b) the strategy applied to realize the objectives, (c) the parameters to be applied in relation to the strategy, for example in respect of the financial risks. The Management Board and Supervisory Board intend to add to the resolutions listed in article 19 of the articles of association, which are subject to the approval of the Supervisory Board: corporate social responsibility issues that are relevant to Spyker Cars N.V. (“Spyker Cars”). Due to the acquisition of Saab, some board members, who have been active in 2009, resigned in 2010. Currently new candidates have been identified and introduced in this report. Their specific tasks and roles withing the board are to be determined. Corporate Governance The application by Spyker Cars of the Corporate Governance Code is addressed in a separate chapter “Corporate Governance” in this Annual Report. In 2009, the Management Board continued the implementation of control systems and risk management measures. The integration of f.i. IT systems of the various departments, including finance, procurement, production and sales have been further improved and the objective is to have a fully integrated system in 2010 and in line with the renewed corporate structure. This will result in an improved performance and more efficiency across various company functions. Interdependencies will be further optimized which will continue to take place during 2010. The Supervisory Board shall discuss the corporate strategy and the risks of the business, the result SUPERVISORY BOARD of the assessment by the Management Board of the structure and operation of the internal risk 33 management and control systems, as well as any significant changes thereto at least once a year. The Financial Statements include a paragraph on related parties. In this paragraph, transactions with individual Management Board members and individual Supervisory Board members are reported. No member of the Management Board or Supervisory Board reported a transaction of material significance to Spyker Cars and/or relevant Board members, which required the approval of the Supervisory Board. Best practise provisions II.3.2 to II.3.4 inclusive have been complied with, as well as III.6.1 to III.6.3 inclusive. There were occasions where the chairman and a member of the Supervisory Board had to abstain from voting in view of a (potential) conflict of interest. It all concerned financial agreements between Spyker Cars and the companies of Mr. Antonov. Provision III.6.4 has been complied with. As explained under the heading “Legal proceedings and other legal matters” in the Management Board’s report, the Dutch Authority for the Financial Markets (“AFM”) lodged notice of appeal to the Supreme Court at the beginning of 2008 in respect of the 2006 annual accounts and the judgement of the Enterprise Section of the Amsterdam Court of Appeal. On 28 December 2007 this Enterprise Section ruled that there was no need for Spyker Cars to amend its 2006 annual report. On 24 April 2009, the Dutch Supreme Court rejected the appeal lodged by the AFM on all 26 accounts, following the ruling of the Court of Appeal that Spyker’s 2006 annual accounts provided a true and fair view in accordance with IFRS as adopted by the European Union. The Supervisory Board had three permanent Supervisory Board Committees up to 31 December 2009: 1. The Audit Committee, chaired by Mr. Hugenholtz; 2. The Remuneration & Nomination Committee, initially chaired by Mr. Apockinas and succeeded by Mr. Stancikas; and 3. The Strategy Committee, chaired by Mr. Antonov. The full Corporate Governance section can be found in a separate chapter on “Corporate Governance” in this annual report. Meetings of the Supervisory Board and topics discussed The year 2009 was a year in which the company restored its focus on the production of the C8 SWB and the start of production of its new model: the C8 Aileron (LWB). Spyker continued the development and engineering of the D8 Peking-to-Paris, which resulted in the production of a “mule vehicle” to be used for testing purposes. In the summer of 2009, Spyker started the production of the first C8 Aileron and the company successfully started the launch of the model by ride & drive events in the United States and Europe. The C8 Aileron was well received by the press. In addition to our focus on the continuity of Spyker Cars, we focussed on cost reduction and control. One of the measures that were taken in this respect was the move of the assembly of our vehicles to the UK. This did not only result in a reduction of costs, but also in the improvement of the quality of the operation and the product. We selected CPP (Manufacturing) Ltd. as our partner for the 34 production of the chassis and the assembly of the Aileron. Topics we discussed were the budget and the financial forecast 2009, further development of our licensing and merchandising activities, and the expansion of our distribution network. We instructed the Management Board to continue its discussions with the Chinese state-owned company CATC for the establishment of a joint venture in China. On March 19 2010 Spyker reached agreement with CATC with respect to a joint venture for the distribution of Spyker cars in China. Spyker decided to remain active in racing through its GT2 Racing team Snoras Spyker Squadron. The company obtained an airbag waiver from the US authorities until 2012. We extensively discussed the acquisition of Saab Automobile AB (“Saab”). The Supervisory Board advised the Management Board to continue its discussions with General Motors, which was formally approved by the Extraordinary General Meeting of Shareholders on 12 February 2010. Subsequently, this resulted in the resignation of Messrs Antonov, Bondars and Stancikas as members of the Supervisory Board. The Supervisory Board believes the acquisition of Saab may be beneficial to the company. Saab has a viable business case and its large distribution network and extensive knowledge of engineering, development and design are elements Spyker can benefit from. During the year, we approved several loans granted by Mr. Antonov’s companies, with a total value of € 28.4 million (increasing the total value of the loans from € 23.2 million to € 51.6 million). The General Meeting of Shareholders, in its meeting of 23 April 2009, approved our decision to appoint Ernst & Young Accountants LLP as the external auditor for the audit of the financial statements for 2009. Spyker Cars issued a total of 253,516 ordinary shares in 2009. During the General Meeting of Shareholders in April 2009, Mr. Stancikas was appointed as a new member of the Supervisory Board, succeeding Mr. Apockinas who resigned as per April 2009. Our Supervisory Board met 9 times in 2009, of which some by way of a conference call; the average percentage of members present was 76%. Spyker Cars held one General Meeting of Shareholders on 23 April 2009. 2009 Audit Committee Hans Hugenholtz (Chairman) Maurizio la Noce Martins Bondars Vladimir Antonov The Audit Committee assists the Supervisory Board in fulfilling its supervising responsibilities for the integrity of Spyker Cars’ financial statements, the financial reporting process, the system of internal business controls and risk management, the external audit process, the external auditor’s SUPERVISORY BOARD qualifications, independence and performance as well as Spyker Cars’ process for monitoring 35 compliance with laws and regulations and the Spyker Code of Conduct. The Audit Committee reviewed and discussed Spyker’s annual and semi-annual financial statements and had various meetings with the auditors on their findings and recommendations, including impairment and funding. Other points of discussions were the appointment of Mr. Go as CFO of the company and the risk management and control system of Spyker Cars. The Management Board is responsible for implementing a risk management and control system that is suitable for Spyker Cars and that is designed to provide reasonable assurance that strategic objectives are met by creating focus, by integrating management control over the company’s operations, by ensuring compliance with applicable laws and regulations and by safeguarding the reliability of the financial reporting and its disclosures. The Management Board formulated the most important risks of the company and the actions to mitigate those risks. An audit was carried out with respect to the insurance portfolio, which led to some improvements to the current insurances of the company. We concluded that over the last two years Spyker Cars’ financial reporting process and the system of internal business control and risk management has been further optimized but that there are still significant areas for further improvement and strengthening of Spyker’s internal control and risk management system. However, targets have to match reality; for example, the reduced number of employees did not allow the institution of an internal audit department in 2009. The new Spyker organization including Saab is and will be on the agenda of the Audit Committee and will be carefully monitored. A description of Spyker’s risk management can be found in the chapter “Risk Management” in this Annual Report. 2009 Remuneration & Nomination Committee Naglis Stancikas (Chairman), formerly Dmitrijus Apockinas Vladimir Antonov The Remuneration & Nomination Committee assists the Supervisory Board. The specific responsibilities of the Committee include the remuneration policy for the Management Board and its individual members, reviewing and preparing proposals concerning the corporate goals and objectives relevant under the ESOP, reviewing and making recommendations to the Supervisory Board relating to the corporate governance of Spyker Cars, reviewing the performance of the members of the Management Board and periodically assessing the size and composition of the Management Board and the Supervisory Board. On the Committee’s agenda was the remuneration of the Management Board members, key positions in Spyker’s organization and the granting of ESOP option rights. In the year under review, we decided to amend the remuneration policy of Spyker Cars. This new remuneration policy has been approved by the Annual General Meeting of Shareholders in April 2009 and is described in the remuneration report on page 37 and onwards. Mr. Apockinas informed us of his resignation as member of the Supervisory Board and chairman of 36 the Remuneration & Nomination Committee as per 23 April 2009. Mr. Apockinas has been succeeded by Mr. Naglis Stancikas as a member of the Supervisory Board and chairman of the Remuneration & Nomination Committee. Mr. Stancikas was appointed by the Annual General Meeting of Shareholders in April 2009. We took notice of Mr. Roukens’ resignation per 31 January 2009. Mr. Go was appointed as his successor at the Annual General Meeting of shareholders in April 2009. Mr. Liebregts retired on 31 December 2009. His tasks were taken over by his direct reporting managers, Mr. Wicher Kist (COO) and Mr. Michael Schouten (CTO). Mr. Gasc, Chief Commercial Officer, left the company per November 2009 and was not replaced. 2009 Strategy Committee Vladimir Antonov (Chairman) Hans Hugenholtz Maurizio la Noce The specific responsibilities of the Strategy Committee include technology & production, marketing, dealer network, racing and the funding of Spyker Cars. In addition, the Strategy Committee determines the responsibilities of the Management Board members, reviews and monitors key performance indicators and approves business plans and partnerships. During the year, we advised on the marketing of Spyker products and on the possibility to (re)enter into Formula One racing. The Board further advised the Management Board on licensing & merchandising, sales & marketing and on the acquisition of Saab and the joint venture in China. Composition of the Supervisory Board Supervisory Board members retire periodically in accordance with a rotation plan drawn up by our Board. Each Supervisory Board member who retires may be re-appointed. The rotation plan is placed on the site www.spykercars.com under the heading “Investors” and “Supervisory Board”. In 2004, the General Meeting determined the remuneration of the Supervisory Board members. The members of our Supervisory Board have signed the financial statements in this annual report pursuant to their statutory obligations under art 2:101(2) Dutch Civil Code. SUPERVISORY BOARD Remuneration report 37 General The remuneration which the Management Board members receive from Spyker Cars shall be such that qualified and expert managers can be recruited and retained. According to the policy, the remuneration consists of the following elements: 1. fixed salary; 2. option rights according to the company’s Employee Stock Option Plan (ESOP); 3. cash bonus linked to short term targets; 4. cash bonus linked to long term targets over a period of 3 years. The elements set out under point 2 to 4 are variable components, which are linked to pre determined targets that can be easily measured and once achieved have the ability to make a positive and direct impact on Spyker Cars’ results and performance. The importance of the variable remuneration component is to strengthen the Board members’ commitment to the company and its objectives. Options to acquire shares in Spyker Cars in principle (i) shall be granted to members of the Management Board and key employees and (ii) are a conditional remuneration component. Shares in Spyker Cars, held by members of the Management Board, are long term investments. The Supervisory Board may award incidental cash bonuses to members of the Management Board. Spyker Cars’ remuneration policy was approved by the General Meeting of Shareholders in 2005 and further amended by the General Meeting of Shareholders in 2009. Spyker Cars does not grant its Management Board members any personal loans or guarantees unless it is within the normal course of business. The terms will be applicable to individual personnel and only granted after approval from the Supervisory Board. Severance payments will not exceed one year’s salary, unless this would be manifestly unreasonable in the circumstances. Remuneration in the past financial year Remuneration Management Board There have been several changes within the Management Board. At the beginning of 2009, the Management Board consisted of a Chief Executive Officer (“CEO”), a Chief Financial Officer (“CFO”) and a Chief Operating Officer (“COO”). Mr. Roukens resigned as CFO of the company per 31 January and was succeeded by Mr. Go who started in March 2009. Mr. Liebregts resigned as COO as per 31 December. Mr. Muller, CEO of Spyker Cars, works for the company pursuant to a management contract between Spyker Cars and his management company. Mr. Go and Mr. Liebregts have concluded an employment contract. The contract with Mr. Muller is for an indefinite period of time and of Mr. Go for a period of four years, ending per the day of Spyker Cars’ Annual General Meeting of 2013. Mr. Roukens terminated his four year contract per 31 January 2009 and Mr. Liebregts terminated his contract per 31 December 2009. No severance payments have been made. The yearly management fee for Mr. Muller is 38 € 240,000. The base remuneration of Mr. Go is € 180,000 per year. All members of the Management Board have been granted 59,782 option rights. Mr. Go has received a “sign on” bonus of € 30,000 in 2009. The contract of Mr. Muller has a notice period of two months for both the company and Mr. Muller. The contract of Mr. Go contains a notice period of two months for himself and of four months for the company. The contract of Mr. Muller does not contain an arrangement regarding severance payments. The employment contract with Mr. Go contains a provision that severance payments will not exceed one year’s salary, unless this would be manifestly unreasonable in the circumstances. In addition to a fixed salary and the long-term option rights under the ESOP, the remuneration of the Management Board members includes a cash bonus linked to short term targets. The Supervisory Board set individual targets for each member of the Management Board, which related to the specific responsibilities of the respective members. The targets for 2009 were not met. No pension scheme has been set up for Mr. Muller. Mr. Go received a contribution of € 12,460 from the Group to build up a pension. Members of the statutory Management Board are compensated for the expenses regarding travelling and communication. Statutory Board of Management V.R. Muller F.J.M. Liebregts A.A. Roukens D.J.C.Y.S. Go Base salary 2009 € € 178.890 € 22.778 € 135.405 Bonus 2009 € € € € 30.000 Management fee € 240.000 € € € - Total cash compensation € 240.000 € 178.890 € 22.778 € 165.405 Vested stock options 2009 none none none none As a % of base salary - The options expensed for the members of the statutory Management Board amount to € 0 Due to the resignation of Mr. Roukens and Mr. Liebregts, a number of 119,564 option rights lapsed (59,782 with an exercise price of € 7.01 and 59,782 with an exercise price of € 4.56). Statutory Board of Management V.R. Muller F.J.M. Liebregts A.A. Roukens R. Borsboom Base salary 2008 € € 90.000 € 135.000 € 58.333 Bonus 2008 € € € € - Management fee € 200.000 € 76.406 € € 64.314 Total cash compensation € 200.000 € 166.406 € 135.000 € 122.647 Vested stock options 2008 none none none n.a. As a % of base salary - The options expensed for the members of the statutory Management Board amount to € 25,315. Remuneration Supervisory Board According to a resolution of the General Meeting of Shareholders in 2004, the chairman is entitled to a remuneration of € 20,000 per year and each of the members to a remuneration of € 15,000 per year. No other compensation, bonuses or options have been granted to the members of the Supervisory Board. SUPERVISORY BOARD Supervisory Board V. Antonov J.B.Th. Hugenholz M. La Noce D. Apockinas M. Bondars N. Stancikas J.H.M. Lindenbergh € € € € € € € 2009 20,000 15,000 15,000 4,603 15,000 10,397 - € € € € € € € 39 2008 20,000 15,000 15,000 15,000 15,000 4,375 ESOP Spyker has an Employee Share Option Plan (ESOP), which came into force in 2005 and was amended in 2006 and 2008. The 2008 amendment was a matter of clarification and adaptation to the new prescriptions of the Financial Market Supervision Act. Under the five-year duration of the ESOP, option rights may be granted to acquire newly issued shares up to an aggregate amount of 10% of the issued share capital per the option date. As per 31 December 2009, 208,128 option rights (2008: 333,670 option rights) were granted to and accepted by members of the Management Board and a number of (key) employees. The exercise price for these options has been determined as follows: € 9.30 for 124,346 option rights; € 17.00 for 24,000 option rights and € 2.37 for 59,782 option rights. In 2009, 59,782 option rights were granted, no option rights were exercised and 185,324 option rights lapsed or expired. An employee is only allowed to convert its option rights into shares if it is still an employee of Spyker. Each year 20% of the option rights will vest if the performance criteria for that year are met. These performance criteria are determined each year by the Supervisory Board. The targets for 2009 set by the Supervisory Board related to the number of cars produced and sold and to a certain reduction of the negative operational cash flow. The targets for 2009 were not met. Remuneration policy for the coming years Spyker Cars intends to amend its present remuneration policy enabling the Supervisory Board to incidentally award shares to members of the Management Board and key employees, in addition to its existing right to award incidental cash bonuses. Shares held by members of the Management Board are long term investments and strengthen the Board Member’s commitment to the company. The Board shall propose in 2010 to the General Meeting of Shareholders to amend the present remuneration policy accordingly in order to award shares to the members of the Management Board and key employees. With the acquisition of Saab, an adequate remuneration policy and target setting will be getting increasingly important in order to recruit and retain qualified people and give them the right incentives. The Remuneration Committee aims to further improve the remuneration policy of the company - within the current framework – in order to ascertain that the interest of the Management Board and the key employees are aligned with the goals of the company. Setting the right targets for the variable element of the remuneration policy is key in this respect. In formulating the remuneration policy and setting targets, the company takes into consideration the principles and best practise provisions of the Dutch Corporate Governance Code. Zeewolde, 7 April 2010 J.B.Th. Hugenholtz, Chairman M. La Noce, Vice Chairman M A N A G E M E N T B O A R D ’ S R E P O R T 40 Global automotive market and premium sports car segment The global car industry has been one of the main victims of the economic crisis, which hit the world in 2008. As the year 2009 progressed, the global economy showed recovery. Economic recovery in North America continued in the last quarter of 2009. Europe slower emerged from recession, overall recovery to remain gradual and uneven. In China, domestic investments supported further growth. Risks remain in countries with heavy debt and flawing credit rating. Exchange rates and interest rates will remain volatile to economical growth expectations, inflation and the management of public debt. Oil prices are widely expected to be in the $80 to $100 per barrel range, higher than pre-crisis levels. Worldwide car sales dipped to 59 million in 2009, 13% below 2008. Predictions are that the economic upturn will clearly show in 2010, with over six million more car sales, accelerating to a total of 71 million in 2011. Vehicle industry growth is lead by China, India, Brazil and US; the development in Europe is uneven and slower as a whole. Spyker Cars’ products are positioned in the top end of the sports car segment (ultra luxury). Global annual sales of this category were around 30,000 in 2007 and 2008. Last years output declined to ca 15,000 units. The segment is to re-bound to pre-crisis level until 2011 and gain another 50% in the years following. The market for top-end SUVs followed a similar pattern, with a pre-crisis volume of 20,000 globally and a 60% drop in 2009. The future segment outlook is a gradual increase to previous output, in the coming years. It can be concluded that worldwide prospects for the car industry, both in total and for the high-end market, are definitely better than at the end of 2008. The main markets for ultra luxury remain in USA, U.K., Germany, Switzerland, Japan, China, SouthEast Asia and the Middle East. Branding and marketing Since its start in 2000, Spyker Cars has consistently focussed on the five main values of the Spyker brand: heritage, design, craftsmanship, performance and exclusivity. Development of the brand is one of the most important issues in its strategy in the near future. Racing is of key importance for the Spyker brand because of the direct impact it has on its road cars being accepted by its target group as high performance sports cars. Spyker concentrates on GT participation in the Le Mans Series and other endurance races. MANAGEMENT BOARD The five Spyker brand values do not only apply to the manufacturing of products, but also to the 41 way the cars are presented to the market through high profile events and the selection of premium dealers. Spyker cars are marketed via face-to-face presentations at high profile events, including selected motor shows, concourses d’elegance and GT endurance racing events including the 24 hours of Le Mans. At the prestigious auto show Pebble Beach Concours d’Elegance in California, Spyker attended with no less than 7 cars and revealed a prototype of the Spyker C8 Aileron Spyder. Furthermore, Spyker participated in the Chicago Auto Show, the Salon International de l’Automobile in Geneva, the New York Auto Show and the Los Angeles Motor Show. Spyker organized several ride & drive events with the Spyker C8 Aileron. This way, the press but also Spyker’s dealers and potential customers were able to experience the all new second generation Spyker. Press coverage of the Aileron was invariably positive. Investment policy, product research and product development Spyker Cars’ investment policy, as determined in Spyker Cars’ business plan 2008-2012, focuses on a limited model range of two models for the years to come. The two models are the C8 Aileron (C-line) and the Super Sports Utility Vehicle (SSUV) Peking-to-Paris (D-line). After the capital contribution by UAB “Snoro turta valdymas”, a subsidiary of Bankas Snoras of Vilnius, Lithuania, (“Snoras”) in January 2008, Snoras continued to fund Spyker Cars in 2009. Selling highly exclusive Spyker sports cars worldwide requires engineering capabilities to design, develop and certify the cars before their launch into the market. The objective is to develop a product in line with consumer expectations, create an efficient production process yet meet high quality standards. In 2009 the development of the long wheel base Spyker C8 Aileron further progressed. The preproduction version of the Spyker C8 Aileron was launched successfully in March 2009 at the Salon International de l’Automobile in Geneva. Engineering developments of the C8 Aileron and the preproduction phase have been finalized. Production at CPP in the UK has started in the first quarter of 2010. The C8 Aileron is built in two versions, a coupe and a convertible. The Aileron comes with an automatic gearbox as an option. Spyker has also continued the development of the D-Line, albeit at a lower pace because of the focus on the C8 Aileron production and the acquisition of Saab, which allows Spyker to develop most of the remaining engineering work cheaper and more efficient. The D8 is aiming to be a stylish, robust everyday usable car that carries the latest technology. Spyker will enter a new segment of the car industry through the introduction of the D-line. Various developments of the C8 are usable in the D8. The relocation of the production to the UK had a significant impact on the number of Spyker’s engineering employees. In 2009, the Group’s engineering team was reduced from 23 engineers and 40 (production and engineering) mechanics to 20 engineers and 11 mechanics. The other departments were reduced with 12 employees. Spyker‘s strategy remains to strive for type approvals under USA and Europe regulations, because 42 these rules are benchmarks for worldwide certification criteria. Other countries may be added in accordance with the corporate sales and distribution plan. In 2009, Spyker obtained European Small Series Type Approval, which regulation was introduced on 1 April 2009. It passed all tests for the Conformity of Production (“COP”) certificate. The COP certificate is issued by the Dutch Rijksdienst voor Wegverkeer. Spyker received the certificate for the Spyker C8 short wheel base, from which the Aileron will benefit to a large extent. Spyker continues its cooperation with several certification specialists and partners. Financial results and funding During the year 2009, Spyker has secured its funding via loans provided by the companies of Mr. Antonov. This has resulted in an increase of the loans from € 23.2 million to € 51.3 million at year-end. Consequently, the interest costs increased by € 1.7 million compared to 2008 (from € 2.0 million to € 3.7 million). Together with the revenues from sales these funds were mainly used for the development of the Spyker C8 Aileron. Furthermore, a tooling lease agreement was set up to finance the tooling required for the new Aileron production in the UK. In spite of the economic crisis, with the car industry as one of its main victims, sales volume maintained almost identical and losses reduced slightly, without any benefit from governmental support measures. In 2009, 31 cars were produced and 36 were sold, compared to 43 and 37 respectively in 2008. Moreover, the operation results improved slightly from - € 21.8 million in 2008 to - € 19.2 million in 2009, due to cost cutting measures implemented during 2009. This includes impairment items that are required under IFRS. Also included are non recurring items in the amount of € 1.5 million, such as cost incurred due to the Saab deal, restructuring costs due to production relocation to the UK and subsequent restructuring costs. This indicates that the cost reduction focus had a positive effect on the results. Despite the additional restructuring and acquisition costs as well as the increased interest costs, the result for the year 2009 was a lower loss of - € 22.9 million compared to the - € 23.8 result in 2008. In 2009, Spyker spent around € 9.8 million on development costs, which mainly relate to the development of the Spyker models C-line and D-line. Hereof, € 9.3 million, (C-line) relates to models already in production and € 0.5 million (D-line) to models still in development. In 2009, a provision of € 445,000 was formed for relocating Spyker Cars’ production to the UK. The balance total increased from € 60.5 million to € 64.2 million The result per share amounted to - € 1.46 (2008: - € 1.62). During 2009, the funding was provided by way of several loan agreements. An overview is given in the Notes section. MANAGEMENT BOARD Under the 7% subordinated convertible bond 2005-2009, originally in the amount of € 4 million, the 43 remaining amount of € 495,000 was converted into 253,516 shares by Bank Sarasin & Cie of Switzerland. The share issue was executed on 11 August 2009. The Group continued its financial lease arrangements with Lease Plan and Amstel Lease. At the end of 2009, the total amount outstanding to both companies was € 2.4 million, and maturities of these facilities range from 1 to 24 months as at year end. During 2009, Spyker had access to an equity facility agreement with Trafalgar entered into in March 2007. On the basis of this agreement, Trafalgar was committed to purchase up to Euro 25,000,000 common stock of Spyker during a three year period, if and when requested by Spyker. During 2009, the Group did not call on this facility. This facility expired in March 2010. No employee share option rights were exercised in 2009. Production and suppliers During 2009, Spyker continued the production and final assembly of the C8 SWB Spyder and Laviolette. Spyker produced and assembled several C8 Aileron pre-production cars that were utilised for engineering, validation, marketing and launch activities. The production contract with Wilhelm Karmann GmbH, Osnabruck, for the Spyker Short Wheel Base automobiles was terminated early 2009. Market circumstances required further cost-down measures. As the year progressed, it was decided to relocate Spykers’ production to its supplier CPP (Manufacturing) Ltd. in Coventry, UK (“CPP”). In December 2009, the physical move of assembly equipment for the C8 Aileron to the UK started. The start of the Aileron production took place in February 2010, whilst the production of the SWB continues in the factory at Zeewolde. The total annual production output fell from 43 cars in 2008 to 31 cars in 2009. This drop was mainly caused by the relocation of the production. Spyker deals with a wide variety of suppliers, ranging from mainstream to strategic. All part sourcing will be handled via Spyker Cars UK and supplies will be directly assembled at the plant of CPP in Coventry. Upon completion of final assembly, Spyker Cars UK will distribute all customer vehicles worldwide from the UK. Spyker Cars UK is currently expanding the team and implementing a new ERP system to deal with procurement and logistical requirements. In 2009, Spyker’s key suppliers included VW/Audi, CPP, Heggemann Aerospace, Lotus and Penso. D8 SSUV testing continued in conjunction with Bosch Engineering to optimize the brake system and ABS application, also to meet future customer and legislative requirements. Last year, Spyker Cars reported that the aim was to reduce the number of suppliers, logistical complexity and handling of tools and materials. With relocation of production to Coventry and the acquisition of Saab, the situation has altogether changed. Saab’s engineering facilities and the access to its spare parts, at prices Spyker would not have obtained as a stand alone low volume manufacturer, are now available. Dealer network/Sales development 44 The year 2009 was a tough year. Even the ultra high-end segment in which Spyker operates has been affected to some extent. With a total of 36 cars (both C8 Spyder and C8 Laviolette body types) the sales performance was very similar to the previous year (37 units in 2008). The geographical split in activity still strengthens the United States share: 47% of sales for the Americas, 42% for Europe and the remaining 11% for Asia. Spyker Cars mainly operates through multi-brand retail outlets. The Spyker dealerships faced a difficult time. Despite of the relatively low investment and low inventory level in their Spyker franchise, which resulted in less impact during the economic downturn, the worsened business at the dealerships in general had a negative impact on the company. However, compared to its peer group, Spyker was relatively fortunate not to have overproduced cars in 2008 en 2009, and hence not stocked dealers to the hilt. As a consequence, throughout 2009, the dealer inventories were low, whereas residual values of factory and dealer demonstrators remained high and the Group created a clear path for future orders and deliveries of the new car, the C8 Aileron. The market circumstances also slowed down the recruitment of new dealers. Since its start of production in 2003, Spyker has expanded its global dealer network in a selective way by choosing best in market dealers candidates. However, in the period 2008-2009, new potential dealer partners were struggling with their existing portfolio and the forecasted objective to open new markets and generate subsequent wholesale orders was not entirely realized. While keeping existing dealer partners on board in the year under review, Spyker appointed four new dealers in the USA: in Northbrook, Illinois (Steve Foley Motors), Houston, Texas (Expo Motor Cars), San Francisco, California and Salt Lake City, Utah. Furthermore, Spyker stepped into four new countries: Canada, Calgary (the Dilawri Group of Companies), Brazil, Sao Paulo (Platinuss), Egypt (Egyptian Automotive and Trading Co) and Russia, Moscow (König Motor Club). GT Racing Snoras Spyker Squadron, the factory race team of Spyker Cars, had a successful race year. At the 1,000 km of Spa-Francorchamps the team finished in fourth position. Weeks later, at the 24 Hours of Le Mans, the Spyker C8 Laviolette GT2R driven by Tom Coronel, Jarek Janis and Jeroen Bleekemolen finished in fifth position in its class, ahead of all the Porsches. After the 24 Hours of Le Mans, Snoras Spyker Squadron claimed a strong second place in the 1,000 km of the Nurburgring in Germany. This result was repeated in the 1,000 km of Silverstone, UK. The team claimed the third overall position in the GT2 class of Le Mans Series championship. Spyker endeavors to have the racing activities financed on a stand-alone basis by racing related revenues. All racing activities fall under Spyker Squadron B.V., which is a 100% subsidiary of Spyker Cars. In 2010, Spyker Squadron will again compete in the GT class of the Le Mans Series and in the ’24 Heures du Mans’. Merchandise, accessories & market supporting activities All merchandise and market supporting activities fall under Spyker Events & Branding B.V., a 100% subsidiary of Spyker Cars. In 2009, agreements were reached with Sony Computer Entertainment Inc. MANAGEMENT BOARD and Atari Inc. for interactive video game licenses. The games are called respectively Gran Turismo 45 5 and Test Drive Unlimited “2”. The range of Spyker watches was extended by granting a license to Hermanos B.V., producer of TW Steel watches. Two types of TW Steel watches are now available in different diameters. Expansion of the merchandising activities remains part of the Group’s business plan. On 27 January 2010, a service agreement was concluded with the English agency Performance Brands Ltd. to further expand the merchandising and licensing activities. Spyker’s collection is available at www.spykercollection.com. In 2009, Spyker Events & Branding continued to sell and organize factory visits and, if the visiting group so desires, a racing experience at the oval circuit of Lelystad. Other activities are the organisation of the Spyker sponsors visit to the 24 hours of Le Mans and other race events of Spyker Squadron as well as visit of auto shows. Events are offered via a special site: www.spykerevents. com. Human resources After nine years of sports car production in Zeewolde, Spyker decided to relocate its production facility to Coventry, UK. Cost reductions and efficiency benefits were the main reason for this operation. Due to this reorganization 44 out of 135 jobs were made redundant. A social plan to minimize the negative impact on the 44 employees was negotiated with the trade unions (FNV and CNV). This social plan provides for a redundancy fee and outplacement services. All employees concerned accepted the plan; they have left Spyker per end of December 2009. On 15 March, Mr. Hans Go took up his role as CFO for Spyker Cars, replacing Mr. Lex Roukens who left the company at the end of January 2009. He was appointed statutory director by the General Meeting of Shareholders, held on 23 April 2009. Mr. Renaud Gasc, CCO, left the company per November and was not replaced. Having fulfilled a Supervisory Board membership for several years, Mr. Frans Liebregts was appointed Management Board member (COO) on 1 July 2008. He retired on 31 December 2009, having prepared his team for his departure. His tasks were taken over by his direct reporting managers, Mr. Wicher Kist (COO) and Mr. Michael Schouten (CTO). The average headcount (in FTE) decreased further in the year under review from 132 to 131 as per 31 December 2009. As a result of the restructuring the number decreased to 85 as per 1 January 2010. The sickness rate remained stable. Spyker Automobielen reported a rate of 3.7%, Spyker Cars 1%, Spyker Squadron 2.5% and Spyker Events & Branding 0,1%. Spyker is a relatively young company with a matching average age of its employees of 33 years: the average at Spyker Cars is 38, Spyker Automobielen 31, Spyker Squadron 31 and Spyker Events & Branding 41. Of the workforce employed by the Group, 9% is female and 91% male, which matches the standard reflection of the automotive industry. The majority of women working for Spyker Cars are employed in support and staff functions. Legal proceedings and other legal matters 46 In 2007, the Dutch Authority for the Financial Markets (“AFM”) indicated to Spyker Cars that it had doubts as to whether Spyker Car’s 2006 financial statements complied with the relevant regulations. The AFM started a procedure with the Enterprise Section of the Court of Appeal (Ondernemingskamer) ex clause 447 Book 2 of the Dutch Civil Code, seeking a judicial order to restate the 2006 accounts. On 28 December 2007, the Court of Appeal ruled on all matters in favour of Spyker. At the beginning of 2008, the AFM lodged a notice of appeal to the Supreme Court (Hoge Raad der Nederlanden). On 24 April 2009, the Dutch Supreme Court rejected the appeal lodged by the AFM on all 26 accounts, following the ruling of the Court of Appeal that Spyker’s 2006 annual accounts provided a true and fair view in accordance with IFRS as adopted by the European Union. Spyker issued proceedings against Connect4 B.V. with respect to a default by Connect4 under the license agreement for the use of Spyker’s trademark for mobile telephony. Spyker terminated the license agreement and claimed an amount of € 103,000 for unpaid royalties. Connect4 issued a counterclaim for the amount of € 2.1 million for alleged damages due to the termination of the license agreement by Spyker. There will be a personal appearance of the parties to give information or to try to reach a settlement in the second quarter of 2010. In 2010, Colin Kolles – the former manager of the Spyker Formula One team – issued preliminary proceedings against Spyker with respect to alleged unpaid commission monies over 2005 and 2006 in the total amount of € 1.2 million. The court rejected the claim of Kolles in its verdict of 22 January. In the share purchase agreement between the company, Spyker Events & Branding B.V. (formerly: Spyker F1 Racing Holding B.V.) and Orange India Holdings Sarl (“OIH”), Spyker has given certain warranties. Notice of a warranty claim must be given by or on behalf of OIH to Spyker in the case of a claim relating to: • the environment: on or before 5 October 2010; • taxation: on or before 5 October 2014; • a matter other than environment or taxation: on or before 5 October 2009. In October 2009 Spyker received notice of claims from OIH in the total amount of about € 6.5 million. OIH did not start any proceedings with respect to this notice. The aggregate liability of Spyker in respect of any claim relating to the share purchase agreement shall not exceed € 16.7 million. As a security for possible claims under the share purchase agreement, an amount of € 4 million was transferred to an escrow account. On 2 October 2008 the company received from OIH a notice of a claim relating to taxation. OIH estimates the aggregate tax liability to an amount of € 1.4 million. The escrow account is not released for this amount. Based on its own estimate, the Group already accrued in 2007 for these tax liabilities and other exposures in connection wit the sale of F1 to OIH. The residual amount of € 2.6 million was released from the escrow account and paid to the Group on 5 October 2008. The net amount receivable on Orange India Holding from the escrow as well as from the completion accounts per year-end amounts to € 2.3 million. MANAGEMENT BOARD Control systems and processes 47 On an overall basis, the Management Board believes that some of the envisaged improvements relating to internal control were accomplished. Others need to be addressed in 2010, amongst others due to the time spent on the production relocation to the UK and related reorganisation, as well as the acquisition of Saab. Necessary improvements are currently being reassessed, considering the changed situation. In 2009 there were other areas of improvement. Spyker has further improved its administrative organisation and internal control functions. The budget process has been divided in cost centres and one manager is made responsible for the budget. Financial internal reporting has improved and as from early 2010 comes per month instead of per quarter. The necessary process improvements which should lead to further efficiency in amongst others production and administration are initiated. However it should be noted that the organisation is kept small for economical reasons. Hence, certain segregation of duties are optimized in the best possible matter. Also the reliance on a few specialist persons entails a risk when these persons are absent or resign. In 2009, the risk management guidance that was introduced in 2008 was continued, aiming to provide tools to management to effectively identify risks across the organisation and assess the impact of those risks on the Spyker Group. Spyker’s current risk management process identifies the most significant and emerging risks and focuses management attention on the action plans identified to mitigate losses and maximize advantages. Although part of the daily routine, formal discussions around risk management recur regularly at the management team meetings and are reported to the Management Board. An audit was carried out with respect to the insurance portfolio, which led to some improvements to the current insurances of the company. Furthermore, registration of all Spyker’s contractual obligations was further optimized during 2009. Before the Saab acquisition, the Spyker Group consisted of seven legal group entities with offices at four locations. Operations at these offices have to be accurately monitored at all times. The Group needs to rely on a well-organized administration, which enables it to decide which tasks can be executed and centralized and which can be decentralized. Further optimization of internal controls and the risk environment is high on the agenda for 2010. Having acquired Saab, the risk management guidance needs to be reviewed; the reporting cycle and the consolidation process need to be modified. The company’s management is fully aware of the necessity to realize further improvements in the internal control and risk management systems and procedures in view of the magnitude of the Saab acquisition and the uncertainties that are inherent to the carve out from the former shareholder. Environmental and social aspects Spyker is conscious of the fact that every company has a duty to respect the environment. This means that every company within its reasonable power must keep the environmental impact of its manufacturing activities to a minimum. One of the main goals within automotive industry is to reduce CO2 emissions. Worldwide, agreements led to four emission standards, of which the Californian regulation meets most stringent demands. 48 Spyker succeeded to comply with the Californian LEV2 (Low Emission Vehicle 2) standard for CO2 emissions, which means that as from 2005, Spyker complies with all emission standards worldwide. Spyker supports the worldwide aim of further reducing CO2 emissions in the future. Within the current environmental conditions and economical climate it is essential to lower the vehicle energy consumption levels. Spyker among others, consistently endeavors to reduce the weight of its cars hence reducing consumption of fuel. Spyker investigates the possibilities for the future vehicles to implement environmentally friendly technologies. The objective within this research is to develop technology which lowers the vehicle energy consumption and carbon dioxide emissions, which is not to the detriment of Spyker’s sports car performance and to the driver’s experience. Spyker complies with regional environmental legislation regarding the production process, such as separated refuse collection and a sound collection of polluting waste. Within the Spyker premises, a heating exchanger delivers warmth to the central-heating system, which results in energy savings and less use of heating. Spyker acknowledges that as a company it has social responsibilities. Spyker proves its social commitment by participating in a number of events and projects for sick children and young people, to give them something positive to look forward to. One of these projects is VU Kinderstad in Amsterdam, an initiative of Ronald Mc Donald. VU Kinderstad, which was officially opened on February 2, 2008, is a kid’s playground within the Amsterdam VU Hospital. VU Kinderstad supports the psychosocial growth of children who have to be in the hospital for a long period. Spyker participated in 2008 by donating a GT car dummy, in which the children play race games on a Playstation. For the sixth consecutive year, Spyker participated in the MaartenMemorial event in 2009. MaartenMemorial is a sponsored ride from Rotterdam to the race circuit of Zandvoort for patients that suffer from cancer, to give them the joy of a ride in one of the 100 participating sports cars and forget their illness for a moment. Furthermore, Spyker occasionally participates in other (small) projects and events of which the goal is similar to the projects mentioned above. As from 2010, Spyker expects to learn from and have access to the programs which Saab enhances regarding the environment and its stakeholders: not only how to source materials and produce goods, but also how to treat colleagues. Saab considers it to be its social responsibility and its challenge to find smart, sustainable solutions that reduce reliance on non-renewable natural resources, conserve energy and reduce waste. Saab has taken positive steps by development of lightweight, fuel efficient technologies and by the use of innovations that cut emissions and reduce reliance on fossil fuels. MANAGEMENT BOARD Recent events 49 Of major importance was the acquisition of Saab, which is described in detail hereunder. The acquisition was approved by the Extraordinary General Meeting of Shareholders on 12 February 2010. Subsequently, this resulted in the resignation of Messrs Antonov, Bondars and Stancikas as members of the Supervisory Board. Furthermore, the General Meeting decided to amend Spyker Cars’ articles of association. The amendment, executed on 24 February 2010, concerns an increase of the authorized share capital and a change of the rights attributed to the priority share. Also significant was the conclusion of a joint venture agreement between China Automobile Trading Co., Ltd., established at Beijing, China (“CATC”) and Spyker Automobielen B.V. on 19 March 2010, by which the parties agreed to establish an equity joint venture company for the marketing and sale of Spyker automobile products in mainland China. The business scope of the joint venture company, called Spyker Automobile (Beijing) Sales Company Ltd., shall be (whole)sale and retailing/ distribution of Spyker cars and parts as well as providing services to distributors. CATC is a major car distributor in mainland China. The Group expects that the cooperation will strongly support car sales in China as from 2011. The acquisition of Saab On 26 January 2010, General Motors Company (“GM”) and Spyker Cars reached agreement over the transfer of ownership of Saab. The transaction was closed on 23 February 2010 (“the Closing”) and the share purchase agreement (“Share Purchase Agreement”) was concluded. Spyker Cars has acquired from Saab Automobile Investering AB, a subsidiary of GM, all the issued and outstanding ordinary shares in the capital of Saab for a consideration of $ 74 million (“Purchase Price”) pursuant to the Share Purchase Agreement. The Purchase Price is paid in two instalments. The first instalment of $ 50 million was paid on the Closing. The second instalment of $ 24 million will be paid on July 15, 2010. Saab was acquired as a complete entity and going concern with all IP rights, trademarks, facilities and other infrastructures. The sale of pre 2003 Saab 9-3 and current Saab 9-5 technology to BAIC in December 2009 did not result in any part of Saab’s business being divested or devalued. On the contrary, Saab has already started the production of the new generation Saab 9-5 in Trollhättan. Spyker believes that through the purchase of Saab it has a rare opportunity to acquire and rebuild a global car brand which will be repositioned towards an independent performance-oriented niche car company with an industry-leading environmental strategy. Saab’s brand DNA is unique and rooted in its aeronautical heritage, innovative and independent thinking and its Swedish origins. Spyker fully supports Saab’s Business Plan which will be implemented by Saab management. The Business Plan, drawn up by Saab management over the past ten months, was analysed by Spyker in assistance with Booz & Co and KPMG Transaction Services, advisors to Spyker. The Business Plan has also been analysed and supported by several advisors to the Swedish Government and the EIB. As from Closing of the Saab acquisition, the ownership structure of Spyker Cars changed as follows: • Tenaci Capital B.V. (“Tenaci”), a company majority owned by Mr. V.R. Muller has taken over Mr. V. Antonov’s shares in Spyker Cars consisting of 4.6 million ordinary shares. Mr. Antonov has 50 caused the transfer of the priority share to Spyker per the date of Closing. • Tenaci has granted to Spyker Cars two loans. One for an amount of $ 25 million towards payment of part of the first instalment of the Purchase Price for Saab. A second loan for an amount of € 57 million for repayment of all of Spyker Cars’ current outstanding loans to banks and other financial institutions controlled directly or indirectly by Mr. Antonov. This loan mirrors the existing terms (including the lender’s right to convert € 9.5 million into ordinary shares at a conversion price of € 4.00 per share). This is further explained in the paragraph “Funding of Spyker Cars”. Saab’s business plan It is the intention to enhance Saab’s Business Plan in several areas. The highlights of Saab’s strategy will be: • Saab will be a stand-alone niche manufacturer with three to four model lines: 9-3 (sedan, hatchback, sports estate, X and convertible) and 9-5 (sedan, sports estate and X) and the 9-4X for both the US and European markets. In addition, Saab will investigate the potential of adding a fourth smaller car line (“9-1”) in due course provided that the positive development of the smaller car segment continues. However, this model is currently not envisaged in the Business Plan so if the outcome of the investigation is positive, additional financing to develop this model could be required. • Saab’s product portfolio will be renewed completely, beginning with the launch of the new 9-5 early this summer, the new 9-4X in early 2011 and the new ‘all Saab’ 9-3 in 2012. • Saab will continue to be repositioned against other brands such as Audi (A4/A6) and BMW (3/5 series) as a premium brand, leveraging its strong and unique brand heritage. • Saab’s Technical Development Centre in Trollhättan has full capability in developing complete vehicles and will continue to do so. In areas such as safety, environment, driving characteristics, practicality, turbo technologies and several other innovations, the Saab brand is among the best in the industry. • With Trollhättan as one of the most efficient mid-size car plants in Europe, production and sales volumes are aimed to be rebuilt to recent pre-crisis levels of about 100,000 to 125,000 vehicles including the 9-4X built in Mexico. • The current dealer network will be re-energized with a new sales and distribution approach in certain markets, which will be implemented during 2010. • The economies of scale of the on-going collaboration with GM after Closing will continue to be leveraged in sourcing via ancillary agreements, with independent sourcing gradually increasing to reduce GM dependency and obtain improved access to other suppliers and the codevelopment of unique innovations. Due to these ancillary agreements and the carve out. • process for these, there is uncertainty on the results. In order to allow Saab to operate on a stand-alone basis outside GM, Saab and GM entered into a large number of ancillary agreements. As part of the transaction, Spyker Cars signed an SPA with General Motors UK Limited for the acquisition by Spyker of all the outstanding shares in Saab Great Britain Limited (“Saab GB”) for a consideration of GBP 1. Saab GB is the distribution, marketing and sales company for Saab in the UK. This transaction is expected to close in May 2010. MANAGEMENT BOARD 51 Spyker believes that the two brands, both deeply rooted in aeronautical and automotive history, will benefit from sharing certain assets and technology services. Examples include but are not limited to: • Saab’s extensive global network of 1,100 dealers. • The extensive engineering know how and innovative technologies available at Saab. • Sharing of activities in marketing & sales: i.e. merchandising, promotion & sponsorship activities, etc. In the future, the two brands will be able to share certain parts and components and expect to obtain access to supplier and partner resources not available to Spyker or Saab individually today. Funding of Saab The Saab Business Plan requires approximately $ 1 billion in peak funding for Saab in advance of the return to profitability, forecast to occur by 2012. The funding was provided in part by GM, through $ 326 million Redeemable Preference Shares (“RPSs”), and in part through other contributions, which concern various substantial contributions to the funding of Saab’s Business Plan on favourable terms for supplies by GM to Saab and deferred payments from Saab to GM. The remaining amount, apart from cash at bank ($ 200 million), was provided by a € 400 million ($ 556 million) loan from the EIB for certain R&D projects at Saab. With this financing in place, the business plan does not envisage any future funding being required, neither from Spyker or elsewhere, for Saab to return to profitability. The Business Plan targets car production and sales at or below historical levels of 100,000 to 125,000. Funding of Spyker Cars Spyker’s existing bank loans in the aggregate amount of € 57 million are refinanced by Tenaci. The terms and conditions of this loan mirror those of the existing loans it repays, including the right to convert € 9.5 million into ordinary shares at € 4.00 per share. The term of the loan is 5 years and the interest 10 percent above Euribor. After payment of the last instalment of the Purchase Price, Tenaci has the right to collateralize the loan on terms and conditions identical to those on which the existing loans were collateralized. The Purchase Price of Saab amounts to $ 74 million (€ 53.23 million at the exchange rate of 1:1.39). The first instalment of $ 50 million, to be paid on Closing, was paid as follows: $ 25 million is borrowed from Tenaci at an interest rate of 6 percent above Euribor, without the right to convert into shares. Payment of the other $ 25 million is financed through a share convertible loan from an investment company owned by Heerema Holding Company Inc. The $ 25 million loan has a two year term, an interest of Euribor + 10% and is convertible into shares at € 4 each. The second instalment, $ 24 million, will be payable on July 15, 2010. Spyker intends to finance this amount through debt, but does not rule out other alternatives. Spyker has committed to pledge its assets to GM as security for this final tranche. In addition Spyker Cars concluded an Equity Credit Line Facility with GEM Global Yield Fund Ltd (“GEM”) in the amount of € 150 million for a term of 3 years, which expires per 26 January 2013. According to this facility, Spyker Cars must issue shares to GEM at 90 per cent of the average of the closing bid prices of the shares over a period of 15 trading days following a draw down notice sent to GEM by Spyker. In relation to the GEM facility, Spyker Cars will issue to GEM share warrants in respect of 1,570,000 ordinary shares at an exercise price of € 4 per ordinary share. The warrants have a 5 year term. Spyker Cars issued a corporate guarantee not exceeding $ 10 million for Saab’s obligations to and for the benefit of the financing company GMAC. Funding of Tenaci Tenaci has bought Mr. Antonov’s current shareholding in Spyker Cars consisting of 4.6 million ordinary shares, at Closing. Outlook for 2010 Outlook for 2010 Spyker Especially in the Americas, Asia and Middle East region, Spyker’s partners and customers are looking forward to first deliveries of the C8 Aileron. Due to its new design, chassis, automatic gearbox and technical enhancements we expect an increase in sales volumes for 2010. To further support the launch of the C8 Aileron the company will take the opportunity to invite top-flight international journalists for first drives of the Aileron in key motoring / newspaper motoring supplements. More than ever Spyker will target media, something that also lifts on the attention recently received due to the Saab acquisition. Management expects this will support dealers to convert all attention and opportunities into actual car sales. It is of utmost importance to generate customer interest and ‘showroom traffic’ and to build media coverage ahead of the first deliveries of the dealer & customer cars. In 2010 Spyker will further strengthen its presence in markets that have proven to be important, including the United States, Germany, the United Kingdom and Switzerland. In spite of the economic climate appointment of new Spyker dealers will be on-going. Overall Management is confident to see a further increase in sales figures and the distribution network in 2010. Outlook 2010 Saab As from the date of the closing, February 23, Saab’s first priority was to restart production which had been halted for seven weeks. Fortunately, on March 22 the first new Saab, a new generation 9-5, rolled onto the production line and left end-of-line on the 24th. Saab is now back in full production mode. Management started the implementation of the business plan. Also the first draw down under the € 400 million loan of the European Investment Bank loan was made. The business plan foresees the widest array of cars the Saab brand has ever had in a matter of 16 months: the new 9-5 52 MANAGEMENT BOARD starting now, the 9-4X cross over in April 2011 and the 9-5 Sport Combi in July 2011. The new 9-3 53 will be launched mid 2012. All production activities are now concentrated in Trollhattan, Sweden and all cars (with the exception of the 9-4X) will be produced there. The offices in Goteborg were closed and all activities were transferred to Trollhattan causing serious savings as well as improved efficiencies. On 15 March Mr. Adrian Hallmark started as Sales Director having been in leading functions at Porsche, Bentley and most recently Volkswagen. On 22 March 2010, Mr. Karl G. Lindström was appointed Chief Financial Officer (CFO) at Saab Automobile AB on a temporary basis. Karl Lindström has during the last 20 years worked as a financial consultant with several management positions such as CFO of Sony Ericsson, Flextronics and Fujutsi Nordic. Karl Lindström will also take part in the recruitment of a new CFO, an external recruitment process that will start this spring. 2010 will also mark the year in which Saab becomes an independent company in the sense that many of the ties to GM are cut and Saab sets up its own infra structures such as the sales organisation outside GM’s. Sales volume in 2010 is expected to reach between 50,000 and 60,000 units which is mainly caused by the loss of capacity in the first quarter as a result of the liquidation period. Further restoring customer confidence and re-engaging the dealer body are the major priorities for management this year. Risk management 54 During 2009, management continued assessing the various risks related to the business, the economic climate and financial outlook of Spyker. The purpose of Spyker’s risk management and control systems is to reduce the uncertainty regarding the achievement of corporate, divisional and subsidiaries’ objectives. The risk management process identifies the most significant and emerging risks and focuses management attention on the action plans identified to mitigate losses and maximise advantages. Risk management guidance notes were introduced to senior employees during the second half of 2008 in order to increase a risk conscious culture across the Group in the course of 2009 through active engagement of employees. The Management Board carries overall responsibility for risk management and control systems, supervised by the Supervisory Board and supported by senior management. The most significant risks related to Spyker Cars’ business are explained hereunder. This risk overview is not exhaustive. It should be noted that some risks may not yet be known to Spyker or may currently not believed to be material, but at a later date could potentially turn out to have a major impact on Spyker’s business. Strategic risks Acquistion of Saab The acquisition of Saab is per definition a substantial risk. The size of Saab is very significant to the Group and will have a critical impact on the Group’s future financial performance and position. Not only the accounting policies and procedures will be affected by this acquisition but also the Group’s financial risk management objectives, policies and exposures as compared to the information provided in note 30 as well as the other management risks as further disclosed. The Saab Business Plan requires approximately $ 1 billion in peak funding for Saab in advance of the return to profitability, forecast to occur by 2012. The funding is provided in part by GM, through set-off of pre-closing receivables on Saab against $ 326 million Redeemable Preference Shares (“RPSs”), and in part through other contributions, which concern various substantial contributions to the funding of Saab’s Business Plan on favorable terms for supplies by GM to Saab and deferred payments from Saab to GM. The remaining amount, apart from cash at bank ($ 200 million), is provided by a € 400 million ($ 556 million) loan from the EIB for certain R&D projects at Saab. Securing this EIB loan was a condition precedent to Closing of the Saab acquisition. With this financing in place, the business plan did not envisage any future funding being required, neither from Spyker or elsewhere, for Saab to return to profitability. The Business Plan targets car production and sales at or below historical levels of 100,000 to 125,000. The original Business Plan of Saab Automobile AB was developed in October 2009 and has been reviewed by parties as, for instance, the Swedish Government and EIB and formed the basis for their MANAGEMENT BOARD 55 decision to support the transaction. The Business Plan as such is in principle fully funded. Whether the available funding will indeed be sufficient obviously depends on whether the assumptions underlying the Business Plan will be met. There are uncertainties relating in particular to whether the envisaged volumes will be met, the pricing of the new models, the pace of the reduction of working capital requirements as well as Saab Automobile AB’s cost structure. Saab Automobile AB is continuously updating and monitoring its cash flow forecasts, including its underlying assumptions, for the coming periods. On an overall basis, the coming year will from a funding perspective be challenging as the available funds, with Saab Automobile AB just restarting its production after the temporary close down of the factory, are tight. The available funds do not provide much headroom to absorb, in a still uncertain (automotive) market, any significant deviations from, for instance, expected sales, working capital requirements and costs (including those related to the carve-out). Saab Automobile AB is evaluating certain other options for managing its cash flow development, amongst others the timing of certain capital expenditures, optimalization of its cost structure and the increase of third party engineering revenues. For a further discussion of the funding position of Saab reference is made to note 2 as included in to the consolidated financial statements. Finally and and as a result of the acquisition of Saab the risk management guidance needs to be fully reviewed, the reporting cycle and the consolidation process need to be modified. The company’s management is fully aware of the necessity of realizing further improvements in the internal control and risk management systems and procedures in view of the magnitude of the Saab acquisition and the uncertainties that are inherent to the carve out from the former shareholder. Despite the fact that the followings risks described concentrate on the risks of the Spyker business, similar risks exist for Saab’s business. Exposure to adverse economic conditions Spyker operates and competes in markets that are subject to considerable volatility in demand. This volatility has a high correlation with cycles in the overall business and economic environment in general and in the automotive and high-end consumer goods sectors in particular. Since Spyker distributes its products internationally, a significant decline in the general economy or in consumer sentiment in Europe, North America, Middle East and Asia could have a material adverse effect on the Group. The recent financial crisis that accelerated during the year under review, forced all players in the industry, including Spyker, its suppliers and dealers, to take a cautious and focussed view on the future. Suppliers have suffered by the sudden drop in demand for their materials and components, resulting in a rationalisation in the industry. Where possible, management has tried to move away from one sided supplier relationships and focussed on building partnerships based on trust and reliability. This approach has had a positive effect on a vast number of relationships, and management believes continuation of this line is key to getting through the downward trend of the current business cycle, 56 and to the successful introduction of new car models. In parallel, management continues to investigate potential substitute suppliers, to ensure optimal performance of existing suppliers and to act swiftly in case current suppliers fail to deliver. Also the relocation to the UK fits into this strategy as Coventry offers more supplier sources opportunities. The risk of dependency on certain suppliers should diminish once the purchasing activities of Saab and Spyker have been investigated and optimised. Pressure on dealers Over the years, Spyker has developed its network of multi-brand dealers in the United States. In 2009, like in 2008, a majority of the Group’s car sales took place in the US. This indicates the importance of, but also the dependence on this market. The US dealers have been hit hard by the market downturn as a result of a collapse in customer demand and the sudden discontinuation of floor financing by the major players in the car financing industry. A number of our dealers has suffered as a result, and were forced to rationalise their multi-brand strategy and decided to terminate their dealer contract. In all cases Spyker was able to respond pro actively and replaced those dealers swiftly. With the Saab acquisition Spyker gained access to a vast the dealer potential, which should lead to accelerated expansion of the dealer network and thus foothold in the US but also in other important market regions. Spyker relies on external single-source suppliers As in previous years Spyker is intensively involved in all aspects of the design and manufacture of its products, but it does not control all of the manufacturing facilities used. Therefore, Spyker is dependent upon independent third parties for the production of key parts and components and the assembly of certain products. Single-source suppliers, such as the Volkswagen/Audi Group, or CPP fill some of Spyker’s requirements for raw materials and supplies. Spyker’s ability to continue to obtain these supplies in an efficient and cost-effective manner is subject to a number of factors, some of which are not within Spyker’s control. The impact of an interruption in supply will vary per part or component. Some parts are generic to the industry while others are of a proprietary design requiring unique tooling, which would require time and resources to recreate. The inability of a supplier to deliver or to timely deliver could have an adverse effect on production and consequently could have a material adverse effect on Spyker’s business. Spyker’s product development and procurement department constantly monitors its supply chain, which currently exists of approximately 150 different suppliers. Alternatives for key suppliers are constantly monitored and the choice for the preferred supply chain is based on costs, quality and added value of possible partners. Highly dependent on single car model Spyker’s product line currently depends on one single car model, the sports car, called C-line. This car model has two designs, the convertible Spyder and the coupé Laviolette. Together with the variations on this model, like the LM85, this product line targets a specific application and market segment. A considerable reduction of the demand in this market segment could put Spyker in a vulnerable position. MANAGEMENT BOARD In order to reduce this vulnerability Spyker investigated which applications, meeting the Spyker 57 philosophy, could be added to its current model line. As a result of this investigation Spyker developed the so-called D-line, which is a super sports utility vehicle. This model will be launched under the name D8 “Peking-to-Paris”. The car, which will be a four-door, four seats luxury super sports utility vehicle powered by a 500+ hp engine, is intended to be used not just as sports car. The first driving production alike prototype of this car was ready in the summer of 2009 and is running the testing program at this moment. Besides the C- en D-line Spyker is also investigating further model developments, such as a four door sports saloon. Spyker has to conclude technology and engineering alliances for each of its models to get access to technology (platforms) at acceptable costs Both for the C-line and the D-line, Spyker needs to enter into technology and engineering partnerships to get access to technology (platforms) at acceptable costs. A small vehicle manufacturer has limited options to reduce production costs, whereas large manufacturers can achieve profitable margins while simultaneously conduct extensive research, and maintain overhead and production automation costs. By the relocation to Coventry UK Spyker has secured the production platform for the C line and in potential the D line. The Saab acquisition also should reduce this risk and the impact of the new situation is now under review. For each new model, Spyker thoroughly conducts a feasibility study to optimize supply chain management. Such study identifies the added value Spyker can offer for a partner and the available scenarios, including the risks. Before any partnership is entered into, Spyker conducts an audit on the potential new partner. Operational risks Spyker relies upon certain key personnel and upon its ability to find and retain skilled personnel Spyker’s success depends to a certain degree upon the efforts and abilities of certain members of its management team. In addition, Spyker relies on its ability (i) to hire, train and retain skilled personnel for the design, engineering, manufacturing, marketing, and distribution of its road cars and (ii) to run its GT team. Although Spyker has shown to be able to hire and retain employees even in difficult times, no assurances can be given that this will be the case in the future. The inability to attract the required skills could hamper Spyker in its efforts to develop new models and grow at the necessary speed. The ability to attract and retain qualified personnel depends on various factors, such as the attractiveness and challenge of the job offered, the contacts Spyker has with automotive education institutions, its general network and the salaries paid. So far, Spyker has no reason to doubt its ability to attract skilled personnel. The build up of the production operation in the UK put extra effort upon the Spyker management team and therefore focus is on this development. Limited production capacity 58 Spyker’s capacity to produce cars has been secured via relocation of production to Coventry, where the production facilities can cover the production in the coming period and could be scaled up via extra shifts without expansion investments. Future growth of operations depends on Spyker’s success regarding sales of the limited model range. Spyker’s inability to fulfil customer’s demand with a limited model range could have a material adverse effect on the business, financial condition and/or results of operations. Spyker acknowledges it cannot simultaneously develop multiple models with a restricted budget. With the help of consultants it has investigated the customer target groups and consequently has decided on its model range. Trademarks and other intellectual property rights Spyker’s business is highly dependent on its ability to protect, preserve, promote and obtain trademarks and other intellectual property rights. In some jurisdictions Spyker owns or otherwise has rights to a number of trademarks relating to the products it manufactures, which rights have been obtained over a period of years. These trademarks have been of value to the growth of Spyker’s business and may continue to be of value in the future. Not all intellectual property rights of Spyker are registered as designs and are therefore as such design protected. Registration of designs is only possible within a twelve-month period after the primary disclosure of the design. Spyker cannot exclude the possibility that others may substantially challenge its intellectual property rights. Also, in some jurisdictions Spyker may be unable to register its trademarks and other intellectual property rights adequately to protect them in full on an economical scale. An inability to protect, preserve, promote or obtain these trademarks or other intellectual property rights could seriously impact the business of Spyker. In addition, the high-end sports cars market is subject to numerous instances of product counterfeiting and other intellectual property infringements. The presence of counterfeit Spyker branded products on the market can negatively impact both Spyker’s sales volumes and its brand image and could have a material adverse effect on the business, financial condition and/or results of operations. Spyker is well aware of the importance of protecting the Spyker brand. It is assisted by a trademark bureau in order to timely apply and preserve trademark registrations and to detect infringements, where possible. Financial risks Availability of funds Spyker has ambitious plans for the growth of its business, through the introduction of the C8 Aileron and the D8 Peking-to-Paris. In addition, the merchandise activities are expected to show growth as a result of intensified efforts in this area. Spyker will continue to face the need to seek funds to finance it´s growth plans and the further engineering and development of these two car models, and its current and future operations. Growth of Spyker’s car sales and containment of costs is essential to start generating positive cash flow over time, and is subject to its ability to obtain additional financing in the form of debt or equity. Like 2008, the year 2009 has shown difficult financial markets and as a consequence banks have taken an extremely conservative view on lending to corporations. Only those companies with stable MANAGEMENT BOARD cash flow and profitability at the operating level, or at least a clear path to becoming profitable at 59 the operating level in due course, were able to attract financing, often at onerous terms. Despite Spyker not passing those two financial tests, it was able to obtain short and medium term financing from the Snoras Bank and LKB Bank. As financial institutions continue to be reluctant to finance companies with a profile similar to that of Spyker, there is no certainty that Spyker will be able to get the necessary financing beyond 2009. Management will continue its search for funds, and has discussed this topic regularly at Supervisory Board meetings. In case Spyker does not secure its future funding, the further development of the D8 Peking-to-Paris may prove to be unachievable, and may be put on hold until such time that the financial markets have turned and funding is available. This could materially influence Spyker in an adverse way. The recent acquisition of Saab has given the company more status and substance. This could be favourable in negotiations with third parties regarding additional funding in various forms in the near future. Saab’s funds are in certain area’s completely ring fenced because of the restrictions that come with the € 400 million loan given to Saab by the European Investment Bank (EIB). Despite these restrictions there are possibilities to restructure the financing of the Group in a more integrated way. This reduces the risk compared to Spyker as a stand alone relative small player. Foreign Exchange exposure As Spyker has international operations and is paid in local currency in several regions, including China, the Middle East and the United States of America, it is exposed to exchange rate movements that could negatively impact its profitability. Spyker’s main currency exposure relates to US Dollar/ Euro exchange rate movements. This exposure is partly covered through a natural hedge, as Spyker has North American operations which costs are denominated in US Dollars. However, the majority of the exposure is uncovered, and exposes Spyker to foreign exchange movements. Management has looked at possibilities to hedge at least a portion of the exposure through derivative transactions. However, the costs of such derivatives have lead management to conclude that it was economically not justifiable to enter into such transaction at the time. As exchange rate fluctuations could have a material adverse effect on Spyker’s financial position, management will monitor the exchange rate movements on regular basis, and will endeavour to mitigate the risk through derivative transactions that are economically viable, sourcing of parts and subcontracting of (sub) assembly to countries that are US Dollar denominated or which currency is pegged to the US Dollar. Regulatory risks Safety standards and detection of defects Government safety standards in certain jurisdictions such as the United States require that defects related to motor vehicle safety be remedied through safety recall campaigns. In the United States these regulations are called the Lemon Laws: each state has its own Lemon Law. A manufacturer may also be obligated to recall vehicles if they do not comply with a safety standard. Should Spyker or the relevant government safety regulators determine that either a safety defect or a noncompliance exists with respect to certain of Spyker’s vehicles, the costs of such recall campaigns could be substantial and could influence purchasing decisions of potential purchasers of Spyker’s vehicles, thereby negatively affecting the Group’s future sales and profitability. Spyker, its distributors June 14, 2009, 16:00 hrs.: Spyker C8 Laviolette GT2-R (chassis number 149) finishes 5th in class behind Ferrari 4305 Calendar 2010 Spyker Squadron GT2 Team 61 11 April 2010 LMS R1 8 hours of Le Castellet, Circuit Paul Ricard, Le Castellet, France 9 May 2010 LMS R2 1000 km of Spa, Circuit de Spa-Francorchamps, Belgium 12-13 June 2010 Le Mans 24 Hours, Circuit de la Sarthe, Le Mans, France 17 July 2010 LMS R3 1000 km of the Algarve, Autódromo Internacional do Algarve, Portimão, Portugal 21 August 2010 LMS R4 1000 km of the Hungaroring, Hungaroring, Hungary 12 September 2010 LMS R5 Autosport 1000 km of Silverstone, Silverstone, United Kingdom and/or its dealers presently provide purchasers of Spyker cars with separate warranty coverage for 62 defects in factory-supplied materials and workmanship on all vehicles. This warranty coverage extends for 24 months, unlimited mileage, and, for some territories, within 90 days replacement of parts of the vehicle. For the U.S. market the warranty on tires is excluded. For the compliance of Spyker’s warranty obligations Spyker relies on its limited warranties, its Lemon Law Manual and availability of resources of its suppliers to meet warranty claims. Various legal actions, governmental investigations, proceedings and claims may be instituted or asserted in the future against Spyker, arising out of alleged defects in Spyker’s products or noncompliance with governmental safety standards. In addition to these risks, doing business in the United States may further aggravate these risks due to, inter alia, higher exposure and higher costs or damages in the United States in relation to claims made under warranties or (alleged) liabilities under governmental regulations or otherwise. The discovery of defects in vehicles or of non-compliance with safety standards may result in recall campaigns, increased warranty costs or litigation which could have a material adverse effect on Spyker’s business, financial condition and/or results of operations. Spyker pursues the exchange of specific information with its dealers. It enhances campaigns to approach the dealer network by way of a technical bulletin. Feedback is communicated with the engineering department. The departments involved register the issue as well as the cause and solution. Spyker gives workshop instructions on the replacement of parts and organises technical training for dealer employees. The feedback may lead to the decision to modify the product or update a model year. Increased safety, environmental, emission or other regulations resulting in higher costs The automotive industry is increasingly subject to extensive and significant governmental and legal regulations worldwide. Laws in various jurisdictions regulate numerous aspects of Spyker’s business, including but not limited to employment, relations with dealers, the protection of consumers, automobile design, licensing, import, engineering and performance, occupant safety and the environmental impact of vehicles, including emission levels, fuel economy and noise. In addition, regulations affect the levels of pollutants or waste products generated by the facilities where Spyker’s production takes place. All of these regulations affecting Spyker are subject to change, often making them more restrictive. In the United States and Europe, for example, governmental regulations have arisen primarily out of concern for the environment, for greater vehicle safety and for improved fuel economy. These regulations are subject to change, usually making them more restrictive. The costs of complying with these requirements can be substantial. Also, Spyker cannot assure that its compliance with the regulations will not be challenged. There is risk of environmental or safety liability inherent to Spyker’s business and there can be no assurance that material environmental, emission level, safety or other requirements will not arise in the future. Various legal actions, governmental investigations and proceedings and claims may be instituted or asserted in the future against Spyker, including those arising out of, inter alia, alleged defects in Spyker’s products and governmental regulations covering safety, emission level, and fuel economy. Such potential liabilities, future governmental MANAGEMENT BOARD 63 requirements or legal actions, governmental investigations and proceedings or claims could have a material adverse effect on Spyker Cars’ business, financial condition and/or results of operations. Spyker is subject to various legal regimes As Spyker is engaged in the distribution of its products in an increasing number of countries, Spyker’s business may be affected by facts and events beyond its control, such as changes in local laws and policies (relating among others to trade, foreign investment, taxation and environmental regulations) and the instability of foreign economies and governments. Spyker has taken applicable laws and regulations into account in seeking to structure its business. Changes in such laws or regulations could, however, have an adverse effect on Spyker operations and financial position. The certification strategy of Spyker is to achieve worldwide certification compliance. This will be pursued step by step with the help of certification partners. All major regulation deadlines are embedded in Spyker’s product development plans. Spykers’ technology partner selection philosophy is based upon utilizing emission related products currently in production and certified in the USA and Europe. Furthermore, the products have to remain in production for the life cycle of the chosen type of Spyker model. Financial reporting risks Spyker shall have an internal risk management and control system that is suitable for the company. On an overall basis, the Management Board believes that some of the envisaged improvements relating to internal control were accomplished. Others need to be addressed in 2010, amongst others due to the time spent on the production relocation to the UK and related reorganisation, as well as the acquisition of SAAB. Necessary improvements are currently being reassessed, considering the changed situation. In 2009, there were other areas of improvement. Spyker has further improved its administrative organisation and internal control functions. The budget process has been divided in cost centres and one manager is made responsible for the budget. Financial internal reporting has improved and as from early 2010 comes per month instead of per quarter. The nessary process improvements which should lead to further efficiency in amongst others production and administration are initiated. However it should be noted that the organisation is kept small for economical reasons. Hence, certain segregation of duties are optimized in the best possible matter. Also the reliance on a few specialist persons entails a risk when these persons are absent or resign. In 2009, the risk management guidance that was introduced in 2008 was continued, aiming to provide tools to management to effectively identify risks across the organisation and assess the impact of those risks on the Spyker Group. Spyker’s current risk management process identifies the most significant and emerging risks and focuses management attention on the action plans identified to mitigate losses and maximize advantages. Although part of the daily routine, formal discussions around risk management recur regularly at the management team meetings and are reported to the Management Board. An audit was carried out with respect to the insurance portfolio, which led to some improvements to the current insurances of the company. Furthermore, registration of all Spyker’s contractual obligations was further optimized during 2009. Before the Saab acquisition, the Spyker Group consisted of seven legal group entities with offices 64 at four locations. Operations at these offices have to be accurately monitored at all times. The Group needs to rely on a well-organized administration, which enables it to decide which tasks can be executed and centralized and which can be decentralized. Further optimization of internal controls and the risk environment is high on the agenda for 2010. Having acquired Saab, the risk management guidance needs to be reviewed, the reporting cycle and the consolidation process need to be modified. The management board shall declare in the annual report that the internal risk management and control systems are adequate and effective and shall provide clear substantiation of this. As in prior years the discussion of the necessary improvements to the risk management and control system, including financial reporting risks, was on the Audit Committee’s agenda during 2009 and early 2010. Both the Management Board and Supervisory Board are truly committed to further improve identified risk areas in Spyker’s administrative organisation. Application of rules and regulations Spyker has to comply with all governmental laws and regulations and with the regulations as prescribed by the Eurolist Euronext Amsterdam stock exchange. These rules are complex and every year there are numerous amendments thereto. For smaller listed companies like Spyker, adequate monitoring of all these rules is a challenge. Wrongful interpretation of the rules may lead to significant reporting deviations. In order to restrict this reporting risk, Spyker consults professional advisors and hires on an interim basis qualified professionals. Spyker is subject to potential tax audits. Spyker operates or will operate in various countries and is therefore subject to the risk of tax audits and assessments in these countries. Spyker seeks to manage its tax affairs in compliance with all applicable laws. However, it is possible that authorities may disagree with positions taken by Spyker, and consequently it may be exposed to tax assessments in excess of those provided in the financial statements for tax assets or liabilities, which could have a material adverse effect on Spyker’s business, financial condition and/or results of operations. The Group accounts for the income taxes on the basis of its own internal analyses, supported by external advice. Spyker continually monitors the global tax position, and whenever uncertainties arise, it assesses the potential consequences and either accrue the liability or disclose a contingent liability in the financial statements, depending on the strength of the position and the resulting risk of loss. Spyker has a large amount of intangible assets in the form of development costs. Spyker has a large amount of intangible assets, mainly in the form of capitalized development costs. The Group’s accounting policy is to amortize the capitalized development costs by a fixed amount at the sum of € 25,000 for each car. Under IFRS an impairment test for development costs and goodwill must be carried out every year. If Spyker’s envisaged production schedule is not structurally met, substantial impairment of capitalized development costs might be considered necessary. Such impairment could have a material adverse effect on its business, financial condition and results of operations. MANAGEMENT BOARD Corporate governance 65 In this report, Spyker Cars addresses its overall corporate governance structure and states to what extent it applies the provisions of the revised Dutch Corporate Governance Code of December 10, 2008 applicable to the financial year 2009 (the “Code”). The acquisition of Saab took place per 23 February 2010; Spyker Cars’ statements in this report only relate to the financial year 2009 and therefore not to Saab, as Saab was not part of the Spyker Group in 2009. Spyker Cars endorses the principles of the Code. The Management Board and the Supervisory Board are responsible for the corporate governance structure of Spyker Cars and compliance with the Code. The Boards are of the opinion that the principles and best practice provisions of the Code, that are addressed to the Management Board and the Supervisory Board, interpreted and implemented in line with the best practices followed by Spyker Cars, are being applied. Deviations from aspects of the corporate governance structure of Spyker Cars, when deemed necessary in the interests of the company, will be disclosed in the annual report. Substantial changes in Spyker Cars’ corporate governance structure and in Spyker Cars’ compliance with the Code are submitted to the General Meeting of Shareholders for discussion under a separate agenda item. In line with the recommendation included in the Code an explanation of the Company’s corporate governance structure as outlined in this report will be discussed at the 2010 General Meeting of Shareholders. Hereunder, Spyker Cars will give a brief overview of its present managerial structure. Spyker Cars has a two-tier governance structure with a Supervisory Board and a Management Board. Each board is a separate body. Management Board The executive management of Spyker Cars is entrusted to its Management Board. It consists of one or more managing directors (in the year under review the CEO, CFO and COO). The members of the Management Board have collective powers and responsibilities. They share responsibility for the management of the company, the setting and achieving of the company’s objectives and policies, the strategy and associated risk profile, and for the ensuing delivery of results. The Management Board has divided its tasks for practical purposes but remains collectively responsible for decisions. The division of tasks must be approved by the Supervisory Board. According to Dutch law, the Management Board is guided by the interests of the company and its affiliated enterprises within the Group, taking into consideration the interests of the company’s stakeholders, and is accountable for the performance of its assignment to the Supervisory Board and the General Meeting of Shareholders. Furthermore, the Management Board has adopted By-Laws regulating its decision-making process. These By-Laws are published on Spyker Cars’ website. Appointment 66 Members of the Management Board are appointed by the General Meeting of Shareholders. A resolution from the General Meeting to appoint a member of the Management Board other than in accordance with a nomination by the priority, may only be adopted by a majority of at least two thirds of the votes cast, representing more than half of the issued capital of the company. The CEO, who was appointed before the first Corporate Governance Code 2003 applied, was appointed for an indefinite period of time. The CFO and COO were appointed for a term of four years, which term expires at the end of the General Meeting of Shareholders to be held in the fourth year after the year of his appointment. Members may be suspended by the Supervisory Board and the General Meeting of Shareholders and dismissed by the latter. Approval of resolutions According to the company’s articles of association, the Management Board shall submit to the Supervisory Board for its approval (a) the operational and financial targets of the company, (b) the strategy applied to realize the objectives, (c) the parameters to be applied in relation to the strategy, for example in respect of the financial risks. Recently, the Management Board and Supervisory Board agreed in joint consultation to add to the resolutions listed in article 19 of the articles of association, which are subject to the approval of the Supervisory Board: corporate social responsibility issues that are relevant to Spyker Cars. The Management Board is responsible for implementing a risk management and control system that is suitable for Spyker Cars and that is designed to provide reasonable assurance that strategic objectives are met by creating focus, by integrating management control over the company’s operations, by ensuring compliance with applicable laws and regulations and by safeguarding the reliability of the financial reporting and its disclosures. The Management Board reports on and accounts for internal risk management and control systems to the Supervisory Board and its Audit Committee. Risk management Regular management reviews, reviews of the effectiveness of internal controls and reviews by the financial administration department are integral parts of the company’s risk management approach. On the basis thereof, the Management Board confirms that internal controls over financial reporting provide a reasonable level of assurance that the financial reporting does not contain any material inaccuracies, and confirms that these controls have properly functioned in 2009. The financial statements fairly represent the financial condition and result of operations of the company and provide the required disclosures. It should be noted that the above does not imply that these systems and procedures provide certainty as to the realization of operational and financial business objectives, nor can they prevent all misstatements, inaccuracies, errors, fraud and non-compliances with rules and regulations. In view of the above the Management Board believes that it is in compliance with the requirements of recommendation II.1.4. of the Dutch Corporate Governance Code. Risk factors and the risk management approach, as well as the sensitivity of the company’s results to external factors and variables, are described in the chapter on Risk Management in this Annual Report. MANAGEMENT BOARD Conflicts of interests 67 No member of the Management Board holds more than two supervisory board memberships of listed companies, or is a chairman of such supervisory board, other than of an affiliate. The acceptance by a Management Board member of membership of the supervisory board of another company requires the approval of the Supervisory Board. The Supervisory Board is required to be notified of other important positions held by a member of the Management Board. Rules are laid-down in the By-Laws to avoid conflicts of interests between the Company and members of the Management Board. A Management Board member shall not take part in any discussion or decision-making that involves a subject or transaction in relation to which he has a conflict of interest with the company. Decisions to enter into transactions in which there are conflicts of interest with Management Board members that are of material significance to the Company and/ or the relevant Management Board members require the approval of the Supervisory Board. The By-Laws of the Management Board establish further rules on the reporting of conflicts of interests. No such reports have occurred during the financial year 2009. Remuneration The remuneration and contractual terms of employment of Management Board members are determined by the Supervisory Board in accordance with article 17 of the Company’s articles of association and clause 10 of the By-Laws of the Supervisory Board, within the scope of the remuneration policy adopted by the General Meeting of Shareholders. The remuneration policy applicable to the Board of Management was adopted by the General Meeting of Shareholders in 2005, and lastly amended by the General Meeting of Shareholders on 23 April 2009. It is published on the company’s website. A full and detailed description of the composition of the remuneration of the individual members of the Management Board is included in the chapter on Remuneration in this Annual Report. The remuneration structure, including severance pay, promotes the interests of the Spyker Cars in the medium and long term, does not encourage members of the Management Board to act in their own interests or take risks that are not in keeping with the adopted strategy, and does not reward failing members of the Management Board upon termination of their employment. The level and structure of remuneration shall be determined in the light of factors such as the results and other developments relevant to the company. The main elements of the contract of employment of the members of the Management Board are put on Spyker Cars’ website. For several years, Spyker Cars adheres to the rule that severance payments should be limited to a maximum of one year’s base salary subject to mandatory Dutch law, unless this would be manifestly unreasonable. However, the contract of Spyker Cars’ CEO, which dates from before the application of the former Code 2003, does not contain an arrangement regarding severance payments. The company and its subsidiaries do not grant personal loans, guarantees or the like to Management Board members except within the framework of its usual business operations, on conditions which apply to all employees and with the approval of the Supervisory Board. Loans are not remitted. Unless the law provides otherwise, the Management and Supervisory Board members shall be reimbursed by the company for various costs and expenses. The company has also taken out liability insurance (D&O - Directors & Officers) for the persons concerned. 68 The set-up Spyker Cars’ share option plan (ESOP) is as follows. Options, granted under the ESOP do not have a three-year, but a five-year term. However, each year only one fifth of the granted option rights can be exercised if the predetermined targets for that year are met. Options are granted at fair market value, based on the closing price of NYSE Euronext Amsterdam. The value of the options granted to members of the Board of Management and other personnel and the method followed in calculating this value are stated in the notes to the annual accounts. A new remuneration plan is under review. Best practice provisions II.2.10 and II.2.11 of the Code (the so-called ultimum remedium clause and claw-back clause) are not yet recorded in the contracts with the Management Board members. It should be noted, however, that no Management Board member of Spyker Cars, since its listing, has received any variable payment under the ESOP. Members of the Management Board hold shares in the Company for the purpose of long-term investment and are required to refrain from short-term transactions in Spyker securities. According to Spyker Cars’ Insider Trading Code of 2008, members of the Management Board are not allowed to trade in Spyker securities (including the exercise of stock options) during closed periods. However, management is informed yearly that, since the Wft does not allow to execute transactions in Spyker securities, unless permitted (for example acceptance of stock dividend, acceptance of employee share option rights, etc) there is no need to determine certain closed periods. Issuing institutions are allowed to determine a certain open period, in which managers may trade in securities. So far, Spyker Cars has not determined such open periods for Spyker securities. Supervisory Board Role The Supervisory Board supervises and advises the Management Board in performing its management tasks, including (a) achievement of the Company’s objectives, (b) corporate strategy and the risks inherent in the business activities, (c) the structure and operation of the internal risk management and control systems, (d) the financial reporting process, (e) compliance with primary and secondary legislation, (f) the company-shareholder relationship, and – as from the fiscal year 2010 - (g) corporate social responsibility issues that are relevant to the enterprise. Major management decisions and the Group’s strategy are discussed with and approved by the Supervisory Board. In its report, the Supervisory Board describes its activities in the financial year 2009. In the year under review, three Supervisory Board committees were in operation: the Strategy Committee, the Audit Committee and the Remuneration & Nomination Committee. Meetings The Supervisory Board shall meet as often as deemed necessary for the proper functioning of the Supervisory Board with a minimum of four meetings per year. The Management Board members and the company secretary shall be requested to attend as many of the Supervisory Board meetings as possible, to the extent the Supervisory Board does not indicate that it wishes to meet in their absence. The Supervisory Board, being responsible for the quality of its own performance, discusses, at least once a year on its own, without the members of the Management Board being present, both its own functioning and that of the individual members, and the conclusions that must be drawn on the basis thereof. The Supervisory Board shall discuss the MANAGEMENT BOARD corporate strategy and the risks of the business, the result of the assessment by the Management 69 Board of the structure and operation of the internal risk management and control systems, as well as any significant changes thereto at least once a year. By-Laws, independence The Supervisory Board’s By-Laws set forth its own governance rules (including meetings, items to be discussed, resolutions, appointment and re-election, committees, conflicts of interests, trading in securities, profile of the Supervisory Board). The Supervisory Board shall endeavour to ensure, within the limits of its powers, that it is at all times composed so that its members are able to act critically and independently of one another, the Management Board and any particular interest. The independent criteria are summarized in article 1.4 of the By-Laws. According to this criterion, more than one member does not qualify as independent. Spyker Cars does not consider this a principal impediment to the Supervisory Board members, who qualify as not independent, because its Supervisory Board pursues its members to be able to act critically and independently towards each other. In case a conflict of interest arises when decisions have to be made, the relevant member will abstain from voting. The composition of the Board follows the profile, which aims for an appropriate combination of knowledge and experience among its members in relation to the Group’s businesses. The By-Laws of the Supervisory Board are published on the company’s website, as well as the By-Laws of its committees, to which the plenary Supervisory Board, while retaining overall responsibility, has assigned certain tasks: the Remuneration & Nomination Committee, the Audit Committee and the Strategy Committee. Each committee reports, and submits its minutes for information, to the Supervisory Board. Appointment The Supervisory Board consists of at least two members (in the year under review five), including a chairman and deputy chairman. Members are elected by the General Meeting of Shareholders for a maximum term of three four-years terms. A resolution from the general meeting to appoint a Supervisory Board member other than in accordance with a nomination by the priority, may only be adopted by a majority of at least two third of the votes cast, representing more than half of the issued capital of the company. Members may at all times be suspended or dismissed by the General Meeting. A resolution to suspend or dismiss other than on the proposal of the priority, may only be adopted by the General Meeting with a majority of at least two thirds of the votes cast, representing more than half of the issued capital. A Supervisory Board member shall retire early in the event of unacceptable performance, structural incompatibility of interests, and in any other instances where deemed necessary by the Supervisory Board. The chairman The chairman sees to it that correct procedures are followed and that the Supervisory Board acts in accordance with its statutory obligations and its obligations under the articles of association. Furthermore the chairman, with assistance of the company secretary, sees to the actual organization of the affairs of the Supervisory Board (information, agenda, evaluation, introductory 70 program). The company secretary, with the approval of the Supervisory Board, shall be appointed and removed by the Management Board. Individual data on the members of the Supervisory Board are published in the annual report, and updated on the Spyker Cars’ website. In accordance with the By-Laws adopted by the Supervisory Board, no member of the Supervisory Board shall hold more than five supervisory board memberships of Dutch listed companies, the chairmanship of a supervisory board counting as two regular memberships. In compliance with the Dutch Corporate Governance Code, the company has formalized strict rules to avoid conflicts of interests between the company and members of the Supervisory Board; all information about a conflict of interests situation is to be provided to the chairman of the Supervisory Board. There were occasions where the chairman and a member of the Supervisory Board had to abstain from voting in view of a (potential) conflict of interest. In several instances, a Supervisory Board member did not take part in a discussion or decision-making that involved a subject or transaction in relation to which he had a conflict of interest with the company. Financial reporting The Supervisory Board supervises compliance with internal procedures established by the Management Board for the preparation and publication of the Annual Report, the Annual Accounts, the quarterly (insofar as required) and half-yearly figures and ad hoc financial information. The Supervisory Board also supervises the establishment and maintenance of internal control mechanisms for external financial reporting as described in the By-Laws of the Management Board. The line of contact between the Supervisory Board and the External Auditor is in principle through the chairman of the Audit Committee of the Supervisory Board. The Audit Committee is the first contact for the External Auditor if any irregularities in the contents of the financial reports are discovered. Remuneration The remuneration of each member of the Supervisory Board is determined by the General Meeting of Shareholders. The remuneration of a Supervisory Board member is not dependent on the results of the company. A Supervisory Board member shall not be granted any shares and/or rights to shares in the company’s capital by way of remuneration. Shares in the company held by a Supervisory Board member are long-term investments. The Supervisory Board has adopted a policy on ownership (and notification) of transactions in non-Spyker securities by members of the Supervisory and Management Board. Spyker Cars and its subsidiaries may not grant personal loans, guarantees or the like to Supervisory Board members, save as part of its usual business operations. Loans are not remitted. No such (remissions of) loans and guarantees were granted to the members in 2009, nor were any outstanding as per December 31, 2009. The Supervisory Board shall determine the remuneration of the individual Management Board members on a proposal by the Remuneration Committee, within the scope of the remuneration policy adopted by the General Meeting of Shareholders. Nomination The Supervisory Board has decided to delegate certain of her tasks to the Remuneration & Nomination Committee. The Committee (a) draws up selection criteria and appointment MANAGEMENT BOARD procedures for members of the Supervisory Board and the Management Board; (b) periodically 71 assesses the size and composition of the Supervisory Board and the Management Board, and makes recommendations relating to the profile of the Supervisory Board; (c) periodically assesses the functioning of individual members of the Supervisory Board, Management Board, and reports on this to the Supervisory Board (d) makes proposals to the Supervisory Board for the (re)appointment of members of the Supervisory Board and the Management Board, and (e) supervises the policy on the selection and appointment of the executives within the Spyker group. General Meeting of Shareholders Powers The main powers of the General Meeting of Shareholders are to appoint, suspend and dismiss members of the Board of Management and of the Supervisory Board, to adopt the annual accounts, declare dividends and to discharge the Board of Management and the Supervisory Board from responsibility for the performance of their respective duties for the previous financial year, to appoint the external auditor as required by Dutch law, to adopt amendments to the articles of association and proposals to dissolve or liquidate the Company, to issue shares or rights to shares, to restrict or exclude pre-emptive rights of shareholders and to repurchase or cancel outstanding shares. All outstanding shares carry voting rights. Spyker Cars has not issued preference shares, financing preference shares or depositary receipts for shares. Annual meeting, agenda A General Meeting of Shareholders is held at least once a year to discuss the annual report, including the Supervisory Board’s Report, the Management Board’s report, the annual financial statements with explanatory notes thereto and additional information required by law. As a separate agenda item and in application of Dutch law, the General Meeting of Shareholders discusses the discharge of the members of the Management Board and of the Supervisory Board from responsibility for the performance of their respective duties in the preceding financial year. This discharge only covers matters that are known to the company and the General Meeting of Shareholders when the resolution is adopted. The policy of the company on reserves and on dividends and any changes to this policy shall be dealt with and explained as a separate agenda item at the General Meeting of Shareholders, as well as a resolution to pay a dividend. The Management Board shall procure that each substantial change in the corporate governance structure of the company or in the company’s compliance with the Dutch Corporate Governance Code is submitted to the General Meeting of Shareholders for discussion under a separate agenda item. When a meeting is convened, the company determines a registration date for the exercise of the voting rights and the rights attached to meetings. The company gives the shareholders the opportunity to vote by proxy according to the instructions given on the voting instruction form. Information The Management Board shall provide the General Meeting of Shareholders with all requested information, unless this would be contrary to an overriding interest of the Company. If the Management Board invokes an overriding interest, it shall state the reasons. The annual report, the financial 72 statements and other regulated information such as defined in the Dutch Act on Financial Supervision, are solely published in English. If a right of approval is granted to the General Meeting of Shareholders by law or under the articles of association (e.g. in the case of option schemes, far-reaching decisions as referred to in Section 2:107a of the Dutch Civil Code), or the Management Board or the Supervisory Board requests a delegation of powers (e.g. issue of shares or authorisation for the repurchase of shares), the Management Board and the Supervisory Board shall inform the General Meeting of Shareholders by means of a shareholders’ circular of all facts relevant to the approval, delegation or authorisation to be granted. If a serious private bid is made for a business unit or a participating interest and the value of the bid exceeds the threshold referred to in Section 2:107a paragraph 1(c) of the Dutch Civil Code, and the bid is made public, the Management Board shall, at its earliest convenience, make public its position on the bid and the reasons for this position. In view of the above, the Company applies principle IV.1 of the Dutch Corporate Governance Code within the framework of the articles of association and Dutch law and in the manner as described in this corporate governance report. Financial reporting The annual financial statements are prepared by the Management Board and reviewed by the Supervisory Board. The supervisory board issues a preliminary report on the annual accounts to the general meeting. The company instructs the external auditor to examine the annual accounts. The external auditor shall report to the Management Board and Supervisory Board on the result of his audit. The external auditor shall lay down the results of his audit in a statement on the fairness of the annual accounts. Appointment external auditor The external auditor is appointed by the General Meeting of Shareholders. The Supervisory Board nominates a candidate for this appointment to the General Meeting of Shareholders and may recommend replacement of the External Auditor. The Management Board and the Audit Committee shall both advise the Supervisory Board in this regard. The Management Board and the Audit Committee shall report their dealings with the External Auditor to the Supervisory Board on an annual basis, including their assessment of the External Auditor’s independence (for example, the desirability of rotating the responsible partners of the External Auditor and the desirability of the External Auditor providing both auditing and non-audit services to the Company). The Supervisory Board shall take this into account when deciding its nomination to the General Meeting of Shareholders for the appointment of an External Auditor Internal procedures Internal procedures, compliance with which is supervised by the Supervisory Board, are in place for the preparation and publication of the annual report, the half year results, the quarterly figures and ad hoc financial information. Auditor assessment 73 At least once every four years the Management Board and the Audit Committee shall conduct a thorough assessment of the functioning of the external auditor in the various entities and capacities in which the external auditor acts. The main conclusions of this assessment are communicated to the General Meeting of Shareholders for the purpose of assessing the nomination for the appointment of the external auditor. The current auditor of the Company, Ernst & Young Accountants LLP, has been appointed by the General Meeting of Shareholders on 23 April 2009 to audit the Financial Statements for the financial year 2009. The external auditor attends the Annual General Meeting of Shareholders. Questions may be put to him at the meeting about his report. The Management Board and the Audit Committee of the Supervisory Board shall report on their dealings with the external auditor to the Supervisory Board on an annual basis, particularly with regard to the auditor’s independence. The external auditor attends, in principle, all meetings of the Audit Committee. The findings of the external auditor, the audit approach and the risk analysis are also discussed at these meetings. The external auditor attends the meeting of the Supervisory Board at which the report of the external auditor with respect to the audit of the annual accounts is discussed. In its audit report on the annual accounts to the Board of Management and the Supervisory Board, the external auditor refers to the financial reporting risks and issues that were identified during the audit, internal control matters, and any other matters, as appropriate. Website Spyker Cars The following items are posted on Spyker’s website (www.spykercars.com under the heading “Investors”): (i) By-laws for the Management Board 2008 (ii) Main elements of the contracts with the Management Board members (iii) By-laws for the Supervisory Board 2008 (iv) Code for the Audit Committee 2007 (v) Code for the Remuneration & Nomination Committee 2007 (vi) Code for the Strategy Committee 2008 (vii) Profile Supervisory Board 2008 (viii) Rotation schedule supervisory Board (ix) Rules for the Management and Supervisory Board on the ownership of and transactions in securities in other listed companies 2008 (x) Insider Trading Code 2008 (xi) Whistleblower policy 2008 (xii) Code of Conduct 2006. Compliance with the Dutch Corporate Governance Code Spyker Cars complies with the Dutch Corporate Governance Code and applies all its principles and best practice provisions that are addressed to the Board of Management and the Supervisory 74 Board. The full text of the Dutch Corporate Governance Code can be found at the website of the Monitoring Commission Corporate Governance Code (www.commissiecorporategovernance.nl). On the basis of the above and in accordance with the best practices of the Dutch corporate governance code of December 2008 and Article 5:25c of the Financial Market Supervision Act the Management Board confirms that internal controls over financial reporting provide a reasonable level of assurance that the financial reporting does not contain any material inaccuracies and confirm that material controls functioned properly in the year under review and that there are no indications that they will not continue to do so. The financial statements fairly represent the Company’s financial condition and the results of the company’s operations and provide the required disclosures. It should be noted that the above does not imply that these systems and procedures provide absolute assurance as to the realization of operational and strategic business objectives, or that they can prevent all misstatements, inaccuracies, errors, fraud and non-compliances with legislation, rules and regulations. The company’s Management is fully aware of the necessity of realizing further improvements in the internal control and risk management systems and procedures in view of the 75 magnitude of the Saab acquisition and the uncertainties that are inherent to the carve out from the former shareholder. In view of the above, the Management Board confirms that, to the best of its knowledge, the financial statements give a true and fair view of the assets, liabilities, financial position and loss of the company and the annual report includes a fair review of the position at the balance sheet date and the development and performance of the business during the financial year together with a description of the principle risks and uncertainties that the company faces. Zeewolde, 7 April 2010 Spyker Cars N.V. The Management Board: V.R. (Victor) Muller, Chief Executive Officer D.J.C.Y.S. (Hans) Go, Chief Financial Officer 76 August 16, 2009, 13:16 hrs.: Spyker C8 Aileron (chassis number 250) exhibited at the Concept Car Lawn at Pebble Beach Concours d ’Elegance, Carmel, California, USA Auto show Calendar 2010 Spyker Cars and Saab 77 4 March – 14 March 2010 80th Geneva International Motor Show, Switzerland. 2 April – 11 April 2010 New York International Auto Show, USA 27 April – 2 May 2010 Beijing International Automotive Exhibition, Beijing, China. 12 August – 15 August 2010 Pebble Beach Concours d’Elegance, USA 23 September – 30 September 2010 Internationale Automobil-Ausstellung Frankfurt, Germany 2 October – 17 October 2010 Mondiale de l’Automobile Paris, France 19 November – 28 November 2010 Los Angeles Motor Show, USA 78 August 14, 2009: Spyker C8 Aileron photographed in Carmel, California, USA Index Financial statements 2009 Page Consolidated income statement Consolidated statement of comprehensive income Consolidated statement of financial position Consolidated statement of changes in equity Consolidated cash flow statement Notes to the consolidated financial statements 1. General information 2. Significant accounting policies 3. Operating segment information Notes to specific items of the consolidated balance sheet and the consolidated income statement 4. Revenues 5. Other income 6. Employee benefits 7. Amortization and depreciation 8. Other operating expenses 9. Financial income and expenses 10. Deferred and current income tax 11. Property, plant and equipment 12. Intangible assets 13. Investments in associates 14. Inventories 15. Trade and other receivables 16. Receivables from and payables to participants 17. Total equity 18. Earnings per share 19. Employee benefits 20. Interest bearing borrowings 21. Provisions 22. Trade and other payables 23. Contingencies 24. Commitments not included in the balance sheet 25. Subsidiaries and associates 26. Subsequent events 27. Accounting estimates and judgements 28. Financial risk management objectives and policies 29. Related parties 30. Financial instruments Company Income statement Company Balance sheet Notes to the company financial statements Notes to specific items of the company balance sheet and the company income statement 1. Property, plant and equipment 2. Intangible assets 3. Investments in subsidiaries and associates 4. Shareholders’ equity 5. Staff and remuneration of Supervisory Board and Management Board 6. Guarantees 7. Notes to the audit fees 8. Subsequent events 80 80 81 82 83 84 84 84 101 104 104 104 104 105 105 105 106 108 110 112 113 113 114 114 116 116 120 126 126 126 127 128 128 132 132 134 137 138 139 140 141 141 142 143 144 145 145 146 146 79 Consolidated income statement S at 31 December 2009 2009 2008 € (‘000) € (‘000) 6,604 7,852 E 4 M Other income 5 Changes in inventories of finished goods and work in progress Work performed by the entity and capitalized A Employee benefits Amortization and depreciation S Impairment charges Other operating expenses 197 381 -586 -511 1,380 997 -7,383 -10,373 6 -8,201 -7,686 7, 11, 12 -2,392 -1,973 11, 12 -1,493 -2,968 8 -7,363 -7,516 -19,237 -21,797 Raw materials and consumables T T Revenues E N T Note 9 37 85 9 -3,682 -2,086 I Share of profit of associates 13 Result before taxation -71 0 0 -22,953 -23,840 -22,953 -24,767 10 Result for the year -23,840 N A Taxation -42 -22,953 N A Financial income Financial expenses C L Operating result F I Attributable to: Equity holders of the company 17 Minority interests 17 0 927 -22,953 Result for the year -23,840 Result: - for the year per weighted average number of shares € -1.46 € -1.62 - for the year per weighted average number of shares diluted € -1.46 € -1.62 Consolidated Statement of Comprehensive Income at 31 December 2009 Result for the period 2009 2008 € (‘000) € (‘000) -22,953 -23,840 Other comprehensive income: Exchange rate differences on translating of foreign operations Total comprehensive income for the period 153 -329 -22,800 -24,169 -22,800 -24,979 Attributable to: Equity holders of the company Minority interests Result for the period 0 -22,800 810 -24,169 Consolidated statement of financial position at 31 December 2009 Assets Note 31.12.2009 31.12.2008 € (‘000) € (‘000) 81 81 Non-current assets Property, plant and equipment 11 4,658 7,673 Intangible assets 12 45,379 36,338 Investments in associates 13 0 0 50,037 44,011 Total non-current assets Current assets Inventories 14 8,020 9,027 Trade and other receivables 15 4,174 6,267 Receivables from participants 16 934 330 1,018 907 Total current assets 14,146 16,531 Total assets 64,183 60,542 31.12.2009 31.12.2008 € ('000) € ('000) Cash and cash equivalents Equity and liabilities Note Equity Issued capital Share premium Reserves Unappropriated net result Total equity attributable to equity holders of the company Minority interest Total equity 17 633 623 135,647 135,157 -110,714 -86,100 -22,953 -24,767 2,613 24,913 0 0 2,613 24,913 Non-current liabilities Interest-bearing borrowings 20 Provisions 21 Total non-current liabilities 15,675 150 16,853 93 15,825 16,946 7,989 Current liabilities Trade and other payables 23 6,290 Payables to participants 16 247 256 Interest-bearing borrowings 20 39,112 10,385 Provisions 21 96 53 Total current liabilities 45,745 18,683 Total liabilities 61,570 35,629 Total equity and liabilities 64,183 60,542 For the year ended 31 December 2009 Attributed to equity holders of the company T S Consolidated statement of changes in equity N UnShare capital premium € (‘000) € (‘000) € (‘000) 623 135,157 Result for the year 0 Other comprehensive income 0 Total comprehensive income 0 Translation Other appropriated Minority Total net result Total interest equity € (‘000) € (‘000) € (‘000) € (‘000) € (‘000) 3 -86,103 -24,767 24,913 0 24,913 0 0 0 -22,953 -22,953 0 -22,953 0 153 0 0 153 0 153 0 153 0 -22,953 -22,800 0 -22,800 reserve reserves Balance at 1 January 2009 Allocation of net result prior year 0 0 0 -24,767 24,767 0 0 0 Proceeds from new share issues 10 490 0 0 0 500 0 500 0 Costs of share issues 0 0 0 0 0 0 0 Share based payments 0 0 0 0 0 0 0 0 10 490 0 -24,767 24,767 500 0 500 633 135,647 156 -110,870 -22,953 2,613 0 2,613 A L S T A T E M E Issued For the year ended 31 December 2008 A N C I Balance at 31 December 2009 Attributed to equity holders of the company Share I capital premium F N UnIssued € (‘000) € (‘000) € (‘000) 390 111,216 215 Result for the year 0 0 Other comprehensive income 0 0 Total comprehensive income 0 0 Balance at 1 January 2008 Translation Other appropriated Minority Total net result Total interest equity € (‘000) € (‘000) € (‘000) € (‘000) € (‘000) -14,858 -71,306 25,657 -810 24,847 0 0 -24,767 -24,767 927 -23,840 -212 0 0 -212 -117 -329 -212 0 -24,767 -24,979 810 -24,169 reserve reserves Allocation of net result prior year 0 0 0 -71,306 71,306 0 0 0 Proceeds from new share issues 233 23,067 0 0 0 23,300 0 23,300 0 160 0 0 0 160 0 160 of convertible notes 0 714 0 0 0 714 0 714 Share based payments 0 0 0 61 0 61 0 61 233 23,941 0 -71,245 71,306 24,235 0 24,235 623 135,157 3 -86,103 -24,767 24,913 0 24,913 Costs of share issues Recognition of equity component Balance at 31 December 2008 Consolidated cash flow statement for the year ended 31 December 2009 83 83 (under the indirect method) Note 2009 2008 € (‘000) € (‘000) -22,953 -23,840 1,157 Cash flows from operating activities Result for the year Adjustments for: Depreciation 7, 11 1,746 Amortization of intangible assets 7, 12 646 816 Impairment charges 12 1,493 2,968 Net financing costs 9 3,645 2,001 -10 -170 19 0 61 Gain on sale of property, plant and equipment Equity-settled share-based expenses Movements in working capital: Change in inventories 14 1,007 261 Change in trade and other receivables 15 1,489 2,767 Change in trade and other payables 23 -2,605 -3,471 Change in provisions 21 100 -67 -15,442 -17,517 -2,536 -2,086 Cash generated from operations Interest paid Interest received Net cash from operating activities 37 85 -17,941 -19,518 23 425 Cash flows from investing activities Proceeds from sale of property, plant and equipment Disposals and retirements of property, plant and equipment Acquisition of property, plant and equipment Acquisition of other investments Disposal of discontinued operations Development expenditure 12 Net cash used in investing activities 0 389 -144 -536 -5 -88 0 2,221 -8,595 -5,697 -8,721 -3,286 9,300 Cash flows from financing activities Proceeds from issue of share capital 17 0 Payment of transaction costs 17 0 -66 Proceeds from borrowings 20 28,255 23,200 Repayment of borrowings 20 Net cash from (used in) financing activities -1,638 -5,271 26,617 27,163 Net increase in cash and cash equivalents -45 4,359 Cash and cash equivalents at 1 January 907 -3,121 156 -331 1,018 907 Effect of exchange rate fluctuations Cash and cash equivalents at 31 December For the purpose of the consolidated cash flow statement, cash and cash equivalents comprise the following at 31 December: Cash at banks and on hand 1,018 907 Cash and cash equivalents 1,018 907 T 1. General information Spyker Cars N.V. (“Spyker Cars”) is a public limited liability company incorporated under the laws of the N S Notes to the consolidated financial statements at 31 December 2009 Netherlands with its statutory seat in Zeewolde, the Netherlands. Spyker Cars is listed at the Euronext M E Amsterdam Stock Exchange since 27 May 2004. The consolidated financial statements of Spyker Cars as at and for the year ended 31 December 2009 comprise principal activities of the Group are described in Note 3. A T E the company and its subsidiaries (together referred to as the “Spyker Group”, the “Group”, or “Spyker”). The The Management Board and Supervisory Board authorized the financial statements for issuance on 22 April 2010. 2. Significant accounting policies Continuity of the Group Spyker Cars has been cash flow negative in 2009 due to, amongst others, operating losses and the investments N made in the development of the new Spyker C8 Aileron. Spyker Cars is expected to show the same pattern in 2010 due to the ramp up of the Aileron, certain engineering projects, as well as the capital investments which A C I A L S T 7 April 2010 and propose that they be adopted at the Annual General Meeting of Shareholders on are required to start up the actual production. In addition, the last installment of the purchase price of Saab (US$ I It is envisaged that the financing needs of Spyker Cars may be covered via intra group arrangements, for F N 24 million plus interest) is due on 15 July 2010. example by cash pooling arrangements with Saab GB once the acquisition of Saab GB has been completed. Saab GB is expected to have a positive cash flow in 2010. If Spyker Cars may need funds in excess of those that can be obtained within its Group, it will seek to obtain regular bank financing within the Group or from its shareholders and third party financiers. Only in the event that these alternative sources would not be available, which is not expected by management, Spyker will resort to the GEM stand-by equity facility. The acquisition of Saab GB is still subject to certain conditions precedent, of which clearance from the UK Pensions Regulator in respect of the Saab GB pension fund is the most significant one. It is not expected that the acquisition of Saab GB will not be completed, with the closing planned to take place around the end of May. In order to finance the acquisition of Saab an extensive financing program has been set up. As part hereof Spyker’s assets have been pledged to GM until the second installment has been paid. Moreover, an option on the assets relating to the Spyker car production business (not Saab), has been granted to Danforth Ventures Inc (reference is also made to note 26 subsequent events, which describes the Saab acquisition including an overview of the various related contractual arrangements). If Tenaci has not repaid Euro 31 million of the (direct and indirect) loans from RMC on or before 31 December 2010, Danforth Ventures Inc has the right to acquire all of these assets, and no liabilities, of Spyker’s car production business and its subsidiaries pertaining only to the Spyker car production business (excluding the shares in the subsidiaries of Spyker and the shares in Saab), for Euro 31 million. Danforth Ventures Inc has granted an extension until the end of April 2011, in order to allow Tenaci to repay the EUR 31 million, as parties involved are interested to continue the Spyker car production activities within the Group. Management is confident that the option will not be exercised. The original Business Plan of Saab Automobile AB was developed in October 2009 and has been reviewed by parties as, for instance, the EIB and Swedish Government and formed the basis for them to, respectively, grant and guarantee the loan that supported the transaction. The Business Plan as such is in principle fully funded. 85 85 Whether the available funding will indeed be sufficient obviously depends on whether the assumptions underlying the Business Plan will be met. There are uncertainties relating in particular to whether the envisaged volumes will be met, which depends on the economic recovery to some extent, although management is of the opinion that volume assumptions are prudent. In addition, uncertainties exist with regard to the pricing of the new models, working capital requirements, as well as Saab Automobile AB’s cost structure. The EIB loan may only be used for capital expenditures related to certain specific (engineering) projects (for a maximum of 50% of the total expenditure on the related projects) and Saab Automobile AB’s financing is further fully ring-fenced, i.e. can only be used for Saab itself and not for any other group company. Saab Automobile AB is continuously updating and monitoring its cash flow forecasts, including its underlying assumptions, for the coming periods. On an overall basis, the coming year will from a funding perspective be challenging. The available cash flow is projected to be sufficient, but in a still uncertain (automotive) market, any significant deviations, for instance in respect of expected sales, the pace of the reduction of working capital requirements and costs (including those related to the carve-out), could have a significant impact. Furthermore, Saab Automobile AB is evaluating certain other options for managing its cash flow development, amongst others the timing of certain capital expenditures, optimalization of its cost structure and the increase of third party engineering revenues. The accounting principles applied in this annual report are based on the assumption that Spyker Cars will be able to continue as a going concern. However, as set out above, there is a number of uncertainties regarding the funding of the Group which implies that if adverse developments do occur, the continuity of Spyker Cars may become uncertain. The timely availability of sufficient funding is, as set out in note 12, also an important assumption in the impairment test. Statement of compliance Spyker Cars prepares the consolidated financial statements in accordance with the International Financial Reporting Standards (IFRS), as adopted by the European Union (EU). Basis of preparation The consolidated financial statements have been prepared on a historical cost basis, except for its derivative financial instruments that have been measured at fair value. The financial statements are presented in Euros, rounded to the nearest thousand, unless otherwise stated. The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other resources. Actual results may differ from these estimates. Critical accounting judgements in applying the Group’s accounting policies relate to development costs, deferred tax assets and impairment of intangible assets and property, plant and equipment. For more details on these judgements and estimates see also Note 30 “Accounting estimates and judgements”. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods, if the revision affects both current and future periods. consolidated financial statements. N E In accordance with Section 402, Book 2 of the Dutch Civil Code, in Spyker Cars income statement, the result on M subsidiaries after taxation is the only item shown separately. Changes in accounting policies T The accounting policies adopted are consistent with those of the previous financial year except as follows. The Group has adopted the following new and amended IFRS and IFRIC interpretations as of 1 January 2009: S A T The accounting policies and accounting principles have been applied consistently by Group entities. E T S The accounting policies set out below have been applied consistently to all periods presented in these - IFRS 1 First-time Adoption of IFRS and IAS 27 Consolidated and Separate Financial Statements – Cost of an Investment in a Subsidiary, Joint Controlled Entity or an Associate, effective 1 January 2009 - IFRS 7 Financial Instruments: Disclosures – Disclosures on Fair Value and Liquidity Risk, effective 1 January 2009 - IFRS 8 Operating Segments, effective 1 January 2009 - IAS 1 Presentation of Financial Statements (Revised), effective 1 January 2009 N - IAS 23 Borrowing Costs (Revised), effective 1 January 2009 - IAS 32 and IAS 1 Puttable Financial Instruments and Obligations Arising on Liquidation, effective 1 January 2009 A C I A L - IFRS 2 Share-based Payment - Vesting Conditions and Cancellations, effective 1 January 2009 - IFRIC 9 and IAS 39 Reassessment of Embedded Derivatives, effective 1 January 2009 F I N - IFRIC 13 Customer Loyalty Programmes, effective 1 January 2009 - IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction, effective 1 January 2009 - Improvements to IFRSs (May 2008) The impact of the adoption of the new and amended standards and interpretations is described below: IFRS 1 and IAS 27 – Cost of an Investment in a Subsidiary, Joint Controlled Entity or an Associate The amendments to IFRS 1 allows an entity, in its separate financial statements, to determine the cost of investments in subsidiaries, jointly controlled entities or associates in its opening IFRS financial statements at cost determined in accordance with IAS 27, or at fair value of the investment at the date of transition to IFRS, determined in accordance with IAS 39, or at the previous GAAP carrying amount of the investment at the date of transition. The amendment to IAS 27 requires all dividends from a subsidiary, jointly controlled entity or associate to be recognized in the income statement in the separate financial statement. As the Group is not a first-time adopter of IFRS, the amendment is not applicable to the Group. IFRS 2 Share-based Payment - Vesting Conditions and Cancellations The amendment clarifies the definition of vesting conditions and prescribes the treatment for an award that is cancelled. The adoption of the amendment did not have an impact on the financial position or the performance of the Group. IFRS 7 Financial Instruments: Disclosures – Disclosures on Fair Value and Liquidity Risk The amended standard requires additional disclosures about fair value measurement and liquidity risk. Fair value measurements related to items recorded at fair value are to be disclosed by source of inputs using a three level fair value hierarchy, by class, for all financial instruments recognized at fair value. In addition, reconciliation between the beginning and ending balance for level 3 fair value measurements is now required, as well as significant transfers between levels in the fair value hierarchy. The amendments also clarify the requirements for liquidity risk disclosures with respect to derivative transactions and assets used for liquidity management. The fair value measurement disclosures are presented in Note 33. The liquidity risk disclosures are not significantly impacted by the amendments and are presented in Note 33. IFRS 8 Operating Segments IFRS 8 replaced IAS 14 Segment Reporting upon its effective date. The Group concluded that the operating segments determined in accordance with IFRS 8 are the same as the business segments previously identified under IAS 14. IFRS 8 disclosures are shown in Note 3, including the related revised comparative information. IAS 1 Presentation of Financial Statements (Revised) The revised standard separates owner and non-owner changes in equity. The statement of changes in equity includes only details of transactions with owners, with non-owner changes in equity presented in a reconciliation of each component of equity. In addition, the standard introduces the statement of comprehensive income: it presents all items of recognized income and expense, either in one single statement, or in two linked statements. The Group has elected to present two statements. IAS 23 Borrowing Costs (Revised) The revised standard requires capitalization of borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset. The Group’s previous policy was in line with IAS 23 Revised. Therefore this amendment did not have any impact on the consolidated financial statements of the Group. IAS 32 and IAS 1 - Puttable Financial Instruments and Obligations Arising on Liquidation The standards have been amended to allow a limited scope exception for puttable financial instruments to be classified as equity if they fulfil a number of specified criteria. The adoption of these amendments did not have any impact on the consolidated financial statements of the Group. IFRIC 9 and IAS 39 – Reassessment of Embedded Derivatives This amendment to IFRIC 9 requires an entity to assess whether an embedded derivative must be separated from a host contract when the entity reclassifies a hybrid financial asset out of the fair value through profit or loss category. The adoption of these amendments did not have any impact on the consolidated financial statements of the Group. IFRIC 13 Customer Loyalty Programs IFRIC 13 requires customer loyalty credits to be accounted for as a separate component of the sales transaction in which they are granted. The adoption of these amendments did not have any impact on the consolidated financial statements of the Group. IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction The interpretation provides guidance on how to assess the limit on the amount of surplus in a defined benefit scheme that can be recognized as an asset under IAS 19 Employee Benefits. The adoption of these amendments did not have any impact on the consolidated financial statements of the Group. Improvements to IFRSs In May 2008, the IASB issued a first omnibus of amendments to its standards, primarily with a view to removing inconsistencies and clarifying wording. There are separate transitional provisions for each standard. Amendments resulting from Improvements to IFRSs to the following standards did not have any impact on the 87 87 T - IFRS 5 Non-current Assets Held for Sale and Discontinued Operations - IAS 1 Presentation of Financial Statements N S accounting policies, financial position or the performance of the Group: - IAS 16 Property, Plant and Equipment E - IAS 20 Accounting for Government Grants and Disclosures of Government Assistance M - IAS 19 Employee Benefits - IAS 23 Borrowing Costs E - IAS 28 Investments in Associates T - IAS 31 Interests in Joint ventures A - IAS 27 Consolidated and Separate Financial Statements - IAS 36 Impairment of Assets - IAS 39 Financial Instruments: Recognition and Measurement S T - IAS 38 Intangible Assets L A listed below: - IFRS 1 First-time adoption of IFRS (Revised), effective 1 January 2010; - IFRS 1 First-time adoption of IFRS – Additional Exemptions for First-time Adopters, effective 1 January 2010; - IFRS 2 Share-based Payment – Group Cash-settled Share-based Payment Arrangements, effective 1 A N - IFRS 9 Financial Instruments, effective 1 January 2013; I January 2010; - IFRS 3 Business Combinations (Revised) and IAS 27 Consolidated and Separate Financial Statements - IAS 24 Related Party Disclosures (Revised), effective 1 January 2011; F N C Standards issued but not yet effective up to the date of issuance of the Group’s financial statements are I Standards issued but not yet effective - IAS 32 Financial Instruments: Presentation – Classification of Rights Issues, effective 1 February 2010; (Amended), effective 1 July 2009; - IAS 39 Financial Instruments: Recognition and Measurement – Eligible Hedged Items, effective 1 July 2009; - IFRIC 12 Service Concession Arrangements, effective 29 March 2009; - Amendment to IFRIC 14/IAS 19 – Prepayments of a Minimum Funding Requirements; - IFRIC 15 Agreements for the Construction of Real Estate, effective 1 January 2010; - IFRIC 16 Hedges of a Net Investment in a Foreign Operation, effective 1 July 2009; - IFRIC 17 Distributions on Non-cash Assets to Owners, effective 1 November 2009; - IFRIC 18 Transfers of Assets from Customers, effective for transactions after 1 July 2009; - IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments; - Improvements to IFRSs (April 2009). The expected effects of these future changes are described below. The analysis performed so far is based on the Spyker Group before the acquisition of Saab, and therefore does not yet include the effects of the acquisition of Saab, which will be further analyzed during the year. IFRS 1 First-time adoption of IFRS (Revised) Certain changes to the structure of the standard have been made. The substance of the standard has not been changed. This amendment is effective from 1 January 2010 and is endorsed by the EU. As the Group is not a first-time adopter of IFRS, the revised standard is not applicable to the Group. IFRS 1 First-time adoption of IFRS – Additional Exemptions for First-time Adopters IFRS 1 has been amended to provide additional exemptions from full retrospective application of IFRS for the measurement of oil and gas assets and leases. This amendment is effective from 1 January 2010 and is not yet endorsed by the EU. As the Group is not a first-time adopter of IFRS, the amendment is not applicable to the Group. 89 89 IFRS 2 Share-based Payment – Group Cash-settled Share-based Payment Arrangements The amendment clarifies the scope and the accounting for group cash-settled share-based payment transactions. This amendment is effective from 1 January 2010 and is not yet endorsed by the EU. The Group has concluded that the amendment will have no impact on the financial position or the performance of the Group. IFRS 3 Business Combinations (Revised) and IAS 27 Consolidated and Separate Financial Statements (Amended) IFRS 3 Business Combinations (Revised) and IAS 27 Consolidated and Separate Financial Statements (Amended) are applicable to business combinations for which the acquisition date is on or after the beginning of the first annual period beginning on or after 1 July 2009 and is endorsed by the EU. IFRS 3 (Revised) introduces significant changes in the accounting for business combinations occurring after this date. Changes affect the valuation of non-controlling interest, the accounting for transaction costs, the initial recognition and subsequent measurement of a contingent consideration and business combinations achieved in stages. These changes will impact the amount of goodwill recognized, the reported results in the period that an acquisition occurs and future reported results. IAS 27 (Amended) requires that a change in the ownership interest of a subsidiary (without loss of control) is accounted for as a transaction with owners in their capacity as owners. Therefore, such transactions will no longer give rise to goodwill, nor will it give rise to a gain or loss. Furthermore, the amended standard changes the accounting for losses incurred by the subsidiary as well as the loss of control of a subsidiary. The changes by IFRS 3 (Revised) and IAS 27 (Amended) will be applied prospectively and will affect future business combinations or loss of control of subsidiaries and transactions with non-controlling interests. IFRS 9 Financial Instruments The IASB has published phase 1 of IFRS 9 Financial Instruments, the accounting standard that will eventually replace IAS 39 Financial Instruments: Recognition and Measurement. Phase 1 establishes a new classification and measurement framework for financial assets. At initial recognition, all financial assets are measured at fair value. For subsequent measurement, financial assets that are debt instruments are classified at amortized cost or fair value though profit and loss on the basis of both the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial asset. All other debt instruments are subsequently measured at fair value through profit and loss. All financial assets that are equity investments are measured at fair value either through profit or loss or other comprehensive income. This amendment will be effective from 1 January 2013 and endorsement is postponed by the EU. The Group does not expect to adopt this standard before 1 January 2013. The Group has studied the standard and is currently assessing its impact. IAS 24 Related Party Disclosures (Revised) The IASB has revised IAS 24 in response to concerns that the previous disclosure requirements and the definition of a ‘related party’ were too complex and difficult to apply in practice, especially in environments where government control is pervasive. The revised standard addresses these concerns by providing a partial exemption for government-related entities and a revised definition of a related party. This amendment will be effective from 1 January 2011 and is not yet endorsed by the EU. The Group does not expect to adopt this standard before 1 January 2011. The Group has studied the standard and is currently assessing its impact, which will be limited to disclosures only. IAS 32 Financial Instruments: Presentation – Classification of Rights Issues The amendment alters the definition of a financial liability in IAS 32 to classify rights issued and certain options or warrants (together, here termed rights) as equity instruments. The amendment provides relief to entities that issue rights in a currency other than their functional currency, from treating the rights as derivatives with fair value T has concluded that the amendment will have no impact on the financial position or the performance of the N Group, as the Group has not made foreign currency rights issues. E conditions are met. This amendment is effective from 1 February 2010 and is endorsed by the EU. The Group IAS 39 Financial Instruments: Recognition and Measurement – Eligible Hedged Items M S changes recorded in profit or loss. Such rights will now be classified as equity instruments when certain The amendment clarifies that an entity is permitted to designate a portion of the fair value changes or cash flow E position or the performance of the Group. A endorsed by the EU. The Group has concluded that these amendments will not have any impact on the financial T variability of a financial instrument as a hedged item. This amendment is effective from 1 July 2009 and is T This interpretation applies to service concession operators and explains how to account for the obligations S IFRIC 12 Service Concession Arrangements undertaken and rights received in service concession arrangements. This amendment is effective from 29 March 2009 and is endorsed by the EU. The Group has concluded that these amendments will not have any impact on A The practical implication of IFRIC 14 has revealed some unintended and counterintuitive results in case of prepayments of future minimum funding requirements. This amendment will be effective from 1 January 2011 and is not yet endorsed by the EU. The Group has studied the standard and is currently assessing its impact. A N C Amendment to IFRIC 14/IAS 19 – Prepayments of a Minimum Funding Requirements I L the financial position or the performance of the Group. IFRIC 15 Agreements for the Construction of Real Estate N be recognized if an agreement between a developer and a buyer is reached before the construction of the real I estate is completed. This amendment is effective from 1 January 2010 and is endorsed by the EU. The Group F The interpretation clarifies when and how revenue and related expenses from the sale of a real estate unit should has concluded that these amendments will not have any impact on the financial position or the performance of the Group. IFRIC 16 Hedges of a Net Investment in a Foreign Operation IFRIC 16 provides guidance on the accounting for a hedge of a net investment. As such it provides guidance on identifying the foreign currency risks that qualify for hedge accounting in the hedge of a net investment, where within the group the hedging instruments can be held in the hedge of a net investment and how an entity should determine the amount of foreign currency gain or loss, relating to both the net investment and the hedging instrument, to be recycled on disposal of the net investment. This amendment is effective from 1 July 2009 and is endorsed by the EU. The Group has concluded that these amendments will not have any impact on the financial position or the performance of the Group. IFRIC 17 Distributions on Non-cash Assets to Owners The Interpretation provides guidance on how to account for non-cash distributions to owners. It clarifies when to recognize a liability, how to measure it and the associated assets, and when to derecognize the asset and liability. This amendment is effective from 1 November 2009 and is endorsed by the EU. The Group does not expect IFRC 17 to have an impact on the consolidated financial statements as the Group has not made non-cash distributions to shareholders in the past. IFRIC 18 Transfers of Assets from Customers IFRIC 18 applies to all entities that receive from customers an item of property, plant and equipment or cash for the acquisition or construction of such items. These assets are then be used to connect the customer to a network or to provide ongoing access to a supply of goods or services, or both. The interpretation provides guidance on when and how an entity should recognize such assets. This amendment is effective for 91 91 transactions after 1 July 2009 and is endorsed by the EU. The Group has concluded that the amendment will have no impact on the financial position or the performance of the Group. IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments IFRIC Interpretation 19 Extinguishing Financial Liabilities with Equity Instruments clarifies the requirements of International Financial Reporting Standards (IFRSs) when an entity renegotiates the terms of a financial liability with its creditor and the creditor agrees to accept the entity’s shares or other equity instruments to settle the financial liability fully or partially. This amendment will be effective from 1 July 2010 and is not yet endorsed by the EU. The Group has concluded that the amendment will have no impact on the financial position or the performance of the Group. Improvements to IFRSs In April 2009, the IASB issued a second omnibus of amendments to its standards, primarily with a view to removing inconsistencies and clarifying wording. There are separate transitional provisions for each standard. - IFRS 2 Share-based Payment - IFRS 5 Non-current Assets Held for Sale and Discontinued Operations - IFRS 8 Operating Segments - IAS 1 Presentation of Financial Statements - IAS 7 Statement of Cash Flows - IAS 17 Leases - IAS 18 Revenue - IAS 36 Impairment of Assets - IAS 38 Intangible Assets - IAS 39 Financial Instruments: Recognition and Measurement - IFRIC 9 Reassessment of Embedded Derivatives - IFRIC 16 Hedges of a Net Investment in a Foreign Operation The Group anticipates that these changes will have no material effect on the financial statements. Basis of consolidation The consolidated financial statements include the financial information of Spyker Cars and its subsidiaries. Subsidiaries are fully included in the consolidation. Minority interests represent the portion of profit or loss and net assets not held by the Group and are presented separately in the income statement and within equity in the consolidated balance sheet, separately from parent shareholders’ equity. Subsidiaries Subsidiaries are entities controlled by Spyker Cars. Control exists when the company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. Subsidiaries are consolidated from the date on which control is transferred to Spyker Cars and cease to be consolidated from the date on which control is transferred out of the company. Where there is a loss of control of a subsidiary, the consolidated financial statements include the results for the part of the reporting year during which Spyker Cars had control. Investments in associates Investments in associates are entities in which Spyker Cars can exercise significant influence, but can not exercise control or joint control, generally in situations when the company owns between 20% and 50% of the voting power. T according to the equity method. The item also includes goodwill paid upon acquisition less accumulated impairment losses, where applicable. N S Upon first inclusion in the accounts, participations are initially accounted for at the cost price and subsequently Under the equity method, the share of Spyker Cars in the result of the associated companies is recognized in E changes in the reserves of associated companies, after the acquisition, is recognized directly in the company’s M the income statement of the company under ‘Share of profit of associates’. The share of the company in shareholders’ equity. The value of the associated companies is adjusted for these results and changes in E If the book value of the associated company falls to zero, no further losses are accounted for, unless the Group T has entered into commitments or made payments on its behalf. The financial statements of the associate are A reserves. prepared for the same reporting period as the company. Where necessary, the accounting principles applied by Spyker Cars. S T the associated companies have been adjusted to ensure consistency with the accounting principles applied by Transactions eliminated on consolidation L recovered. Discontinued operations N A discontinued operation is a component of the activities of the Group that represents a separate significant line of business or separate significant geographical area of operation, or is a subsidiary that has been acquired with A C I transactions, have been eliminated in full. Unrealized losses are eliminated unless such losses cannot be A All intercompany balances and transactions, including unrealized results arising from intra-company the sole intention of reselling it. An operation is classified as discontinued when it is sold or, if it has not yet been N ‘Result from discontinued operations’. F operations are presented as a single amount in the income statement both for the current and prior period as I sold, when the operation meets the criteria for classification as held for sale. The results of discontinued Summary of significant accounting policies Foreign currency Currency The functional and presentation currency of Spyker Cars is the Euro (€). Foreign currency transactions Transactions in foreign currencies are recorded in the functional currency rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the balance sheet date. All differences are taken to the consolidated income statement. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of initial transaction. 93 93 Financial statements of foreign operations The financial statements of consolidated and associated companies which are drawn up in a foreign currency are: Functional Country of incorporation currency Spyker Cars UK Ltd. United Kingdom GBP Spyker of North America LLC United States of America USD Spyker of China Ltd. Hong Kong CNY Tenaci Engineering Pvt. Ltd. India INR The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to Euro at exchange rates at the reporting date. The income statements are translated at the appropriate average exchange rates for the year. The exchange differences arising on the translation, if applicable, are taken directly to a separate component of equity. On disposal of a foreign operation, the deferred cumulative amount recognized in equity relating to that particular foreign operation shall be recognized in the income statement. The exchange rates of those currencies that have a material impact on the Group financial statements are as follows: Closing rate 31.12.2009 31.12.2008 British Pound (GBP) 0.90 0.96 US Dollar (USD) 1.43 1.41 Chinese Yuan Renminbi (CNY) Indian Rupees (INR) 9.80 9.66 67.21 67.00 Impairment The carrying amounts of the Group’s assets other than deferred tax assets (see accounting policy income tax and deferred tax), are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated (see below). For goodwill and intangible assets that have indefinite lives or that are not yet available for use, recoverable amount is estimated at each reporting date. Goodwill that has not been allocated to (groups of) cash generating units is not yet tested for impairment. An impairment loss is recognized whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses recognized in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis. Impairment losses are recognized in the income statement. Calculation of recoverable amount The recoverable amount of the Group’s assets is the greater of their fair value less cost to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. T In respect of other assets, an impairment loss is reversed only if there has been a change in the estimates used N to determine the recoverable amount. E An impairment loss in respect of goodwill is not reversed. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying M S Reversals of impairment amount that would have been determined, net of depreciation or amortization, if no impairment loss had been Property, plant and equipment A T E recognized. T Items of property, plant and equipment are stated at cost less accumulated depreciation (see below) and S Owned assets impairment losses (see accounting policy ‘impairment’ below). The cost of self-constructed assets includes the L A The Group recognizes in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when that cost is incurred if it is probable that the future economic benefits embodied with the item will flow to the Group and the cost of the item can be measured reliably. All other costs are recognized in the income statement as an expense as incurred. A N C Subsequent costs I cost of materials, direct labour and an appropriate proportion of production overheads. Depreciation N The estimated useful lives are as follows: F part of an item of property, plant and equipment. Land is not depreciated. I Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each - Buildings 25 years - Building improvements 10 years - Plant and equipment 3-10 years - Prototypes, test models (residual value 50%) 5 years - GT2 racing cars 5 years - Furniture, fixtures and equipment 3-5 years The residual value and the useful lives, if not insignificant, are reassessed annually. Intangible assets Research and development Research costs are expensed as incurred. Development costs incurred on an individual project are capitalized as intangible asset when future recoverability can reasonably be regarded as assured. This occurs when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete the asset and the ability to measure reliably the expenditure during development. Any development expenditures for which these criteria are not are immediately expensed. In practice, these criteria will only be met when management together with the development department have made the decision to develop a specific design, following technical and economical feasibility studies. The capitalized expenditure includes the directly attributable costs of materials, direct labour and production 95 95 overheads as well as interest costs for related financing. The development costs relate to the design, innovation and improvement of new or substantially improved motorcars, car parts and product lines. Following the initial recognition of the development expenditure the cost model is applied requiring the asset to be carried at cost less any accumulated amortization and accumulated impairment losses. The capitalized development costs are amortized by a fixed amount for each car sold, based on expected sales over the estimated remaining useful life. Additionally the carrying value is assessed for impairment when there is an indication that the intangible asset may be impaired. The carrying value of development costs is tested for impairment annually when the asset is not yet in use, or more frequently when an indicator of impairment arises during the reporting year indicating that the carrying value may not be recoverable. Goodwill All business combinations are accounted for by applying the purchase method. Goodwill represents the difference between the cost of the acquisition and the fair value of the net identifiable assets, liabilities and contingent liabilities acquired. Following initial recognition goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing goodwill will be allocated to each of the Group’s cash generating units, or groups of cash generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units. Each unit of group of units to which the goodwill will be allocated represents the lowest level within the Company at which the goodwill is monitored for internal management purposes and is not larger than a segment. When an operation is disposed of, the associated goodwill is included in the carrying amount of the operation disposed of when determining the gain or loss on disposal of the operation. Licenses and other intangible assets Spyker Cars has applied for registration of several model rights and licenses. The costs are capitalized and amortized under the straight-line method over the estimated useful life (of 10 years). Expenditure on internally generated goodwill and brands is recognized in the income statement as an expense as incurred. Subsequent expenditure Subsequent expenditure on capitalized intangible assets is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred. Government grants Government grants are recognized where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. Government grants received relating to capitalized development projects are deducted from the capitalized development expenditures, otherwise the government grant is recognized in income in the same period as the expenditures they relate to. Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset, being an asset that necessarily takes a substantial period of time to prepare for its intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that the Group incurs in connection with the borrowing of funds. S T E Raw materials are stated at the lower of cost and net realizable value. Work in process and finished goods M Raw materials N Inventories Work in process and finished goods are stated at the lower of cost and net realisable value. Net realisable value E T allocation of fixed and variable overheads incurred in the Group’s manufacturing activities based on normal operating capacity. Financial Assets S T selling expenses. Cost includes all expenditure related directly to the manufacturing of the specific cars and an A is the estimated selling price in the ordinary course of business, less the estimated costs of completion and The Group classifies its financial assets in the category loans and receivables and derivative financial Management determines the classification of its financial assets at initial recognition. A N C I A L instruments. The classification depends on the purpose and the nature of the respective financial assets. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets. These loans and receivables are initially recognized at fair value less directly attributable transaction costs, and subsequently measured at amortized I Derivative financial instruments F N cost using the effective interest method. Derivatives are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at their fair value. Any gains or losses from changes in fair value on derivatives during the year that do not qualify for hedge accounting are taken directly to the income statement. The Group currently does not apply any hedge accounting. Fair values are obtained from quoted market prices in active markets, including recent market transactions. All derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative. Trade and other receivables Trade and other receivables are stated at their amortized cost less a provision for doubtful debt if deemed necessary. Cash and cash equivalents Cash and cash equivalents in the balance sheet comprise cash at bank and in hand. Financial liabilities Interest-bearing borrowings Interest-bearing borrowings are recognized initially at fair value, less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortized cost, using the effective interest method. Convertible notes Convertible notes that can be converted to share capital at the option of the holder, where the number of shares issued does not vary with changes in their fair value, are accounted for as compound financial instruments. Transaction costs that relate to the issue of a compound financial instrument are allocated to the liability and 97 97 equity components in proportion to the allocation of proceeds. The equity component of the convertible notes is calculated as the excess of the issue proceeds over the fair value of the liability component, being the present value of the future interest and principal payments, discounted at the market rate of interest applicable to similar liabilities that do not have a conversion option. The liability component is measured at amortized cost until it is extinguished on conversion or redemption. The carrying amount of the equity component is not re measured in subsequent years. Derivative financial instruments Derivative financial liabilities are accounted for as set out under ‘financial assets’. Trade and other payables Trade and other payables are stated at amortized cost. Employee benefits Pension benefits The Group operates various pension schemes. The schemes are generally funded through payments to separately administered funds or insurance companies determined by periodic actuarial calculations. The Group has both defined benefit and defined contribution plans. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. A defined benefit plan is a pension plan that is not a defined contribution plan. When the Group participates in a multi-employer plan, qualifying as a defined benefit plan, but has not sufficient information to apply the required IAS 19 accounting principles, such pension commitments are accounted for as a defined contribution plan. The Group would record an asset or liability only when there is a contractual agreement between the multi-employer plan and its participants how the surplus will be distributed to the participants or the deficit funded. For defined contribution plans the contributions are recognized as employee benefit expense when they are due. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in the future payments is available. Share-based payment transactions Employees (including senior executives) of the Group receive remuneration in the form of share-based payment transactions, whereby employees render services as consideration for equity instruments (‘equity-settled transactions’). In situations where equity instruments are issued and some or all of services received by the entity as consideration cannot be specifically identified, they are measured as the difference between the fair value of the share based payment and the fair value of any identifiable services received at the grant date. Equity-settled transactions The cost of equity-settled transactions with employees is measured by reference to the fair value at the date on which they are granted. The fair value is determined by using a Black-Scholes option-pricing model, further details of which are given in Note 19. The cost of equity-settled transactions is recognized, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant T settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest. The profit N S employees become fully entitled to the award (‘the vesting date’). The cumulative expense recognized for equity- or loss charge or credit for a period represents the movement in cumulative expense recognized as at the M E beginning and end of that period. No expense is recognized for awards that do not ultimately vest, except for awards where vesting is conditional satisfied, provided that all other performance and/or service conditions are satisfied. A T E upon a market condition, which are treated as vesting irrespective of whether or not the market condition is Where the terms of an equity-settled award are modified, the minimum expense recognized is the expense as if T total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee as S the terms had not been modified. An additional expense is recognized for any modification, which increases the measured at the date of modification. L A the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous N per share (further details are given in Note 18. Provisions F I The dilutive effect of outstanding options is reflected as additional share dilution in the computation of earnings A paragraph. N C expense not yet recognized for the award is recognized immediately. However, if a new award is substituted for I Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any General Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in profit or loss net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost. Warranties A provision for warranties is recognized when the underlying products or services are sold. The provision is based on estimated future cost and past experiences. Lease transactions The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset. Group as lessee 99 99 Finance leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. Assets held under finance leases are initially recognized as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. They are subsequently measured at cost less accumulated depreciation and impairment losses (see also ‘property, plant and equipment’). The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalized. Operating leases Operating leases are all leases not qualifying as finance leases. Operating lease payments are recognized as an expense in profit or loss on a straight-line basis over the lease term. Sale and leaseback transactions A sale and leaseback transaction is accounted for as a finance transaction when the leaseback qualifies as a finance lease. For such transactions no revenue or income is recognized, but a liability is recognized for the received payment. When the leaseback qualifies as an operating lease, any profit or loss is regarded similar to a regular sale, assuming the sales price is at fair value. Revenues Automotive Revenues from the sale of goods are recognized in the income statement when significant risks and rewards of ownership have been transferred to the buyer. No revenue is recognized if there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods. A car sale is constituted by Spyker once a car is invoiced and title is legally transferred to the dealer or consumer. Net sales comprise the revenues from goods and services supplied during the year, net of discounts, VAT, “Belasting Personenwagens en Motorvoertuigen” (BPM) and other sales taxes. Racing activities Racing revenues arise from the rendering of advertisement, sponsoring and TV income, and are recognized only when the related event takes place. Merchandise and events Revenue from the merchandise sales is recognized in the income statement when significant risks and rewards of ownership have been transferred to the buyer. Revenues from events are recognized when the related event takes place. Expenses Operating lease payments Payments made under operating leases are recognized in the income statement on a straight-line basis over the term of the lease. Lease incentives received are recognized in the income statement as an integral part of the total lease expense. T liability. The finance charge is allocated to each period during the lease term so as to produce a constant N periodic rate of interest on the remaining balance of the liability. E Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding Net financing costs M S Finance lease payments Net financing costs comprise interest payable on borrowings calculated using the effective interest rate method recognized in the income statement using the effective interest method. Interest income is recognized in the income statement as it accrues, using the effective interest method. Income taxes S T A T E and foreign exchange gains and losses. The interest expense component of finance lease payments is Income tax on the result for the year comprises current and deferred tax. Income tax is recognized in the income equity, in which case it is recognized in other comprehensive income or equity respectively. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or N substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred income tax is provided using the liability method, providing for temporary differences between the A C I A L statement except to the extent that it relates to items recognized in other comprehensive income or directly in carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation N the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance I sheet, and are measured at nominal amount. Deferred income tax assets are also recognized for carry-forward F purposes. The amount of deferred tax provided is based on the expected manner of realization or settlement of of unused tax assets and tax losses. A deferred tax asset is recognized only to the extent that it is probable that future taxable results will be available against which the asset can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realized. Notes to the consolidated cash flow statement The cash flow statement has been prepared according to the indirect method. The funds stated in the cash flow statement are comprised of cash and bank overdraft. Cash flows in foreign currencies are translated at average exchange rates for the year. Interest received, interest paid and income tax paid are included in cash flow from operating activities. Determination of fair values A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and / or disclosure purposes based on the following methods. Where applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability. Trade and other receivables The fair value of trade and other receivables, excluding construction work in progress, is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. Non-derivative financial liabilities 101 101 Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. For finance leases the market rate of interest is determined by reference to similar lease agreements. Share-based payment transactions The fair value of share appreciation rights is measured using the Black-Scholes formula. Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historic volatility adjusted for changes expected due to publicly available information), weighted average expected life of the instruments (based on historical experience and general option holder behaviour), expected dividends, and the risk-free interest rate (based on government bonds). Service and non-market performance conditions attached to the transactions are not taken into account in determining fair value. 3. Operating segment information Operating segment information is presented in respect of the Group’s operating segments and is based on the Group’s management and internal reporting structure. The activities of Spyker Cars N.V. and its subsidiaries comprise the design, production, purchase and sale of motorcars in the broadest sense of the word including GT racing. The Group is organized and managed as Automotive and GT racing. The Automotive operating segment comprises the design, production, purchase and sale of motorcars while GT racing comprises the activities in the GT2 category of sports car racing including the sale of GT sports cars. Merchandise and events consist of events at the factory and merchandise and are included in the Automotive operating segment. For the operating segments, the same principles for valuation and determination of the result are used as set out in the accounting principles for the consolidated statement of financial position and the income statement of the Group. For the settlement of transactions between operating segments, the prices are used that would ensue from regular market conditions (‘at arm’s length’). See also Note 29. Operating segment results, assets and liabilities include items directly attributable to an operating segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise the net finance costs. Operating segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment, and intangible assets other than goodwill. 2009 S E Total external revenues M N T The following tables include the 2009 operating segment information. Intersegment revenue GT racing Eliminations Consolidated € (‘000) € (‘000) € (‘000) € (‘000) 5,756 848 0 6,604 0 0 0 0 5,756 848 0 6,604 -17,800 -1,508 T Segment result from A E Total segment revenue Automotive operating activities associates -19,308 S T and result from Net finance costs -3,645 0 Loss for the period -22,953 C I A L Income tax expense 2009 N Unallocated assets A Total assets N Segment liabilities I Unallocated liabilities F Segment assets Total liabilities Automotive GT racing Eliminations Consolidated 62,179 2,004 0 64,183 0 64,183 61,446 124 0 61,570 0 61,570 Capital expenditure 9,927 0 0 9,927 Depreciation 1,347 399 0 1,746 646 0 0 646 1,493 0 0 1,493 Amortization of intangible assets Impairment charges 103 103 The following tables include the 2008 operating segment information. 2008 Total external revenues Intersegment revenue Total segment revenue Automotive GT racing Eliminations Consolidated € (‘000) € (‘000) € (‘000) € (‘000) 5,675 2,177 0 7,852 0 0 0 0 5,675 2,177 0 7,852 -18,712 -3,127 Segment result from operating activities and result from associates -21,839 Net finance costs -2,001 Income tax expense 0 Loss for the period -23,840 2008 Segment assets Automotive GT racing Eliminations Consolidated 58,773 1,769 0 60,542 0 Unallocated assets Total assets 60,542 Segment liabilities 35,510 119 0 35,629 0 Unallocated liabilities Total liabilities 35,629 Capital expenditure 6,098 223 0 6,321 Depreciation 1,040 117 0 1,157 813 3 0 816 1,273 1,695 0 2,968 NL EMEA USA Asia Total € (‘000) € (‘000) € (‘000) € (‘000) € (‘000) External revenues 691 2,706 2,521 686 6,604 Segments assets 62,538 0 1,643 2 64,183 9,927 0 0 0 9,927 NL EMEA USA Asia Total € (‘000) € (‘000) € (‘000) € (‘000) € (‘000) External revenues 369 4,418 2,727 338 7,852 Segments assets 57,435 3 2,932 172 60,542 6,263 0 0 58 6,321 Amortization of intangible assets Impairment charges Geographic information 2009 Capital expenditure 2008 Capital expenditure Notes to specific items of the consolidated income statement and the 4. Revenues 2009 2008 € (‘000) € (‘000) 5,772 E Car sales 848 1,752 Merchandise and events 363 328 6,604 7,852 T Revenues from the car sales comprise sales to external customers, consisting of the dealer network and end- A E 5,393 Racing activities M N T S consolidated balance sheet users. Racing activities comprise solely racing income (sponsoring) of GT racing, while the sales of race cars are 5. Other income 2008 € (‘000) Sales of spare parts and Corporate Identity materials 127 204 Royalty fees 15 177 Other income 55 0 197 381 A I 6. Employee benefits 2009 2008 F The other income relates amongst others to the divestments of tangible fixed assets. N N C A 2009 € (‘000) I L S T included in car sales. Merchandise and events consist of events at the factory and merchandise GT racing. € (‘000) € (‘000) Wages and salaries 5,554 5,104 Social security contributions 1,082 670 Contributions to defined contribution plans 329 296 Management fee 313 258 Hired personnel and other personnel costs 923 1,297 Equity settled share based payments 0 61 8,201 7,686 The remuneration of the individual members of the Management Board and the members of the Supervisory Board of Spyker Cars is explained in the Note 29 Related parties. In 2009 an amount of € 289 thousand is recorded relating to restructuring costs. Staff The Group employed at average 131 full-time equivalents in 2009 (2008: 132). 105 105 7. Amortization and depreciation Amortization development costs Amortization intellectual property rights and contracts Depreciation of property, plant and equipment 2009 2008 € (‘000) € (‘000) 600 775 46 41 1,746 1,157 2,392 1,973 8. Other operating expenses 2009 2008 € (‘000) € (‘000) PR and marketing costs 1,399 1,311 Travel expenses and costs of company cars 1,160 1,418 670 732 1,196 1,474 Freight and transportation costs Advisory costs Rent and housing costs 781 671 Insurance 835 748 Office costs 409 428 Other 913 734 7,363 7,516 2009 2008 € (‘000) € (‘000) In 2009 an amount of € 155 thousand is recorded relating to restructuring costs. 9. Financial income and expenses Financial income Interest income Foreign exchange results Financial expenses Interest expense Foreign exchange results 4 18 33 67 37 85 2009 2008 € (‘000) € (‘000) 3,651 2,012 31 74 3,682 2,086 Consolidated income statement 2008 € (‘000) S Current income tax charge 0 0 Deferred income tax charge 0 0 Income tax expense reported in the income statement 0 0 Consolidated statement of changes in equity A T E E 2009 € (‘000) M N T 10. Deferred and Current Income Tax 2008 2008 € (‘000) € (‘000) 0 0 0 0 - In respect of transaction costs S T Deferred income tax related to items directly charged to equity expected income charge at statutory rates is reconciled as follows: Tax reconciliation N Less: losses foreign operations 2009 2008 € (‘000) € (‘000) -22,953 -23,840 2,202 1,835 -20,751 -22,005 I Average tax rate (25.5%) F N Accounting loss before income tax A C I A L The difference between the income tax expense provided in the consolidated financial statements and the Valuation allowance deferred tax assets Effective tax rate 5,292 5,611 -5,292 -5,611 0 0 0,0% 0,0% Deferred tax assets and liabilities The deferred tax asset arising from tax-deductible losses can be specified as follows: Composition 2009 2008 € (‘000) € (‘000) Total tax-deductable net operating losses 97,070 76,319 Average tax rate 25,5% 25.5% Deferred tax assets from net operating losses Less: valuation allowance Total deferred tax asset 24,753 19,461 -24,753 -19,461 0 0 Spyker Cars has no deferred tax liabilities at the end of the year 2009 and 2008. The total tax-deductible net operating losses can be carried forward for a period of nine years. This implies that the carry forward losses will expire between 2011 and 2018 depending on the year during which these losses were created. 107 107 The movement in the deferred tax asset is as follows: 2009 2008 € (‘000) € (‘000) 19,461 13,850 5,292 5,611 Deferred tax assets from net operating losses: At 1 January Net operating tax losses for the year for continuing operations Adjustments to prior years net operating losses Deferred tax assets from net operating losses at December 31 Less: valuation allowance at December 31 Total deferred tax asset 0 0 24,753 19,461 -24,753 -19,461 0 0 The Group has significant tax loss carry forwards available, for which management has to assess to what extent it is probable that they will be realized. Given the uncertainty of future taxable income, management decided to record a valuation allowance equal to the deferred tax assets. Although management is positive about the future developments of the Group, it feels it only to be appropriate to recognize the deferred tax asset again once these expected developments have been sufficiently realized. Some minor tax losses in other foreign countries have not been recognized since future usage is depending on, among other things, profit-earning capacity. In the year under review all foreign operations were loss-making. Tax company liability Spyker Cars N.V. together with its subsidiaries Spyker Automobielen B.V., Spyker Squadron B.V. and Spyker Events & Branding B.V., constitutes a single tax entity for corporate tax. With respect to the VAT purposes, Spyker Cars N.V. together with its subsidiaries Spyker Automobielen B.V. and Spyker Squadron B.V. constitute a single tax entity. All companies within this single tax entity are jointly and severally liable for corporate tax debts and VAT debts stemming from the relevant tax entities. S T 11. Property, plant and equipment Furniture, Racing fixtures and Plant and test models Buildings equipment and demo’s cars equipment Total € (‘000) € (‘000) € (‘000) € (‘000) € (‘000) € (‘000) 1,430 3,328 827 823 1,265 7,673 N M E 31 December 2009 Prototypes, At 1 January, T Additions 0 14 0 0 130 144 A E net of accumulated depreciation Disposals and retirements 0 -13 0 0 0 -13 T Impairment charges S Depreciation charge for the year Effect of movements in L exchange rates -425 -163 -58 -399 -701 -1,746 0 -893 -504 0 0 -1,397 0 0 0 0 -3 -3 1,005 2,273 265 424 691 4,658 1,900 3,839 1,728 1,382 4,472 13,321 At 31 December, C I A net of accumulated depreciation At 1 January: Cost N and impairment A Net carrying amount N At 31 December: I Cost F Accumulated depreciation Accumulated depreciation and impairment Net carrying amount -470 -511 -901 -559 -3,207 -5,648 1,430 3,328 827 823 1,265 7,673 1,900 3,789 1,729 1,382 4,528 13,329 -895 -1,516 -1,464 -958 -3,837 -8,671 1,005 2,273 265 424 691 4,658 The capitalized buildings relate to buildings and building improvement cost in The Netherlands. Repair costs of the property, plant and equipment are charged to the income statement. Buildings, plant and equipment and furniture, fixtures and equipment are subject to a first charge to secure the bank credit facility (see Notes 20). Leased assets and assets under hire purchase contracts are pledged as security for the related finance lease and hire purchase liabilities. The carrying amount of these secured and pledged items amounts to € 4.658 million (2007: € 7.673 million). Major additions in 2009 were investments in Smartteam Cad Software. As part of the impairment review a charge of € 893 thousand was recognized regarding tooling that will no longer be used as a result from the transfer from the short wheel base (SWB) to the new Aileron model. Furthermore, an amount of € 505 thousand was impaired relating to prototypes. In 2008 the disposal of a racing car resulted in a profit of to € 170 thousand. One racing car was retired due to a racing accident. Financial lease contracts are arranged for most of the prototypes, test models and racing cars. Furniture, fixtures and equipment comprise investments in hard- and software and trade fair stands and promotion material. 31 December 2008 109 109 Prototypes, Furniture, Plant and test models Racing fixtures and Buildings equipment and demo’s cars equipment Total € (‘000) € (‘000) € (‘000) € (‘000) € (‘000) € (‘000) 1,571 3,291 1,179 1,584 1,566 9,191 0 210 0 0 326 536 0 0 -255 0 0 -255 At 1 January, net of accumulated depreciation Additions Reclassificied to intangible assets Disposals and retirements Depreciation charge for the year 0 0 0 -644 0 -644 -141 -173 -97 -117 -629 -1,157 0 0 0 0 2 2 1,430 3,328 827 823 1,265 7,673 1,900 3,629 2,152 2,173 4,144 13,998 Effect of movements in exchange rates At 31 December, net of accumulated depreciation At 1 January: Cost Accumulated depreciation and impairment Net carrying amount -329 -338 -973 -589 -2,578 -4,807 1,571 3,291 1,179 1,584 1,566 9,191 1,900 3,839 1,728 1,382 4,472 13,321 -470 -511 -901 -559 -3,207 -5,648 1,430 3,328 827 823 1,265 7,673 At 31 December: Cost Accumulated depreciation and impairment Net carrying amount Major additions in 2008: Plant and equipment: Company cars and technical equipement Furniture, fixtures and equipment: Mainly relates to investments in the ERP system S T 12. Intangible assets Development costs N Not yet Patents and E 31 December 2009 In use in use licenses Total € (‘000) € (‘000) M € (‘000) 326 36,338 496 5 9,783 -600 0 -46 -646 -96 0 0 -96 35,911 9,183 285 45,379 Cost 31,300 8,687 451 40,438 A Accumulated amortization and impairment -3,975 0 -125 -4,100 I Net carrying amount 27,325 8,687 326 36,338 Cost 40,486 9,183 456 50,125 Accumulated amortization and impairment -4,575 0 -171 -4,746 Net carrying amount 35,911 9,183 285 45,379 T 8,687 9,282 N accumulated amortization and impairment Additions - internally developed A 27,325 A E Cost as at 1 January net of Amortization T accumulated amortization and impairment At 1 January: C L At 31 December, net of S Impairment charges I Development costs F N At 31 December: The development costs in 2009 mainly relate to the development of the Spyker models C–line and D-line (SSUV). The capitalized development costs are amortized over their estimated useful lives by a fixed amount for each new car sold based on expected sales over that period. The development costs for the C-line are currently amortized over the period up to 2016 (2008: 2016) and for an amount of € 25,000 per car (2008: € 25,000). For amortization purposes no residual value is taken into account. The expenditure on research is recognized as an expense in 2009 for an amount of € 14,000 (2008: € 378,000). Due to the nature of research activities, it is not certain that it will generate probable future economic benefits. In 2009 an amount of € 969 thousand (2008: € 0) of borrowing costs were recognized that were directly attributable to the development costs. On 25 September 2009 and 29 September 2009 Spyker Cars (as lessee) entered into financial lease agreements with SIA LKB Lîzings (as lessor), a company controlled by Snoras, and CPP (Manufacturing) Limited (as seller) in respect of the sale and lease of the tooling for the production the Spyker C8 Aileron. The total purchase price of the tooling amounts to € 1,2 milion and is financed by financial lease agreements with a maturity date 28 September 2014. Recoverable amount of Development costs Management performed an impairment test on the capitalized development costs at year-end. The book value of the cash generating units was compared to the calculated recoverable amount. The recoverable amount of the cash generating units was determined by value-in-use calculations. 111 111 Development costs are allocated primarily to the cash generating units C-line and D-line. Other includes primarily development costs related to Zagato and LaTurbie (insofar as significant): Development costs C-Line D-Line Other Total € (‘000) € (‘000) € (‘000) € (‘000) At December 31, 2009 35,911 6,985 2,198 45,094 At December 31, 2008 27,325 6,489 2,198 36,012 C-line and D-line For 2009 the main principles of the value-in-use calculations of the cash generating units C-line and D-line are: 1. Focus on limited model range C-line and D-line: 2. Increase sales volume, by means of: • Strengthening sales & after-sales organization; • Extension dealer network and geographic range; • Capitalise on strong existing product, image and brand; • Competitive pricing; 3. Cost down, by means of: • Cost efficient assembly of cars; • Target costing & production cost down programs; • Further economy of scale effects. Management has based its cash flow forecasts on the latest forecasts as prepared by the Group and approved by management. These forecasts are consistent with the Group’s strategic review, which was carried out during 2007, which was based on several operational and strategic experts in the automotive market, the Group’s business plan (Road Map), expected future market developments and past experience, and have been updated for the latest developments in respect of the factors mentioned above. The weighted average cost of capital used for the C- and D-line is 14% to 18%, pre tax (2008: in a range of 14% to 17%, pre-tax) and reflects the specific risks of the business segment Automotive. As part of the impairment review a charge of € 97 thousand (2008: € 1.3 million) was recognized in connection with the C-line, this charge was caused by certain technology that will no longer be used as a result from the transfer from the SWB to the new Aileron model. The impairment test of the C-line revealed no further impairment, although the margin is limited for the C-line when the calculations are made with a slow ramp-up or a lower sales price. The development of the Aileron is finalised and this new model have become available for sale in the course of 2009. In the cash flow forecasts, a steady sales volume is assumed as of 2013 for the Aileron, with sales gradually increasing for the years 2010 to 2012. The sales projections are based upon management’s best estimates, however, current market conditions remain unstable and may impact the pace by which the expected steady sales volume is achieved. The forecasts take into account the expected cash flows for the period up to 2016 (2008: 2016), the moment that the new Aileron model is expected to be replaced, and includes an appropriate residual value in connection with the transfer of the respective intangible assets to the Aileron’s successor. The impairment calculation of the C-line is especially sensitive for variations in the expected sales volumes in the coming years. The impairment test of the (still to be completed) D-line revealed no impairment and resulted in a material headroom in the calculated recoverable amount compared to the carrying amount. In the analysis it was assumed that car production and sales will start as of 2013. The impairment test of the other cash generating units revealed no impairment (2008: € 1.7 million). Patents and licenses are being amortized over their useful economic lives of 10 years. N T S Patents and licenses Not yet Patents and 31 December 2008 In use in use € (‘000) T Cost as at 1 January net of A E M E Development costs accumulated amortization and impairment T Reclassificafied from tangible assets S Additions - internally developed Amortization Impairment charges licenses Total € (‘000) € (‘000) 26,689 7,114 279 34,082 4,124 1,573 88 5,785 255 0 0 255 -775 0 -41 -816 -2,968 0 0 -2,968 27,325 8,687 326 36,338 29,889 7,114 363 37,366 accumulated amortization and impairment At 1 January: -3,200 0 -84 -3,284 Net carrying amount 26,689 7,114 279 34,082 N Cost 31,300 8,687 451 40,438 Accumulated amortization and impairment -3,975 0 -125 -4,100 Net carrying amount 27,325 8,687 326 36,338 A N Accumulated amortization and impairment I Cost F C I A L At 31 December, net of At 31 December: Development costs The development costs in 2008 mainly relate to the development of the Spyker models C–line and D-line (SSUV). 13. Investment in associates The Group has a 45% interest in Tenaci Engineering Pvt. Ltd., which is involved in delivering engineering services for the automotive industry. Tenaci Engineering Pvt. Ltd. is a private entity, founded in 2007 in India, which is not listed on any public exchange. Activities of Tenaci Engineering Pvt. Ltd. have been minimal during 2009 and 2008. As per year end the value amounts to € 0 (2008: € 0). The investments for the year of € 71 thousand (2008: € 42 thousand) have been written down to the income statement. The Group is still discussing the potential sale of its share to the other shareholders of Tenaci Engineering Pvt. Ltd., which will, most likely, take place against the book value of Tenaci Engineering Pvt. Ltd.. 113 113 14. Inventories Raw materials (at cost) Work in progress (at cost) 2009 2008 € (‘000) € (‘000) 4,333 3,475 816 706 2,871 4,846 8,020 9,027 2009 2008 31 43 Rebuilds -9 -13 New cars produced 22 30 Stock at 1 January 42 31 Finished goods (net realisable value) The following table illustrates the finished cars held in stock: Production output Purchased cars (a.o. trade-ins) External sales of cars Development cars Racing cars Stock at 31 December 6 17 -36 -37 -6 0 0 1 28 42 A sale is constituted once a car is invoiced and title is legally transferred to the dealer or consumer. Production output is defined as the number of individual cars the Group has produced in any given period of time and includes the production capacity absorbed by cars that are so-called “rebuilds”. For instance, a crash car is used several times for tests and rebuild after every crash. Also prototypes, engineering, pre-production and endurance test vehicles are produced but not sold. Demonstration cars are produced but not sold until after having served their purpose at a later stage. In 2009 the cost of goods sold amounts to € 4.7 million (2008: € 5.9 million). The amount of write-down of inventories recognized as an expense is € 0.5 million (2008: € 1.8 million). 15. Trade and other receivables 2009 2008 € (‘000) € (‘000) Trade receivables 1,089 1,005 Escrow account relating to disposal Spyker Formula One 1,429 1,429 Amounts due from Orange India Holdings 865 1,981 Taxes and social security contributions 103 119 Other receivables and pre payments 688 1,733 4,174 6,267 The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. 2008 € (‘000) Provision for bad debts per 1 January 112 0 Additions 100 112 Released -57 0 Provision for bad debts per 31 December 155 112 As at 31 December, the ageing of the trade receivables is as follows: T A T E E 2009 € (‘000) M T (2008: € 112 thousand). N S The trade and other receivables contain a provision for impaired assets in 2009 amounting to € 155 thousand Past due Past due Past due Past due nor impaired < 30 days 30-120 days 120-360 days >360 days € (‘000) € (‘000) € (‘000) € (‘000) € (‘000) € (‘000) 2009 1,089 51 0 19 635 385 2008 1,005 33 393 68 196 315 C N parties, for the amount past due more than 360 days an amount of € 230 thousand (2008: € 172 thousand) is attributable to related parties. These amounts will be settled in 2010. F I N In the amount past due more than 120 days an amount of € 600 thousand (2008: € 0) is attributable to related A L S past due Total A Past due but not impaired I Neither 16. Receivables from and payables to participants As per 31 December 2009, the receivables from participants amount to € 0.9 million and the payables to participants amount to € 0.2 million. As per 31 December 2008, the receivables from participants amount to € 0.3 million and the payables to participants amount to € 0.3 million. 17. Total equity Issued share capital Issued number of shares Issued shares per 1 January Issued in 2009 Converted from class A to ordinary shares Issued shares per 31 December Ordinary Priority Class A Total shares shares shares shares 10,662,210 1 4,910,265 15,572,476 253,516 0 0 253,516 4,643,750 0 -4,643,750 0 15,559,476 1 266,515 15,825,992 Spyker Cars issued share capital consists of ordinary shares, shares class A and one priority share. The nominal value of each share in Spyker Cars is € 0.04. Shares class A are registered shares and cannot be listed. Shares class A can, however, be converted into ordinary shares if the shareholder so requires by means of an application to that effect to the Management Board. In total, 253,516 shares were issued in 2009. It concerned all ordinary shares and were issued on 11 August 115 115 2009 to Affaires Financières SA / Bank Sarasin & Cie by the conversion of convertible notes to shares at a conversion rate of € 1.97 per share. During 2009, 4,643,750 shares class A were converted to ordinary shares by RMC Convers Group Holding Ltd. At year end, 15,825,992 shares were in issue, divided by 15,559,476 ordinary shares, 266,515 shares class A and 1 (one) priority share. Priority Share The Priority Share was transferred on 21 December 2007 from the foundation Stichting Prioriteit Spyker Cars (“Stichting Prioriteit”) to UAB “SNORO turto valdymas” (Snoras). Snoras transferred the Priority Share to Spyker Cars on 22 February 2010. The Priority Share will be cancelled during the Annual General Meeting of Shareholders to be held on 22 April 2010. The Priority Shareholder has the following rights and privileges: (i) the right to make a proposal to nominate members of the Management Board and the Supervisory Board; (ii) the right to make a proposal to suspend or dismiss members of the Management Board and the Supervisory Board; (iii) the right to propose to amend the Articles of Association and to dissolve Spyker Cars; (iv) the right to convene an extraordinary meeting of shareholders; (v) prior approval of whole or partial transfer of control over Company activities and the entering into or amendment of agreements between the Company on the one hand, and shareholders, members of the Management Board or members of the Supervisory Board, as individuals, on the other hand, or between the Company and legal entities over which the aforementioned persons have direct or indirect control; (vi) the right to receive, before any other shareholders, a dividend of 6% of the nominal amount of the Priority Share of € 0.04. On 24 February 2010, Spyker Cars’ articles of association were amended and a new article 42 was introduced, stating: “If, and as long the voting rights attached to the priority share cannot be exercised, the rights attributed to the priority in these articles of association, will be exercised by the Supervisory Board.” Share premium reserve In 2009, the new issue of 253,516 shares at an issue price of € 1.97 resulted in a share premium reserve addition of € 489 thousand. Shares class A are registered shares; these shares are not to be listed. Shares class A can, however, be converted into ordinary shares if the shareholder so requires by means of an application to that effect to the Management Board. Translation reserve The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations having a functional currency other than the Euro. Other reserves The other reserve comprises allocated net result of prior years and share based payments. Minority interest The losses applicable to the minorities exceed the minority interest in the equity of the subsidiaries. The minority interest is no longer deemed to make additional investments to cover the losses. Therefore the excess of € 127 thousand (2008: € 927 thousand), and any further losses attributable to the minority interest, is charged to the Group. Dividends Spyker Cars did not issue any dividend in 2009 and 2008. Result attributable to equity holders of Spyker Cars S E Result for the year M N T 18. Earnings per share Attributable to minority interests 2008 € (‘000) -22,953 -23,840 0 -927 -22,953 -24,767 Weighted average number of shares 2009 2008 15,572,476 9,774,181 A T E Result attributable to equity holders of Spyker Cars 2009 € (‘000) T Effect of shares issued S Issued shares at 1 January Weighted average number of shares at 31 December 5,521,781 15,295,962 2009 2008 15,671,799 15,295,962 1,195,000 1,210,872 41,891 207,487 16,908,690 16,714,321 2009 2008 € € A Effect of conversion of convertible notes Effect of share options on issue Weighted average number of shares (diluted) at 31 December A N Result per weighted average number of shares -1.46 -1.62 Result per weighted average number of shares diluted -1.46 -1.62 F Results per share I N C Weighted average number of shares at 31 December I L Weighted average number of shares (diluted) 99,323 15,671,799 Since the Group was in a loss in 2009 the result per weighted average number of shares diluted is determined on - € 1.46 (calculated: € -1.39) in 2009. The calculated result per weighted average number of shares diluted includes result attributable to equity holders of the company adjusted for the interest charges relating to convertible notes. The earnings per share could be influenced by the subsequent events as part of financing of the Saab acquisition as entered into by the Group: the convertible loan agreements with Epcote and Tenaci Capital and the warrants issued to GEM. For further details see Note 26 Subsequent events. 19. Employee benefits The expense recognized in the income statement is disclosed in Note 19 Employee benefits. ESOP Spyker has an Employee Share Option Plan (ESOP), which came into force in 2005 and was amended in 2006 and 2008 with respect to the definition of some words and expressions in the plan. Under the five-year duration of the ESOP, option rights may be granted to acquire newly issued shares up to an aggregate amount of 10% of the issued share capital per the option date. Per 31 December 2009 208,128 option rights (2008: 333,670 option rights) were granted to and accepted by members of the Management Board and a number of (key) employees. The exercise price for these options has been determined as follows: € 9.30 for 124,346 option rights; € 17.00 for 24,000 option rights and € 2.37 for 59,782 options rights. In 2009, 59,782 option rights were granted, no option rights were exercised and 185,324 options rights lapsed or expired. An employee is only allowed to convert its option rights into shares if it is still an employee of the Group. Each year 20% of the option rights 117 117 will vest if the performance criteria for that year are met. These performance criteria are determined each year by the Supervisory Board. The targets for 2009 set by the Supervisory Board related to the number of cars produced and sold and to a certain reduction of the negative operational cash flow. The targets for 2009 were not met. Share-based payments On 24 May 2004, Spyker Cars’ General Meeting of Shareholders approved to grant Mr. Jaharia’s management company, as of the first listing date of 27 May 2004, unconditional option rights to acquire 59,782 shares, representing 2.5 per cent of the outstanding shares as per the first listing date. The exercise price for these options is the same as the issue price of € 15.50 at the IPO. In 2009 these options expired and were not exercised. As at 27 May 2004, the Employee Share Option Plan (ESOP) was established. In the light of the business developments of 2004, the Supervisory Board decided to postpone the duration of effectiveness, which was from 2004 up to and including 2008, from 2005 up to and including 2009. All other terms remained unchanged. The first option rights under the ESOP were granted on 5 July 2005. The amount of the share based payment is determined based on the increase in the share price of Spyker Cars from grant date until vesting time. During 2009 59,782 new option rights were granted. S The terms and conditions are as follows, whereby all options are settled by physical delivery of shares. N T Number of price options Vesting conditions life of 59,782 Spyker Cars options M E Grant date / employee entitled Contractual Exercise Options grant to key management Completion of IPO of € 15.50 Expired 5 years -59,782 0 A T E at 27 May 2004 T at 31 December 2005 S Options grant to key management Lapsed € 9.30 143,477 -59,782 83,695 Yearly, max 20% can vest if 5 years performance criteria set by + 1 month Supervisory Board are met. Employee has to be in service at A at 31 December 2005 € 9.30 Exercized Lapsed Yearly, max 20% can vest if 5 years 59,780 performance criteria set by + 1 month -2,390 Supervisory Board are met. -16,739 Employee has to be in service at 40,651 moment of vesting Yearly, max 20% can vest if 5 years 24,000 performance criteria set by + 1 month A N C Option grant to other employees I L moment of vesting € 17.00 I at 31 December 2007 Supervisory Board are met. F N Options grant to other employees Employee has to be in service at moment of vesting Options grant to key management at 1 April 2008 € 7.01 Lapsed 59,782 -59,782 0 Yearly, max 20% can vest if 5 years performance criteria set by + 1 month Supervisory Board are met. Employee has to be in service at moment of vesting Options grant to key management at 17 September 2008 € 4.56 Lapsed 59,782 -59,782 0 Yearly, max 20% can vest if 5 years performance criteria set by + 1 month Supervisory Board are met. Employee has to be in service at moment of vesting Options grant to key management at 23 April 2009 € 2.37 59,782 Yearly, max 20% can vest if 5 years performance criteria set by + 1 month Supervisory Board are met. Employee has to be in service at moment of vesting 208,128 The performance criteria set by the Supervisory Board for 2009, have not been met. During 2009 185,324 option rights were lapsed or expired (2008: no lapsed or expired option rights). 119 119 The number and weighted average exercise prices of share options are as follows: As per Granted 1 January during period Exercised Exercise price € 17.00 24,000 0 Exercise price € 15.50 59,782 0 Exercise price € 9.30 130,324 Exercise price € 7.01 59,782 Exercise price € 4.56 59,782 Exercise price € 2.37 0 2009 Lapsed As per during period 31 December 0 0 24,000 0 -59,782 0 0 0 -5,978 124,346 0 0 -59,782 0 0 0 -59,782 0 59,782 0 0 59,782 As per Granted Lapsed As per 31 1 January during period Exercised during period December Exercise price € 17.00 24,000 0 0 0 24,000 Exercise price € 15.50 59,782 0 0 0 59,782 Exercise price € 9.30 130,324 0 0 0 130,324 Exercise price € 7.01 0 59,782 0 0 59,782 Exercise price € 4.56 0 59,782 0 0 59,782 2008 The fair values for the granted options in the respective years were calculated using the Black-Scholes option pricing model. The inputs into the model were as follows: Weighted average fair value of share options at measurement date Weighted average exercise price 2009 2008 2007 2005 € 1.15 € 2.37 € 2.80 € 5.79 € 2.13 € 17.00 € 2.37 € 9.30 40% 20% Expected volatility 77% 67% Expected life 3.25 years 3.25 years Risk free rate 3.498% 3.498% 3.498% 3.498% 0.0% 0.0% 0.0% 0.0% Expected dividend yield 3.25 years 3.25 years Expected volatility was determined by calculating the historical volatility of the company’s share price over the period it was listed on the stock exchange adjusted for the fact that the company’s volatility in the first years of its existing is to be expected higher than in the coming years. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. In 2009 the Group recognized as employee benefits a total expenses of € 0 (2008: € 61 thousand) related to equity-settled share-based payment transactions during the year. Pension benefits The pension plan for employees of Spyker Cars qualifies as a defined contribution plan. Under this plan a fixed agreed amount is paid to the insurance company. There is no commitment either enforceable by law or otherwise to pay additional contributions, pension benefits and related investments. is unable to calculate the pension commitments and related investments on the basis of required IAS 19 accounting principles. Therefore these pension commitments are accounted for as a defined contribution plan. M This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings. Non-current liabilities 2009 2008 € (‘000) € (‘000) Convertible notes Snoras 9,295 9,051 Loan agreements Snoras 5,155 6,340 Finance lease liabilities 1,225 1,462 15,675 16,853 Current liabilities N Loan agreements Snoras A C I A L S T A T 20. Interest bearing borrowings E E T Pensioenfonds Metaal en Techniek (PMT). This pension plan qualifies as a defined benefit plan. However the PMT N S The pension benefits of the employees of Spyker Automobielen B.V. and Spyker Squadron B.V. are insured in Convertible notes Affairs Financiers 2008 € (‘000) 36,740 7,300 0 495 2,372 2,590 39,112 10,385 F I N Finance lease liabilities 2009 € (‘000) The fair value of current and non-current liabilities is not significantly different from their carrying amount, as the impact of discounting is not significant. Convertible notes Snoras (a) Original proceeds from issue of convertible notes Transaction cost Net proceeds Recognition of equity component of convertible notes Intrest charges Carrying amount of liability at 31 December 2009 2008 € (‘000) € (‘000) 9,560 9,560 0 0 9,560 9,560 -713 -713 448 204 9,295 9,051 On 21 January 2008 Snoras Bank of Vilnius, Lithuania (Snoras) granted Spyker Cars a 7% convertible loan in the amount of € 9,560,000. This loan may be converted, in whole or in part, into 2,390,000 shares at a price of € 4.00 each at any time during its 3 year term. The interest payment (7.0%) on the convertible notes was deemed to be below the interest rate (10%) that would be due in case no conversion right was granted to the note holders, therefore an equity component was recognized for the amount of € 713 thousand. Notes were issued in denominations of € 50 thousand. Each note can be converted in 12.500 shares at a conversion rate of € 4.00. Notes that are not converted to ordinary shares will be redeemed at face value before 121 121 31 January 2011. In 2009, the interest paid amounts to € 939 thousand (2008: € 631 thousand) and the interest charged to the income statement amounts to € 1,183 thousand (2008: € 835 thousand). The difference between the fair value and the nominal value of the convertible notes is not considered material. On 3 February 2009 Snoras and the Group entered into an amended agreement to this loan agreement in order to change the interest rate of the loan to 10% per annum. As per 30 December 2009 this loan was assigned to Flemming Ltd. Snoras loan agreements (b to n) 2009 2008 € (‘000) € (‘000) As per 1 January 13,640 0 Additions 28,255 13,640 As per 31 December 41,895 13,640 5,155 6,340 36,740 7,300 Non-current Current b. Snoras amended and restated loan agreement 21 January 2008 On 21 January 2008 Snoras and the Group agreed to amend and restate the investment agreement of 21 December 2007 in its entirely on the terms and conditions of a new amended and restated loan agreement for an amount of € 6,340,000. The loan shall be used for the financing of working capital. The loan has an interest rate of 6 months LIBOR plus 200 basis points and shall be paid quarterly in arrears. The loan shall not be subject to a reduction scheme and repaid in full on the final maturity date of 21 December 2010 together with all accrued interest, costs, charges, fees, expenses and other outstanding amounts. As a collateral for the loan the company, Spyker Automobielen B.V., Spyker Squadron B.V. and Spyker Events & Branding B.V. provided Snoras with the following security interests: domain names, intellectual property rights, receivables, including intragroup receivables, stock, work in progress, inventory, fixtures and fittings, intangible assets, financially leased vehicles, current account and moveable assets and a mortgage regarding Edisonweg 16, Zeewolde. In addition, Spyker Cars pledged its shares in Spyker Automobielen B.V., Spyker Squadron B.V., Spyker Events & Branding B.V., Spyker Cars UK Ltd. and Spyker of North America, LLC. On 3 February 2009 Snoras and the Group entered into an amended agreement to this loan agreement in order to change the interest rate of the loan to 10% per annum. c. Snoras additional loan agreement 25 September 2008 On 25 September 2008 Snoras granted an additional loan in the amount of € 5,000,000. The loan was used for the financing of working capital. The loan had a fixed interest rate per annum of 9%, to be paid monthly in arrears. The loan was to be repaid in full on the final maturity date on 25 March 2009 together with all costs, charges, fees, expenses and other outstanding amounts. To this additional loan the same terms and conditions applied as the amended and restated loan agreement of 21 January 2008. On 3 February 2009 Snoras and the Group entered into an amended agreement to this loan agreement in order to change the interest rate of the loan to 10% per annum. On 24 March 2009 Snoras and the Group agreed to amend the loan agreement by replacing the final maturity date to 22 March 2010. T On 20 December 2008 Snoras granted a second additional loan in the amount of € 2,300,000. The loan was used for the financing of working capital. The loan had a fixed interest rate per annum of 9%, to be paid monthly N S d. Snoras second additional loan agreement 20 December 2008 in arrears. The loan was to be repaid in full on the final maturity date on 25 March 2009 together with all costs, E conditions applied as the amended and restated loan agreement of 21 January 2008. M charges, fees, expenses and other outstanding amounts. To this second additional loan the same terms and On 3 February 2009 Snoras and the Group entered into an amended agreement to this loan agreement in order amend the loan agreement by replacing the final maturity date to 22 March 2010. e. SIA Krâjinvestïcijas T On 22 April 2009 SIA Krâjinvestïcijas granted a loan in the amount of € 430,000. The loan shall be used for the financing of working capital. The loan has a variable interest rate per annum of 9.01%, consisting of a fixed part S A T E to change the interest rate of the loan to 10% per annum. On 24 March 2009 Snoras and the Group agreed to of 6.7% and a variable part of 3 months interbank loan interest rate index values of LIBOR EUR on 21 January 2009. The variable part of the interest rate shall be changed every 3 months, starting from the first change date maturity date on 22 January 2012. As a collateral Spyker pledged the rights with respect to 2 Spyker SWB cars. f. Snoras third additional loan agreement 29 January 2009 On 29 January 2009 Snoras granted a third additional loan in the amount of € 2,600,000. The loan shall be used N for the financing of working capital. The loan has a fixed interest rate per annum of 11% and shall be paid monthly in arrears. The loan shall be repaid in full on the final maturity date on 25 January 2010 together with all A C I A L of the interest rate. The interest shall be paid monthly in arrears. The loan shall be repaid in full on the final costs, charges, fees, expenses and other outstanding amounts. To this third additional loan the same terms and this loan was assigned to Flemming Ltd. F I N conditions apply as the amended and restated loan agreement of 21 January 2008. As per 30 December 2009 g. Snoras fourth additional loan agreement 1 March 2009 On 1 March 2009 Snoras granted a fourth additional loan in the amount of € 4,000,000. The loan shall be used for the financing of working capital. The loan has a fixed interest rate per annum of 11% and shall be paid monthly in arrears. The loan shall be repaid in full on the final maturity date on 25 January 2010 together with all costs, charges, fees, expenses and other outstanding amounts. To this fourth additional loan the same terms and conditions apply as the amended and restated loan agreement of 21 January 2008. As per 30 December 2009 this loan was assigned to Flemming Ltd. h. Snoras fifth additional loan agreement 31 March 2009 On 31 March 2009 Snoras granted a fifth additional loan in the amount of € 5,000,000. The loan shall be used for the financing of working capital. The loan has a fixed interest rate per annum of 11% and shall be paid quarterly in arrears. The loan shall be repaid in full on the final maturity date on 22 March 2010 together with all costs, charges, fees, expenses and other outstanding amounts. To this fifth additional loan the same terms and conditions apply as the amended and restated loan agreement of 21 January 2008. i. AS Latvijas Krâjbanka credit line agreement 19 June 2009 and 17 July 2009 On 19 June 2009 AS Latvijas Krâjbanka granted a credit line in the amount of € 3,000,000. The loan shall be used for the financing of working capital. The credit line has a fixed interest rate per annum of 10% and shall be paid quarterly in arrears. On 17 July 2009 AS Latvijas Krâjbanka amended the existing credit line agreement of 19 June 2009. The credit line was raised to the amount of € 7,500,000 and fully used per year end. To this amended credit line agreement the same terms and conditions apply as the credit line agreement of 19 June 2009. On 18 December 2009 the agreement was amended to extend the repayment date of the credit line to 18 June 2010. j. Belgravia Limited loan agreement 5 October 2009 123 123 On 5 October 2009 Belgravia Limited granted a loan in the amount of € 2,000,000 for the term of 5 October 2011. The loan shall be used for general corporate purposes and the financing of working capital. The loan has a fixed interest rate per annum of 10% and shall be paid simultaneously with repayment of the entire loan amount. k. RMC Convers Group Holding Limited 14 October 2009 On 14 October 2009 RMC Convers Group Holding Limited granted a loan in the amount of € 725,000. The loan shall be repaid on 13 October 2014. The loan has a variable interest rate per annum of 6-month EURIBOR plus 1%. Interest shall be paid on the repayment date. l. Spilen Limited 26 October 2009 On 26 October 2009 Spilen Limited granted a loan in the amount of € 2,000,000. The loan shall be repaid on 26 October 2014. The loan has a variable interest rate per annum of 6-month EURIBOR plus 1%. Interest shall be paid on the repayment date. m. Snoras sixth additional loan agreement 2 December 2009 On 2 December 2009 Snoras granted a sixth additional loan in the amount of € 2,000,000. The loan shall be used for the financing of working capital. The loan has a fixed interest rate per annum of 10% and shall be paid quarterly in arrears. The loan shall be repaid in full on the final maturity date on 21 December 2010 together with all costs, charges, fees, expenses and other outstanding amounts. To this sixth additional loan the same terms and conditions apply as the amended and restated loan agreement of 21 January 2008. n. RMC Convers Group Holding Limited 28 December 2009 On 28 December 2009 RMC Convers Group Holding Limited granted a loan in the amount of € 3,500,000 of which € 2,000,000 was received in 2009 and the remainder of € 1,500,000 in 2010. The loan shall be repaid on 28 December 2010. The loan has a fixed interest rate per annum of 9.5%. Interest shall be paid on the repayment date. Subsequent event regarding the Snoras loan agreements In relation to the Saab acquisition Tenaci Capital B.V., a company majority owned by Mr. V.R. Muller, granted Spyker Cars on 23 February 2010 a loan for an amount of € 57 million for repayment of all of Spyker Cars’ current outstanding loans to banks and other financial institutions controlled directly, or indirectly by Mr. V. Antonov as mentioned in sub-note a to n as described above as well as the financial lease between Spyker Cars, SIA LKB Lîzings and CPP (Manufacturing) Limited as described below. This loan mirrors the existing terms (including the lender’s right to convert € 9.5 million into ordinary shares at a conversion rate of € 4.00 per share). This is further explained in Note 26 Subsequent events. S 2009 2008 € (‘000) € (‘000) 4,000 4,000 -47 -47 3,953 3,953 -3,793 -3,298 -232 -232 N T Convertible notes Affairs Financiers Original proceeds from issue of 400 convertible notes Net proceeds M E Transaction cost E Recognition of equity component of convertible notes T Amortization transaction costs 32 32 A Conversion Interest charges 40 40 0 495 S T Carrying amount of liability at 31 December The interest payment on the convertible loan notes Affaires Financiers is 7.0%. This rate was deemed to be below the interest rate (10%) that would be due in case no conversion right was granted to the note holders, L A conversion rate of € 13.50. At 16 June 2005, the convertible loan has been attracted to further finance the development costs. Therefore, the related interest expenses have been capitalized. On 11 August 2009 a total of 253,516 ordinary shares were issued to Affaires Financières SA / Bank Sarasin & N Cie by the conversion of all of the convertible notes to shares at a conversion rate of € 1.97 per share. In 2009, the interest paid amounts to € 18 thousand (2008: € 35 thousand) and the interest charged to the A C Notes were issued in denominations of € 10 thousand. Each note can be converted in 740 shares at a I therefore an equity component was recognized. income statement amounts to € 18 thousand (2008: € 75 thousand). The difference between the fair value and I Finance lease liabilities F N the nominal value of the convertible notes is not considered material. Finance lease liabilities are payable as follows: Minimum Less than one year Between two and five years Future lease Present interest payments value payable 2009 2009 2009 2,558 2,372 186 1,465 1,225 240 4,023 3,597 426 Minimum Future lease Present interest payments value payable 2008 2008 2008 Less than one year 2,758 2,590 168 Between two and five years 1,620 1,462 158 4,378 4,052 326 Leaseplan and Amstel Lease Spyker Cars has entered into financial lease agreements with Lease Plan and Amstel Lease in respect of 25 produced but unsold cars, including test models and finished cars held in stock including sale-and-lease back transactions. At the end of 2009, the total amount owed to both companies is € 3.6 (2008: € 4.1 million), and 125 125 maturities of these facilities range from 2 to 36 months up to 21 December 2011. The interest payments vary from 4.6% to 7.0% per year. The Group has provided the following collateral for these lease commitments: a right of pledge on transport vehicles (partly), prototypes, test models, a part of the trade fair stands and finished cars held in stock. The carrying amount of these collaterals approximate the carrying amounts of the respective lease liabilities. SIA LKB Lîzings and CPP (Manufacturing) Limited On 25 September 2009 and 29 September 2009 Spyker Cars (as lessee) entered into financial lease agreements with SIA LKB Lîzings (as lessor), a company controlled by Snoras, and CPP (Manufacturing) Limited (as seller) in respect of the sale and lease of the tooling for the production the Spyker C8 Aileron. The total purchase price of the tooling amounts to € 1,183,000 and is financed by financial lease agreements with a maturity date of 28 September 2014. The floating annual interest rates consist of a fixed part of 10.0% and a floating part of 3-month interbank credit interest rate index LIBOR EUR. The Group has provided the tooling as collateral for the lease commitments. The carrying amount of the collateral approximate the carrying amounts of the respective lease liabilities. Subsequent event regarding the financial lease liabilities regarding SIA LKB Lîzings and CPP (Manufacturing) Limited In relation to the Saab acquisition Tenaci Capital B.V., a company majority owned by Mr. V.R. Muller, granted Spyker Cars on 23 February 2010 a loan for an amount of € 57 million for repayment of all of Spyker Cars’ current outstanding loans to banks and other financial institutions controlled directly, or indirectly by Mr. V. Antonov as mentioned above in note a to n as well as the financial lease between Spyker Cars, SIA LKB Lîzings and CPP (Manufacturing) Limited. This loan mirrors the existing terms (including the lender’s right to convert € 9.5 million into ordinary shares at a conversion rate of € 4.00 per share). This is further explained in paragraph 26 Subsequent events. The exposure of the Group’s borrowings to interest changes and the contractual repricing dates at the balance sheet dates are as follows: 2009 2008 € (‘000) € (‘000) 6 months or less 27,706 9,487 6-12 months 11,406 898 1-5 years 15,675 16,853 Over 5 years Total non-current and current liabilities The carrying amounts of all the Group’s borrowings are denominated in Euro. 0 0 54,787 27,238 S € (‘000) € (‘000) Balance as at 1 January 146 213 Additions 103 93 E Released -53 -160 T T 2008 Balance as at 31 December 196 146 Non-current 150 93 Current 96 53 246 146 period applies). The Group accrues a fixed amount per car, primarily based upon past experiences with warranty costs. 22. Trade and other payables 2009 2008 € (‘000) € (‘000) 2,507 2,845 I Trade payables F N A N C A Warranty provision relates to the two years warranty period for new cars (for used cars a one year warranty I L A M E 2009 T Warranty provision S The following table illustrates the movements in the warranty provision: N 21. Provisions Taxes and social security contributions 346 315 Installments invoiced 869 1,569 Non trade payables and accrued expenses 2,568 3,260 6,290 7,989 23. Contingencies The Group has contingent liabilities in respect of bank and other guarantees arising in the ordinary course of business amounting to € 140 thousand (2008: € 127 thousand) for lease liabilities and € 100 thousand (2008: € 100 thousand) for legal proceedings. Tax exposure The Group operates or will operate in various countries and is therefore subject to the risk of tax audits and assessments in these countries for various taxes like value added taxes, wage taxes and corporate income taxes. The Group seeks to manage its tax affairs in compliance with all applicable laws. However, it is possible that authorities may disagree with positions taken by the Group, and consequently the Group may be exposed to tax assessments in excess of those provided in the financial statements for tax assets or liabilities, which could have a material adverse effect on Spyker Cars’ business, financial condition and/or results of operations. Warranties and escrow account In the share purchase agreement between Spyker Cars, Spyker Events & Branding B.V. (formerly: Spyker F1 Racing Holding B.V.) and Orange India Holdings Sarl (“OIH”), Spyker Cars has given certain warranties. 127 127 Notice of a warranty claim must be given by or on behalf of OIH to Spyker Cars in the case of a claim relating to: • the environment: on or before 5 October 2010; • taxation: on or before 5 October 2014; • a matter other than environment or taxation: on or before 5 October 2009. In October 2009 Spyker Cars received notice of claims from OIH in the total amount of about € 6.5 million. OIH did not start any proceedings with respect to this notice. The aggregate liability of Spyker Cars in respect of any claim relating to the share purchase agreement shall not exceed € 16.7 million. As a security for possible claims under the share purchase agreement, an amount of € 4 million was transferred to an escrow account. On 2 October 2008 the company received from OIH a notice of a claim relating to taxation. OIH estimates the aggregate tax liability to an amount of € 1.4 million. The escrow account is not released for this amount. Based on its own estimate, the Group already accrued in 2007 for these tax liabilities and other exposures in connection wit the sale of F1 to OIH. The residual amount of € 2.6 million was released from the escrow account and paid to the Group on 5 October 2008. Legal proceedings Spyker issued proceedings against Connect4 B.V. with respect to a default by Connect4 under the license agreement for the use of Spyker’s trademark for mobile telephony. Spyker terminated the license agreement and claimed an amount of € 103,000 for unpaid royalties. Connect4 issued a counterclaim for the amount of € 2.1 million for alleged damages due to the termination of the license agreement by Spyker. There will be a personal appearance of the parties to give information or to try to reach a settlement in the second quarter of 2010. In 2010, Colin Kolles – the former manager of the Spyker Formula One team – issued preliminary proceedings against Spyker with respect to alleged unpaid commission monies over 2005 and 2006 in the total amount of € 1.2 million. The court rejected the claim of Kolles in its verdict of 22 January. Equity facility During the year under review, Spyker Cars had access to an equity facility agreement with Trafalgar entered into in March 2007. On the basis of this agreement, Trafalgar is committed to purchase up to € 25 million common stock of Spyker Cars during a three year period, if and when requested by the Group. Up until the end of 2008, the Group has received an amount of € 4.8 million under the Trafalgar facility. During 2009, the Group did not call on this facility and was still able to draw up to € 20.2 million under the agreement. The agreement ended March 2010. 24. Commitments not included in the balance sheet Operating leases – Group as lessee Non-cancellable operating leases are payable as follows: 2009 2008 € (‘000) € (‘000 Less than one year 603 602 Between one and less than five years 779 571 1,382 1,173 from one to five-years. The other annual operational lease commitments amount to € 302 thousand (2008: € 309 thousand). 25. Subsidiaries and associates Ownership Interest Spyker Automobielen B.V. Netherlands 100% 100% T Spyker Squadron B.V. Netherlands 100% 100% Spyker Events & Branding Netherlands 100% 100% United States 100% 100% Spyker Cars UK Ltd. United Kingdom 100% 100% Spyker of China Ltd. Hong Kong 51% 51% India 45% 45% A T Country of incorporation S E M E T thousand). The last lease contracts will expire before 31 December 2012 and are subject to optional extensions N S The Group has leased accommodations in Zeewolde for an amount of € 337 thousand in 2009. (2008: € 293 Subsidiairies and associates: Tenaci Engineering Pvt. Ltd. (asssociate) 26. Subsequent events A N C I A L Spyker of North America LLC, USA Of major importance was the acquisition of Saab, which is described in more detail below. The acquisition was Meeting decided to amend Spyker Cars’ articles of association. F I N approved by the Extraordinary General Meeting of Shareholders on 12 February 2010. Furthermore, the General The acquisition of Saab On 23 February 2010 Spyker Cars purchased all of the shares in Saab Automobile AB (‘Saab’) from General Motors for an aggregate purchase price of $ 74,000,000, comprising an amount of $ 50,000,000, which was paid on 23 February 2010 (“Closing’), and $ 24,000,000, which is deferred to no later than 15 July 2010 (plus interest at 5% per annum). Spyker Cars expects to be able to use the substance and magnitude of the new group to refinance in order to be able to pay the last payment in July, as it was able to do so with the first payment in February. Spyker Cars has entered into a separate agreement with General Motors UK Limited for the purchase of the shares in Saab Great Britain Limited (Saab GB), which will be held directly by Spyker Cars. The purchase price is £ 1. Completion is subject to clearance by the UK pensions regulator and is anticipated to occur in or around May 2010. As back-up financing, Spyker Cars entered into a € 150 million Equity Credit Line Facility with GEM Global Yield Fund Limited (“GEM”) for a term of 3 years. According to this facility, Spyker Cars may issue shares to GEM at 90 per cent of the volume weighted average price of the shares over a period of 15 trading days following a draw down notice sent to GEM by Spyker. A commitment fee of € 2,250,000 is payable not later than 31 August 2010, subject to retention of approximately 680,000 ordinary shares in Spyker as collateral. In relation to the GEM facility, Spyker Cars has issued to GEM share warrants in respect of 1,570,000 ordinary shares at an exercise price of € 4 per ordinary share. If Spyker Cars does not issue further warrants for 3,430,000 shares to GEM by 26 January 2011, GEM has the right to terminate this facility. The warrants have a 5 year term. Spyker Cars expects to use this facility only at a very limited extend, because it is a very expensive way to obtain funding. To facilitate continuation of the Saab business, Saab and relevant subsidiaries have entered into several (transitional) services, license and other agreements with members of the GM group. 129 129 Spyker Holding B.V. was incorporated on 17 February 2010 in order to accomodate an efficient ownership and capital structure with respect to the acquisition of Saab. Ownership and financing re-structuring of Spyker Cars As from Closing of the Saab acquisition, the ownership structure of Spyker Cars has changed as follows: • Tenaci Capital B.V. (“Tenaci”), a company majority-owned by Mr. V.R. Muller (50.1% interest) has taken over Mr. V. Antonov’s current shareholding in Spyker consisting of 4.6 million ordinary shares. As agreed in 2007, when Mr. V. Antonov acquired his shares in Spyker, Mr. V. Antonov transferred the priority share to Spyker as per the date of Closing. • Messrs. N. Stancikas, M. Bondars and Mr. V. Antonov resigned as members of Spyker Cars’ Supervisory Board effective as per the date of Closing. • Tenaci has granted to Spyker Cars two loans. One for an amount of €17 million towards payment of part of the Purchase Price ($ 25 million) for Saab upon completion of the transaction. A second loan for an amount of € 57 million for repayment of all of Spyker Cars’ current outstanding loans to banks and other financial institutions controlled directly, or indirectly by Mr. V. Antonov. This loan mirrors the existing terms (including the lender’s right to convert € 9.5 million into ordinary shares at a conversion price of € 4.00 per share). This is further explained under “Funding of Spyker” below. Funding of Saab The Saab Business Plan requires approximately $ 1 billion in peak funding for Saab in advance of the return to profitability, forecast to occur by 2012. The funding is provided in part by GM, through set-off of pre-closing receivables on Saab against $ 326 million Redeemable Preference Shares (“RPSs”), and in part through other contributions, which concern various substantial contributions to the funding of Saab’s Business Plan on favorable terms for supplies by GM to Saab and deferred payments from Saab to GM. The remaining amount, apart from cash at bank ($ 200 million), is provided by a € 400 million ($ 556 million) loan from the EIB for certain R&D projects at Saab. Securing this EIB loan was a condition precedent to Closing of the Saab acquisition. With this financing in place, the business plan did not envisage any future funding being required, neither from Spyker or elsewhere, for Saab to return to profitability. The Business Plan targets car production and sales at or below historical levels of 100,000 to 125,000. For a further discussion of the funding position of Saab we refer to note 2. Explanation on the two sources of funding: Redeemable Preference shares At Closing, GM converted $ 326 million of pre-closing receivables on Saab into RPSs in Saab. The issue of the RPSs therefore do not cause any dilution for the shareholders in Spyker Cars. The voting rights attaching to these RPSs constitute 0.0005% of the total voting rights in Saab. The other 99.99% of the voting rights (100% of the ordinary shares) are held by Spyker Cars. Since the RPSs are capital under Swedish law and not a loan, no interest is due at any time by Saab. The RPSs carry no dividend from Closing until December 31, 2011. A dividend entitlement of 6% per annum starts from January 1, 2012 through June 30, 2013 and increases over time to 12% as from July 1, 2013 until the scheduled redemption date of December 31, 2016. The dividend over 2012 will be added to principal, but as from fiscal year 2013 the dividend is payable in cash. Should Saab have insufficient distributable reserves to pay the cash dividend it will be added to principal increased with a penalty factor of up to 4%, but such that the total dividend entitlement will never exceed 12%. The RPSs qualify as equity under Swedish law and therefore, if Saab cannot pay dividends or redeem the RPSs, Saab will not be in default but the RPSs will simply continue to accrue. Also, the RPSs cannot be redeemed as out of retained profit, without additional funding (from Spyker or anyone else) being required. N T S long as the EIB loan is not yet fully repaid. The Saab Business Plan envisages redemption of the RPSs per 2016 EIB loan E and the EIB, for which a guarantee was obtained from the Swedish Government on 26 January, 2010 and was M The Share Purchase Agreement was subject to the execution of a € 400 million loan agreement between Saab approved by the European Commission on 12 February 2010. This loan will be issued to Saab in tranches. At E plus a spread. The Swedish National Debt Office (NDO) has guaranteed the loan for which Saab pays a certain T fee. All amounts payable by the EIB are specifically earmarked to the Euro for designated Saab projects and A each tranche Saab can chose the currency and a fixed or floating interest benchmarked against Libor or Stibor capital expenditures and represent 50% of these projects or capital expenditures. The projects mainly relate to T Business Plan. Spyker will not have any access to the EIB funds which are completely ring-fenced nor will it pay S increasing fuel efficiency and clean car technology. The remaining 50% is funded by Saab itself pursuant to its any part of the Purchase Price with proceeds from the EIB loan. Each loan tranche must be repaid in installments pursuant to an amortization table delivered by the EIB in L scheduled disbursement of the first tranche and (b) 31 December 2017. Funding of Spyker Cars N Spyker Cars’ existing bank loans in the aggregate amount of € 57 million are refinanced by Tenaci. The terms and conditions of this loan mirror those of the existing loans it repaid, including the right to convert € 9.5 million A C I inter alia, the last repayment date will fall not earlier than 4 years and not later than the earlier of (a) 7 years from A connection with the disbursement of that tranche. Each amortization table is to be drawn up on the basis that, into ordinary shares at € 4.00 per share. The term of the loan is 5 years (or shorter once all preference shares N which the existing loans were collateralized. F of the purchase price, Tenaci has the right to collateralize the loan on terms and conditions identical to those on I have been redeemed) and the interest 10 percent above 6-month Euribor. After payment of the last installment The purchase price of Saab amounts to $ 74 million (€ 53.23 million at the exchange rate of 1:1.39). The first installment of $ 50 million, paid on Closing, is funded as follows. An amount of $ 25 million is borrowed from Tenaci at an interest rate of 6 percent above 6-month Euribor, without the right to convert into shares. On 8 February 2010 Spyker Cars entered into a $ 25 million convertible loan agreement with an investment company owned by Heerema Holding Company Inc to fund the remaining part of the first installment. The $ 25 million loan has a 2 year term, an interest of 10% above 6-month Euribor and is convertible into shares at € 4 each. The second installment, $ 24 million (plus interest at 5% per annum), will be payable on July 15, 2010. Spyker Cars intends to finance this amount primarily through senior debt (senior to the debt owed to Tenaci), but does not rule out other alternatives. Each member of the Spyker Group has pledged all of their assets (excluding the Spyker Holding B.V. and Saab shares) to GM as security for this final tranche. Spyker Cars issued a corporate guarantee of $ 10 million for Saab’s obligations to and for the benefit of the financing company GMAC. Funding of Tenaci – securities provided by Spyker Cars Tenaci’s share capital is majority-owned by Investeringsmaatschappij Helvetia B.V. (50.1% interest), the personal holding company of Mr. Victor Muller. Tenaci obtains its debt funding from RMC. Tenaci has taken over Mr. V. Antonov’s current shareholding in Spyker Cars consisting of 4.6 million ordinary shares, subject to closing of the Saab acquisition. As a security for the lendors of Tenaci an option over Spyker Cars’ assets has been granted by Spyker Cars. 131 131 If Tenaci has not prepaid at least Euro 31 million of the (direct and indirect) loans from its lendors on or before 31 December 2010, Danforth Ventures Inc. has the right to acquire all of the assets (and no liabilities) of Spyker Cars and its subsidiaries pertaining to the Spyker business, as carried on before the acquisition of Saab (excluding the shares in the subsidiaries of Spyker and the shares in Saab), for Euro 31 million. Danforth Ventures Inc has granted an extension until the end of April 2011, in order to allow Spyker Cars to repay the EUR 31 million, as parties involved are interested to continue the Spyker car production activities within the Group. Management is confident that the option will not be exercised. Additionally Spyker Cars has agreed a negative and positive pledge undertaking vis-à-vis Tenaci’s lendors until all loans have been repaid by Tenaci. Significant voting stake On 24 March 2010, Victor Muller transferred 1,295,711 listed ordinary shares reducing his voting rights in Spyker to below 30%. Prior to the share transfer, Mr. Victor Muller held, including through Tenaci and Investeringsmaatschappij Helvetia B.V., voting rights in Spyker Cars of approximately 34.3%. Following the transfer of the 1,295,711 listed ordinary shares to Dorwing Solution Limited (“Dorwing”), a special purpose company based in Cyprus with independent management and ownership, this combined holding has been reduced to approximately 26.8%. The agreement in relation to this transfer contains an option for the repurchase of the shares from Dorwing at the same price Dorwing paid for the shares. Any increase in the value of the shares will be for the benefit of Mr. Muller if the option is exercised. Dorwing’s shareholding gives it full and independent shareholder voting rights. The purpose of the share transfer was to break up the significant voting stake of Mr. Muller in Spyker Cars. As a result of the transfer, Mr. Muller does not have the obligation to make a public bid for all the shares in Spyker Cars, since his voting rights in Spyker Cars have been reduced to below 30%. Financial impact of Saab acquisition The size of Saab is very significant to the Group and will have a critical impact on the Group’s future financial performance and position. The Group has engaged an external valuator to support the company in performing the purchase price allocation in respect of the Saab acquisition. Due to the short time period available, the special circumstances under which the acquisition occurred and the complexity of this exercise, it is at this moment impracticable to provide further detailed information on the amounts to be recognized as of the acquisition date of the acquiree’s assets, liabilities and contingent liabilities, the amount of goodwill and the contribution of Saab to the company’s revenue and profit or loss. Not only the accounting policies and procedures will be affected by this acquisition but also the Group’s financial risk management objectives, policies and exposures as compared to the information provided in note 28. For further and more detailed information we refer to the extensive disclosure in the management board report. Joint venture with CATC Spyker Automobielen B.V. concluded a joint venture agreement with China Automobile Trading Co., Ltd., established at Beijing, China (“CATC”) per 19 March 2010, by which the parties agreed to establish an equity joint venture company for the marketing and sale of Spyker automobile products in mainland China. The business scope of the joint venture company shall be (whole)sale and retailing/distribution of Spyker cars and parts as well as the providing of services to distributors. CATC is a major car distributor in mainland China. The Group expects that the cooperation will strongly support car sales in China as from 2011. N accounting policies and estimates and the application of these policies and estimates. E S T Management Board members discussed the development, selection and disclosure of the Group’s critical Critical accounting judgements and estimates in applying the Group’s accounting policies M 27. Accounting estimates and judgements Certain critical accounting judgements and estimates in applying the Group’s accounting policies are described T Development cost: A E below. All qualifying expenses related to development cost are capitalized in certain categories, when the respective T of the expected technical and economic feasibility in close cooperation with the development department. S criteria are met. Management bases its judgment whether the respective criteria are met primarily on the study Amortization of these development cost are charged to the income statement with a fixed amount per sold car. The Group reviews assets for impairment annually. Assets subject to this review include intangible assets and property, plant and equipment totalling € 50.0 million at the 2009 balance sheet date (2008: € 44.0 million). In determining impairments, management makes significant judgements and estimates to determine if the N recoverable amount, based on future cash flows expected to be generated by those assets, is less than their carrying value. Determining cash flows requires the use of judgements and estimates that have been included in A C A Impairment of intangible assets and property, plant and equipment: I L See also Note 12. the Group’s strategic plans and long-range planning forecasts. The data necessary for the execution of the N revenue growth rates and profit margins. Additionally an assessment needs to be made for the discount rate to I be applied in these discounted cash flow calculations. Management bases itself in its forecasts as much as F impairment tests are based on management’s best estimates of future cash flows, which require estimating possible on external evidence, like industry specific study reports, opinions from external industry experts and strategic consultants. However, due to the unique activities of the Group and the niche market in which it operates significant management judgement is necessary. In Note 12 Intangible assets the assumptions have been described in more detail that were applied in the impairment test performed at the year-end carrying amount of the capitalized developments costs. Since the budget and projections relate to the future, actual results are likely to be different from the projected results because events and circumstances frequently do not occur as expected, and the differences may be material. Deferred tax assets The Group has significant tax loss carry forwards available, for which management has to assess to what extent it is probable that they will be realized. Although management is positive again about the future developments of the Group, it feels it only to be appropriate to recognize the deferred tax asset again once these expected developments have been sufficiently realized. 28. Financial risk management objectives and policies The followings section relating to financial risk management objectives and policies relate to the Spyker Group. The Group has mainly nominal financial assets such as trade receivables, trade payables and cash, which arise directly from its operations. It is and has been the Group’s policy in 2009 and 2008 that no trading in derivatives shall be undertaken. The main risks arising from the Group’s activities are accordingly foreign currency risk, 133 133 credit risk and liquidity risk. The Group’s long term financing is a mix of fixed and variable interest rates, with the Company thus being partly sheltered against changes in market interest rates. As LIBOR fluctuates over time, a decrease of 100 base points would result in lower interest payments amounting to € 51.6 thousand per annum, whereas an increase of 100 base points would result in higher interest payments of € 51.6 thousand per annum. The Group has via its available cash and existing facilities sufficiently secured the funding of its on-going operations. The funding of the planned (and substantial) investments in the development of the new models includes elements, such as cash generated from the sales of cars, which may vary from the present expectations. The Group will accordingly closely monitor the developments in its cash position and will, if and when needed, timely adjust the spending on development costs to ensure that the Group remains sufficiently liquid. Foreign currency risk The Group is, due to its international operations, subject to currency rate risks, most notably vis-a-vis the US dollar. The Group is well aware of this exposure and is presently reviewing measures to safeguard itself against foreign exchange exposure, such as purchasing and subcontracting in US dollar based countries. At year end 2009, the Group carried a US dollar exposure of $ 0.9 million at a EUR/USD exchange rate of 1.43. Continued weakening of the US dollar against the Euro would result in foreign exchange gains, whereas a strengthening of the US dollar against the Euro would result in foreign exchange losses. A 10% depreciation of the US dollar would therefore result in exchange loss approximately € 61 thousand, and would negatively impact Equity for a similar amount. A 10% appreciation of the US dollar would result in exchange gain of approximately € 61 thousand, and positively impact Equity for a similar amount. Credit Risk Given the nature of its products, The Group normally trades only with well recognized, wealthy parties. It is nevertheless the Group’s policy that all customers are subject to credit verification procedures. The Group’s exposure to bad debts is accordingly, under normal market conditions, minimal. Liquidity risk The Group monitors its risk to a shortage of funds using a liquidity planning tool. The Group has via its available cash and existing facilities sufficiently secured the funding of its on-going operations. The funding of the planned (and substantial) investments in the development of the new models includes elements, such as cash generated from the sales of cars, which may vary from the present expectations. The Group will accordingly closely monitor the developments in its cash position and will, if and when needed, timely adjust the spending on development costs to ensure that the Group remains sufficiently liquid. remaining period at the balance sheet to the contractual maturity date. N Between 1 Between 2 Over 1 year and 2 years and 5 years 5 years € (‘000) € (‘000) € (‘000) € (‘000) 39,112 11,295 4,380 0 2,951 372 308 0 M Less than E T S The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the E Borrowings T Interest A At 31 December 2009 Payables to participants S T Trade and other payables L Interest Payables to participants Trade and other payables I A 0 0 0 0 0 0 48,600 11,667 4,688 0 10,385 7,526 9,327 0 1,632 1,285 39 0 At 31 December 2008 Borrowings 256 0 0 0 7,989 0 0 0 20,262 8,811 9,366 0 N Capital management The primary objective of the Group’s capital management is to ensure that it obtains a sufficient solvency in A C 247 6,290 order to support its business and maximise shareholder value. To maintain or adjust the capital structure, the F I N Group may issue new shares. 29. Related parties Identity of related parties The Group has a related party relationship with: - its subsidiaries (group companies); - its directors, executive officers and supervisory board members (individuals); - shareholders of the company and certain third parties. All related party transactions are concluded at arms length basis against normal market conditions. Therefore the Group complies with best practice principles II.3-4 and III.6.3 of the Dutch Corporate Governance Code. Transactions with group companies Spyker Cars is the parent company of a group of companies. The interests in all its subsidiaries are directly and indirectly held by the company. Mr. V.R. Muller, CEO of the company, is one of the two directors of Spyker Automobielen B.V., Spyker Squadron B.V., Spyker Events & Branding B.V., Spyker of China Ltd and Spyker Cars UK Ltd. The director of Spyker of North America LLC is an UK citizen, residing in the USA. A variety of the company’s activities are done by its subsidiaries. Spyker Automobielen is set up to develop, produce and sell cars, Spyker Events & Branding is involved in events and merchandising and Spyker Squadron participates in races with Spyker racing cars. Spyker Cars, as the parent company of those subsidiaries, is responsible for managing the Spyker Group and is the owner of the Spyker trademark and the intellectual property rights (including the development of the cars) in the Spyker vehicles. Spyker Cars incurs various costs, mainly of a general nature, which (directly – or indirectly) are also attributable to the operations of its subsidiaries, such as automation, housing and financing. Spyker Cars 135 135 allocates these costs to the various entities within the Group as appropriate on a going forward basis. Spyker Automobielen has, at the request of the Group, been rendering services in connection with the development of the new cars. These services have been charged by Spyker Automobielen to Spyker Cars at a fixed hourly rate including labour and (Spyker Automobielen’s current) overhead. In addition, Spyker Automobielen has charged Spyker Cars for all external costs related to the development of cars. Moreover, Spyker Cars has charged Spyker Automobielen with a € 25,000 amortisation charge for each car sold. The transactions between group companies are eliminated from the consolidated financial statements. Transactions with individuals Remuneration Management Board There have been several changes within the Management Board. At the beginning of 2009, the Management Board consisted of a Chief Executive Officer (“CEO”), a Chief Financial Officer (“CFO”) and a Chief Operating Officer (“COO”). Mr. Roukens resigned as CFO of the company per 31 January and was succeeded by Mr. Go who started in March 2009. Mr. Liebregts resigned as COO as per 31 December. Mr. Muller, CEO of Spyker Cars, works for the company pursuant to a management contract between Spyker Cars and his management company. Mr. Go and Mr. Liebregts have concluded an employment contract. The contract with Mr. Muller is for an indefinite period of time and of Mr. Go for a period of four years, ending per the day of Spyker Cars’ Annual General Meeting of 2013. Mr. Roukens terminated his four year contract per 31 January 2009 and Mr. Liebregts terminated his contract per 31 December 2009. No severance payments have been made. The yearly management fee for Mr. Muller is € 240,000. The base remuneration of Mr. Go is € 180,000 per year. All members of the Management Board have been granted 59,782 option rights. Mr. Go has received a “Sign on” bonus of € 30,000 in 2009. The contract of Mr. Muller has a notice period of two months for both the company and Mr. Muller. The contract of Mr. Go contains a notice period of two months for himself and of four months for the company. The contract of Mr. Muller does not contain an arrangement regarding severance payments. The employment contract with Mr. Go contains a provision that severance payments will not exceed one year’s salary, unless this would be manifestly unreasonable in the circumstances. In addition to a fixed salary and the long-term option rights under the ESOP, the remuneration of the Management Board members includes a cash bonus linked to short term targets. The Supervisory Board set individual targets for each member of the Management Board, which related to the specific responsibilities of the respective members. The targets for 2009 were not met. No pension schemes have been set up for Mr. Muller. Mr. Go received a contribution of € 12,460 from the Group to build up a pension. Members of the statutory Management Board are compensated for the expenses regarding travelling and communication. Statutory Board Base Management Total cash Vested stock As a % of of Management salary 2009 V.R. Muller € - € - € 240,000 fee compensation € 240,000 options 2009 base salary none F.J.M. Liebregts € 178,890 € - € - € - 178,890 none A.A. Roukens € 22,778 € - € - - € 22,778 none - D.J.C.Y.S. Go € 135,405 € 30,000 € - € 165,405 none - Bonus 2009 The options expensed in 2009 for the members of the statutory Management Board amount to € 0. T management contract and therefore received a management fee. After Mr. Borsboom stepped down as Management Board member per 1 June 2008, he finalized his financial N S Before concluding an employment contract per 1 July 2008 Mr Liebregts worked for the Group on the basis of a management duties in the period hereafter on the basis of a management contract and therefore received a Base of Management salary 2008 E V.R. Muller € - € - € 200,000 € F.J.M. Liebregts € 90,000 € - € 76,406 A.A. Roukens € 135,000 € - € - R. Borsboom € € - € 64,314 58,333 Management Total cash Vested stock As a % of fee compensation options 2008 base salary 200,000 none - € 166,406 none - € 135,000 none - € 122,647 n.a. - Bonus 2008 S T A M Statutory Board T E management fee. The options expensed in 2008 for the members of the statutory Management Board amount to € 25,315. L A remuneration of € 20,000 per year and each of the members to a remuneration of € 15,000 per year. No other compensation, bonuses or options have been granted to the members of the Supervisory Board. 2009 2008 N V. Antonov 20,000 20,000 A J.B.Th. Hugenholtz 15,000 15,000 M. La Noce 15,000 15,000 N D. Apockinas 4,603 15,000 I M. Bondars 15,000 15,000 F C According to a resolution of the General Meeting of Shareholders in 2004, the chairman is entitled to a I Remuneration Supervisory Board Supervisory Board N. Stancikas 10,397 - - 4,375 J.H.M. Lindenbergh Remuneration of managers in key positions: Managers in key positions with Spyker Cars comprise the Management Board and members of the Management Team of Spyker Cars. Transactions with these individuals constitute related-party transactions. Remuneration of managers in key positions Fixed salary and management fee 2009 2008 € (‘000) € (‘000) 607 760 Bonus 30 0 Pensions and other remuneration components 12 30 649 790 Total Transactions with shareholders and certain third parties The Group has a related party relationship with the following shareholders and certain third parties: • Mr. V. Antonov, chairman of the Supervisory Board in 2009 and shareholder of Snoras Bank of Vilnius, Lithuania (Snoras). Snoras is shareholder and financier of the Group. During 2008 and 2009, Snoras provided several loans in the aggregate amount of € 57 million (2008: € 23.2 million). Reference is made to Note 20 Interest bearing borrowings. • Mr. V.R. Muller, CEO and shareholder of Investeringsmaatschappij Helvetia. This company is shareholder of Spyker Cars. In 2008 a shareholder loan to Spyker Cars was converted into share capital; 137 137 • J.B. Th. Hugenholtz , shareholder of Milestone Beheer B.V. and vice-chairman of the Supervisory Board in 2009. Milestone Beheer B.V. holds a share interest in the Group. In 2008 a shareholder loan to the Group was converted into share capital; • Mr. Button, managing director of Spyker of North America LLC, owns a transport company in the USA. This transport company executed several transportations for the Company in the USA, for example for auto shows; • Mr. Pesci; owner of Speedy Garage (the Spyker dealer for Switzerland) and Spyker of Milan, holds a share interest in the Group; • Mr. Schilte, shareholder (indirect) and director of Spyker of China Ltd; • Mr. Van der Laar, former shareholder of the Group and managing director of AHC Nederland B.V. from which the Group obtains most of its insurances. The related parties transactions can be summarized as follows: As at 31 December 2009 the related parties have a total balance of € 1.2 million to pay to the Group. Shareholders loans Sales of cars Purchase of cars Racing activities Operating expenses and charges including key management remuneration 2009 2008 € (‘000) € (‘000) 29,682 23,200 1,024 591 0 246 800 881 1,418 1,177 30. Financial instruments All financial instruments at balance sheet date qualify as loans and receivables or other financial liabilities and are measured at amortized cost. Company income statement for the year ended 31 December 2009 S 2009 € (‘000) Result after taxation -8,848 -11,441 Income from investments in subsidiaries after taxation -14,105 -13,326 Net result -22,953 -24,767 F I N A N C I A L S T A T E M E N T € (‘000) 2008 Company balance sheet at 31 December 2009 (before appropriation of the net result) Assets Note 139 139 31.12.2009 31.12.2008 € (‘000) € (‘000) Non-current assets Property, plant and equipment 1 4,629 7,604 Intangible assets 2 45,379 36,338 Investments in subsidiairies and associates 3 812 0 50,820 43,942 2,945 4,790 Total non-current assets Current assets Trade and other receivables Receivables from participants Receivable from group companies Cash and cash equivalents 493 166 12,548 13,901 700 31 Total current assets 16,686 18,888 Total assets 67,506 62,830 31.12.2009 31.12.2008 € (‘000) € (‘000) Shareholders’ equity and liabilities Shareholders’ equity Issued capital 633 623 Share premium 90,552 99,144 Legal reserves 45,250 36,016 Other reserves -110,869 -86,103 -22,953 -24,767 2,613 24,913 6,861 7,069 Interest-bearing borrowings 15,675 16,853 Total non-current liabilities 15,675 16,853 39,112 10,385 2,724 3,288 Unappropriated net result Total shareholders’ equity Provisions 4 Non-current liabilities Short-term liabilities Interest-bearing borrowings Trade and other payables Receivable from group companies 521 322 Total current liabilities 42,357 13,995 Total liabilities 58,032 30,848 Total shareholders’ equity and liabilities 67,506 62,830 General The company financial statements comprise the financial statement of the company only. N T S Notes to the company financial statements The company has prepared its company financial statements based in accordance with Dutch GAAP and the E opportunity offered in section 362-8 of the Dutch Civil Code, Book 2, Title 9, the company has drawn up its M financial reporting requirements included in Part 9 of Book 2 of the Netherlands Civil Code. Based on the company financial statements according to the same recognition and measurement principles as used in the E T to the consolidated financial statements. Investments in subsidiaries are carried at net asset value. T For those recognition and measurement principles reference is made to Note 2 ‘Significant accounting policies’ For additional information on items not explained further in the notes to the company balance sheet, reference is S accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union. A consolidated financial statements. The company has prepared its consolidated financial statements in made to the notes to the consolidated balance sheet. subsidiaries after taxation is the only item shown separately. F I N A N C I A L In accordance with Section 402, Book 2 of the Dutch Civil Code, in the income statement the result on The company’s financial statements are presented in Euros, rounded to the nearest thousand, unless stated otherwise. Notes to specific items of the company balance sheet and the company income statement 141 141 1. Property, plant and equipment 31 December 2009 At 1 January, net of accumulated depreciation Additions Disposals and retirements Depreciation charge for the year Impairment charges At 31 December, net of accumulated depreciation At 1 January: Cost Accumulated depreciation and impairment Net carrying amount At 31 December: Cost Accumulated depreciation and impairment Net carrying amount 31 December 2008 At 1 January, net of accumulated depreciation Additions Reclassificied to intangible assets Disposals and retirements Depreciation charge for the year At 31 December, net of accumulated depreciation At 1 January: Cost Accumulated depreciation and impairment Net carrying amount At 31 December: Cost Accumulated depreciation and impairment Net carrying amount Buildings € (‘000) Plant and equipment € (‘000) Prototypes, test models and demo’s € (‘000) Furniture, Racing fixtures and cars equipment € (‘000) € (‘000) 1,430 3,380 827 823 1,144 7,604 0 0 -425 0 0 -13 -160 -893 0 0 -58 -504 0 0 -399 0 112 0 -635 0 112 -13 -1,677 -1,397 1,005 2,314 265 424 621 4,629 1,900 3,942 1,823 1,529 4,360 13,554 -470 1,430 -562 3,380 -996 827 -706 823 -3,216 1,144 -5,950 7,604 1,900 3,828 1,729 1,382 4,445 13,285 -895 1,005 -1,514 2,314 -1,464 265 -958 424 -3,824 621 -8,656 4,629 Buildings € (‘000) Plant and equipment € (‘000) Prototypes, test models and demo’s € (‘000) Furniture, Racing fixtures and cars equipment € (‘000) € (‘000) Total € (‘000) 1,571 3,343 1,179 1,584 1,501 9,178 0 210 0 0 268 478 0 0 -141 0 0 -173 -255 0 -97 0 -644 -117 0 0 -625 -255 -644 -1,153 1,430 3,380 827 823 1,144 7,604 1,900 3,732 2,267 2,173 4,092 14,164 -329 1,571 -389 3,343 -1,088 1,179 -589 1,584 -2,591 1,501 -4,986 9,178 1,900 3,942 1,823 1,529 4,360 13,554 -470 1,430 -562 3,380 -996 827 -706 823 -3,216 1,144 -5,950 7,604 Total € (‘000) 31 December 2009 S M E N T 2. Intangible assets Development Patents and costs licenses Total € (‘000) € (‘000) € (‘000) 36,012 326 36,338 9,778 5 9,783 -600 -46 -646 -96 0 -96 45,094 285 45,379 40,447 Cost as at 1 January net of T Additions - internally developed A E accumulated amortization and impairment Amortization T accumulated amortization and impairment 39,987 460 Accumulated amortization and impairment -3,975 -134 -4,109 Net carrying amount 36,012 326 36,338 C Cost A At 1 January: I L At 31 December, net of S Impairment charges N 49,669 465 50,134 Accumulated amortization and impairment -4,575 -180 -4,755 Net carrying amount 45,094 285 45,379 Development Patents and F I N Cost A At 31 December: 31 December 2008 costs licenses Total € (‘000) € (‘000) € (‘000) 33,803 279 34,082 5,697 88 5,785 255 0 255 Cost as at 1 January net of accumulated amortization and impairment Additions - internally developed Reclassificafied from tangible assets Amortization -775 -41 -816 -2,968 0 -2,968 36,012 326 36,338 Cost 37,003 372 37,375 Accumulated amortization and impairment -3,200 -93 -3,293 Net carrying amount 33,803 279 34,082 39,987 460 40,447 Accumulated amortization and impairment -3,975 -134 -4,109 Net carrying amount 36,012 326 36,338 Impairment charges At 31 December, net of accumulated amortization and impairment At 1 January: At 31 December: Cost 143 143 3. Investments in subsidiaries and associates The item investments in subsidiaries and associates includes the following companies: Share in issued capital 2009 2008 € (‘000) € (‘000) Spyker Automobielen B.V. 100% 812 0 Spyker Squadron B.V. 100% 0 0 Spyker Events & Branding B.V. 100% 0 0 Spyker of North America LLC, USA 100% 0 0 Spyker Cars UK Ltd. 100% 0 0 Spyker of China Ltd. 51% 0 0 45% 0 0 0 0 Tenaci Engineering Pvt. Ltd. (associate) Except Spyker Automobielen B.V., all the other investments in subsidiaries have a negative net asset value, due to negative results up and until 2009. For this reason, these investments in subsidiaries and loans receivable are provided and a provision for the remaining deficit has been recorded. Share Net Equity Spyker Automobielen B.V. Spyker Squadron B.V. Spyker Events & Branding B.V. Spyker of North America LLC, USA Spyker Cars UK Ltd. Spyker of China Ltd. Tenaci Engineering Pvt. Ltd. Results from Net Equity in issued value as at capitalization Translation participating Re- value as at Book-value Loans as at capital 31-Dec-08 2009 reserve interests 31-Dec-09 receivable Provision 31-Dec-09 100% -29,443 100% -2,268 100% -35,146 100% -3,835 100% -81 51% -2,666 45% -92 39,666 0 0 0 0 0 0 0 0 0 114 -7 45 1 -9,411 -1,511 -982 -1,868 -4 -259 -71 812 -3,779 -36,128 -5,589 -92 -2,880 -162 0 3,779 36,128 0 85 1,664 112 0 0 0 5,589 7 1,216 50 812 0 0 0 0 0 0 -73,531 39,666 153 -14,106 -47,818 41,768 6,862 812 Recapitalization Spyker Automobielen The company decided to recapitalize its subsidiary Spyker Automobielen. This subsidiary had a significant amount of debt on its balance sheet which was contributed by the company, while the equity position of Spyker Automobielen was highly negative at year end 2008. During 2009 all of the debt of Spyker Automobielen towards Spyker Cars was converted into equity, resulting in a stronger balance sheet position for Spyker Automobielen. S T 4. Shareholders’ equity Issued Share Legal Other appropriated capital premium reserve reserves net result Total € (‘000) € (‘000) € (‘000) € (‘000) € (‘000) € (‘000) 623 99,144 36,016 -86,103 -24,767 24,913 Result for the year 0 0 0 0 -22,953 -22,953 Other comprehensive income 0 0 153 0 0 153 Total comprehensive income 0 0 153 0 -22,953 -22,800 Allocation of net result prior year 0 0 0 -24,767 24,767 0 Proceeds from new share issues 10 489 0 1 0 500 0 -9,081 9,081 0 0 0 10 -8,592 9,081 -24,766 24,767 500 633 90,552 45,250 -110,869 -22,953 2,613 Share Legal reserve Balance at 31 December 2009 N C I A L S T T Balance at 1 January 2009 A E M E N Un- A Legal Other appropriated premium reserve reserves net result Total € (‘000) € (‘000) € (‘000) € (‘000) € (‘000) € (‘000) 390 77,413 34,018 -14,858 -71,306 25,657 -24,767 F I capital N UnIssued Balance at 1 January 2008 Result for the year 0 0 0 0 -24,767 Other comprehensive income 0 0 -212 0 0 -212 Total comprehensive income 0 0 -212 0 -24,767 -24,979 Allocation of net result prior year 0 0 0 -71,306 71,306 0 Proceeds from new share issues 233 23,067 0 0 0 23,300 Costs of share issues 0 160 0 0 0 160 Legal reserve 0 -2,210 2,210 0 0 0 of convertible notes 0 714 0 0 0 714 Share based payments 0 0 0 61 0 61 233 21,731 2,210 -71,245 71,306 24,235 623 99,144 36,016 -86,103 -24,767 24,913 Recognition of equity component Balance at 31 December 2008 Issued share capital Spyker Cars’ issued share capital consists of ordinary shares, shares class A and one priority share. The nominal value of each share in Spyker Cars is € 0.04. Shares class A are registered shares and cannot be listed. Shares class A can, however, be converted into ordinary shares if the shareholder so requires by means of an application to that effect to the Management Board. 145 145 As per 31 December 2009, the authorized share capital of the company amounts to a sum of € 1,760,000 (2008: € 1,760,000), divided into 32,999,999 (2008: 32,999,999) ordinary shares, 11,000,000 shares class A (2008: 11,000,000) and one priority share, with a nominal value of € 0.04 each. Per 31 December 2009, 15,559,476 ordinary shares (2008: 10,662,210), 266,515 shares class A (2008: 4,910,265) and one priority share (2008: one) were issued and paid in full. During the year 2009, one share conversion took place, all as described in the “Information for Shareholders” chapter of the Annual Report. Share premium reserve In 2009, the new issue of 253,516 shares at an issue price of € 1.97 resulted in a share premium reserve addition of € 489 thousand. Shares class A are registered shares; these shares are not to be listed. Shares class A can, however, be converted into ordinary shares if the shareholder so requires by means of an application to that effect to the Management Board. The legal reserve has been charged against share premium reserve as other reserves were not sufficient. Cost of share issues represents an adjustment on fees charged in connection with the 2007 Snoras financing. Legal reserve Pursuant to Section 365(2) of Book 2 of the Netherlands Civil Code, a legally-required reserve is formed for capitalized development costs to the amount of € 45.2 million (2008: € 36.0 million) and for foreign currency translations to the amount of € 156 thousand (2008: € 3 thousand). 5. Staff and remuneration of Supervisory Board and Management Board During 2009, Spyker Cars employed at average 27 full-time equivalents (2008: 25). The remuneration of the individual members of the Management Board and the members of the Supervisory Board of Spyker Cars is explained in the Notes Renumeration and Related Parties. 6. Guarantees Guarantees Spyker Cars together with its subsidiaries Spyker Automobielen B.V., Spyker Squadron B.V. and Spyker Events & Branding B.V., constitutes a single tax entity for corporate tax. With respect to the VAT purposes, Spyker Cars together with its subsidiaries Spyker Automobielen B.V. and Spyker Squadron B.V. constitute a single tax entity. All companies within this single tax entity are jointly and severally liable for corporate tax debts and VAT debts stemming from the relevant tax entities. 7. Notes to the audit fees In the financial year, the following fees of the audit firm Ernst & Young Accountants LLP were invoiced to the company and its subsidiaries, all this as referred to in Book 2, Section 382a of the Dutch Civil Code: 31 December 2009 Ernst & Young € (‘000) Statutory audit of annual accounts, including the audit of the financial statements and other statutory audits of subsidiaries and other consolidated entities: - 2008 380 - 2007 44 Other non-audit services Total 31 December 2008 4 428 Ernst & Young € (‘000) Statutory audit of annual accounts, including the audit of the financial statements and other statutory audits of subsidiaries and other consolidated entities: - 2008 65 - 2007 365 Other non-audit services Total 8. Subseguent events Subsequent events are indicated in the notes to the consolidated financial statements. January 21, 2010: Spyker C8 Aileron (chassis number 255) during testdrives with the USA press in Scottsdale, Arizona, USA 11 441 147 147 Signing of the financial statements The members of the Management Board have signed the financial statements in this annual report pursuant to their statutory obligations under art. 2:101(2) Dutch Civil Code and art. 5:25c(2) (c) Financial Market Supervision Act. To the best of their knowledge, the financial statements give a true and fair value of the assets, liabilities, financial position and profit or loss of the company and its subsidiaries in accordance with the International Financial Reporting Standards (IFRS) as adopted with the European Union as well as in accordance with Title 9 Book 2 of the Dutch Civil Code, and the Management Board’s report gives a true and fair view of the position and performance of the business of the company and its subsidiaries, and reflects the significant risks related to the business. The members of our Supervisory Board have signed the financial statements in this annual report pursuant to their statutory obligations under art 2:101(2) Dutch Civil Code. Zeewolde, 7 April 2010 Management Board: Supervisory Board: V.R. Muller J.B.Th. Hugenholtz Chief Executive Officer chairman D.J.C.Y.S. Go M. La Noce Chief Financial Officer vice-chairman Statutory rules concerning appropriation of result S N T Additional information M E Article 29 of Spyker Cars’ articles of association includes the following provisions regarding result appropriation: 1. The Management Board shall annually, with the approval of the Supervisory Board, determine which part of the result - the positive balance on the income statement - is added to the reserves. dividend is distributed on the Priority Share of six percent (6%) of the nominal paid up amount. 3. Any remaining result after application of paragraph 1 and 2 of this article is available to the General Meeting. A T E 2. From the results remaining after transfer to the reserves in accordance with the previous paragraph, a S T Statutory rules concerning issue of new shares and acquisition by Spyker Cars of its shares. New shares may be issued pursuant to a resolution of the Management Board. The authority to issue new shares has been delegated to the Management Board by resolution of the General Meeting of Shareholders for Management Board with approval of the Supervisory Board. The resolution by the General Meeting of Shareholders to delegate the issue-authority to a different body than the Management Board can only be taken N upon proposal of the Management Board with approval of the Supervisory Board. Spyker may acquire fully paid shares at any time for no consideration, or, subject to certain provisions of Dutch A C A Meeting of Shareholders or by the Management Board upon delegation, can only be taken upon proposal of the I L a period of 18 months, ending on 22 October 2010. A resolution to issue new shares, whether by the General law and the articles of association, if (i) Spyker Cars’ shareholders equity less the payment required to make the N (ii) Spyker Cars and its subsidiaries would thereafter not hold shares or hold a pledge with an aggregate nominal I value exceeding 10% of its issued share capital. F acquisition, does not fall below the sum of called-up and paid-up share capital and any statutory reserves, and An acquisition of shares may be effected by a resolution of the Management Board, subject to approval of the Supervisory Board. Other than for no consideration, shares including the Priority Share may only be acquired subject to a resolution of the Management Board, authorized thereto by the General Meeting of Shareholders. Such authorization may apply for a maximum period of 18 months and must specify the number of shares that may be acquired, the manner in which shares may be acquired and the price limits within which shares may be acquired. On 23 April 2009, the General Meeting of Shareholders has authorized the Management Board to acquire the maximum number of shares by law, for a period of 18 months against a purchase price between the nominal value per share, as a minimum, and certain average price of the shares as quoted at Eurolist by Euronext Amsterdam, as a maximum. No such authority is required for the acquisition by Spyker Cars of fully paid shares for the purpose of transferring these shares to Spyker Cars’ employees or employees of a group company. Any shares held by Spyker Cars may not be voted on or counted for quorum purposes. Proposed allocation of the result for the financial year 2009 A proposal will be made to allocate the loss for 2009 to the other reserves (deficit). This proposal has not yet been reflected in the balance sheet. Appointment of members of the Management Board and Supervisory Board. Members of the Management Board and members of the Supervisory Board are appointed by the General Meeting of Shareholders. The holder of the Priority Share has nomination rights, see hereunder. Priority Share 149 149 The Priority Share was transferred on 21 December 2007 from the foundation Stichting Prioriteit Spyker Cars (“Stichting Prioriteit”) to UAB “SNORO turto valdymas” (Snoras). Snoras transferred the Priority Share to Spyker Cars on 22 February 2010. The Priority Share will be cancelled during the Annual General Meeting of Shareholders to be held on 22 April 2010. The Priority Shareholder has the following rights and privileges: (i) the right to make a proposal to nominate members of the Management Board and the Supervisory Board; (ii) the right to make a proposal to suspend or dismiss members of the Management Board and the Supervisory Board; (iii) the right to propose to amend the Articles of Association and to dissolve Spyker Cars; (iv) the right to convene an Extraordinary Meeting of Shareholders; (v) prior approval of whole or partial transfer of control over company activities and the entering into or amendment of agreements between the company on the one hand, and shareholders, members of the Management Board or members of the Supervisory Board, as individuals, on the other hand, or between Spyker Cars and legal entities over which the aforementioned persons have direct or indirect control; (vi) the right to receive, before any other shareholders, a dividend of 6% of the nominal amount of the Priority Share of € 0.04. On 24 February 2010, Spyker Cars’ articles of association were amended and a new article 42 was introduced, stating: “If, and as long the voting rights attached to the Priority Share cannot be exercised, the rights attributed to the Priority in these articles of association, will be exercised by the Supervisory Board.” Auditor’s report S N T To: the Shareholders of Spyker Cars N.V. M E Report on the financial statements We have audited the accompanying financial statements 2009 of Spyker Cars N.V., Zeewolde as set out on E financial statements. The consolidated financial statements comprise the consolidated statement of financial T position as at 31 December 2009, the consolidated income statement, consolidated statements of A pages 79 to 147. The financial statements consist of the consolidated financial statements and the company comprehensive income, consolidated statements of changes in equity and consolidated cash flow statement for T information. The company financial statements comprise the company balance sheet as at 31 December 2009, S the year then ended, and notes comprising a summary of significant accounting policies and other explanatory the company income statement for the year then ended and the notes. with International Financial Reporting Standards as adopted by the European Union and with Part 9 of Book 2 of the Netherlands Civil Code, and for the preparation of the management board report in accordance with Part 9 of Book 2 of the Netherlands Civil Code. This responsibility includes: designing, implementing and maintaining N material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; A and making accounting estimates that are reasonable in the circumstances. N Auditor’s responsibility I internal control relevant to the preparation and fair presentation of the financial statements that are free from Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our F C A Management is responsible for the preparation and fair presentation of the financial statements in accordance I L Management Board’s responsibility audit in accordance with Dutch law. This law requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion with respect to the consolidated financial statements 151 151 In our opinion, the consolidated financial statements give a true and fair view of the financial position of Spyker Cars N.V. as at 31 December 2009, and of its result and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union and with Part 9 of Book 2 of the Netherlands Civil Code. Opinion with respect to the company financial statements In our opinion, the company financial statements give a true and fair view of the financial position of Spyker Cars N.V. as at 31 December 2009, and of its result for the year then ended in accordance with Part 9 of Book 2 of the Netherlands Civil Code. Emphasis of Matter We draw attention to note 2 to the financial statements, which describes the continuity of Spyker Cars N.V. and in which it is noted that there are a number of uncertainties regarding the funding of the Group, which implies that if adverse developments do occur, the continuity of Spyker Cars N.V. may become uncertain. The availability of sufficient funding is also one of the critical assumptions in performing the impairment tests as disclosed in note 12 Intangible assets. Our opinion is not qualified in respect of this matter. Report on other legal and regulatory requirements Pursuant to the legal requirement under 2:393 sub 5 part f of the Netherlands Civil Code, we report, to the extent of our competence, that the management board report is consistent with the financial statements as required by 2:391 sub 4 of the Netherlands Civil Code. Rotterdam, 7 April 2010 Ernst & Young Accountants LLP Signed by J.J.J. Sluijter F I N A N C I A L S T A T E M E N T S 153 153 Organisation Chart Spyker Cars NV Spyker of North America LLC 100% 100% Spyker Automobielen BV Spyker Cars UK Ltd 100% 100% Spyker Squadron BV Spyker of China Ltd 51% 100% Spyker Events & Branding BV Tenaci Engineering Pvt Ltd 45% 100% Saab GB Ltd 99,99% SAAB Automobile AB 100% Saab Automobile Property AB 100% Saab Automobile Parts AB 100% Saab Automobile Tools AB 100% SAAB Deutschland GmbH 100% Saab Cars North America, Inc. 100% 100% Saab Automobile Powertrain AB General Motors Nordiska AB (dormant) Autohaus SAAB GmbH This Annual Report is available online at www.spykercars.com under Investors, Financial. 100% Saab Canada Inc. (dormant) January 21, 2010: Spyker C8 Aileron (chassis number 255) during testdrives with the USA press in Scottsdale, Arizona, USA Design: Mediabrein Concept Spyker is a public company traded at Euronext Amsterdam tickersymbol SPYKR. Edisonweg 2 3899 AZ Zeewolde The Netherlands Tel:+31 36 535 8787 Fax:+31 36 535 8780 E-mail: [email protected] www.spykerworld.com Photography: Stefan Ammerlaan, Barry Hathaway and Saab Automobile AB SPYKER CARS N.V.