2001 ANNUAL REPORT FINANCIAL REPORT chapitre 1° anglais 15/05/02 15:06 Page 1 FINANCIAL REPORT FOR 2001 Reference document Approved by the Board of Directors meeting of February 26, 2002. Table of contents 01 I. Group profile 02-13 Background 02-03 Ownership structure and stockmarket performance 04-06 Shareholder information 07 Senior management and corporate governance 08-11 Legal information 12-13 II. Renault in 2001 14-43 Financial results 14-17 Cash flows 18-19 Financial situation 20 Research and development 20-21 Environment 22-23 Workforce and human resources 24-29 Renault-Nissan Alliance: A plan to step up development of the bi-national group 30-35 Strategy 36-41 Strategic presence in trucks 42 Outlook 43 III. Review of operations 44-55 Automobile Division 44-52 Finance Division 53-55 IV. Consolidated financial statements 56-103 Auditors’ report on the consolidated financial statements 56-65 Notes to the consolidated financial statements 66-103 V. Information on the principal subsidiaries 104-107 VI. Resolutions 108-114 Extraordinary General Meeting of March 28, 2002 108-110 Joint General Meeting of April 26, 2002 111-114 1 chapitre 1° anglais 15/05/02 15:06 Page 2 GROUP PROFILE BACKGROUND It was just over one hundred years ago, in 1898, when Louis Renault year, Renault acquired a new brand by taking a 51% stake in produced the first "Type A" voiturette. The same year, he set up Romanian carmaker Dacia. Société Renault Frères to manufacture motor vehicles, taking In 2000, this expansion continued, with Renault increasing its stake advantage of patents such as the first direct-drive transmission. in Dacia to 80.1% and acquiring a new brand – Samsung Motors Based in the Paris suburb of Billancourt, the company achieved in Korea. international renown through its success in motor sports, and initially specialized in the construction of passenger cars and taxis. During In January 2001, the agreement signed with Volvo in July 2000 the First World War, it produced substantial volumes of trucks, light came into effect, making Renault the principal shareholder in the tanks and aircraft engines. world's second-largest truck manufacturing company. Work In 1922, having expanded strongly in the passenger car and towards the formation of a Renault-Nissan bi-national group entered commercial vehicle markets, Renault became a limited company. a new phase on October 30, with the announcement of a plan to Establishing numerous production centers in France and abroad, step up the development of the Alliance. The plan involves: Renault gradually emerged as the French market leader. a) strengthening equity ties,to reinforce links between the two companies and create a community of interests. In January 1945, the company was nationalized and renamed b) setting up a common strategic command structure. "Régie Nationale des Usines Renault" and concentrated on Renault also increased its stake in Dacia to 92.7%. 2001 saw the producing the 4 CV. market launch of Laguna II from January, New Clio in the first half- Through to the mid 1980s, Renault followed a strategy of diversification year and Avantime in November. In 2001, Renault also unveiled in the industrial, financial and service sectors, while at the same Vel Satis, its top-range sedan which will go on sale in March 2002. time growing its industrial and commercial activities internationally. The Renault 5,which remains one of the group's most popular Renault's strategy models, was launched in 1972. But in 1984, the company ran into Renault is implementing a strategy of profitable growth with three financial difficulties. As a result, it concentrated on restructuring and areas of focus: refocusing on core activities, and returned to profit in 1987. • Develop a brand identity based on innovative products and In 1990, Renault became a limited company once again. In the services that provide complete customer satisfaction; same year, it signed an agreement for close cooperation with the Volvo group. And in 1991 the two groups linked their car and truck • Become the most competitive carmaker in our markets in terms businesses via cross-shareholdings. This arrangement was unwound of quality, costs and delivery times; after plans to merge the two groups were shelved in late 1993. • Increase international scope in order to become a major player One year later, the French government opened Renault to outside in automotive development throughout the world. capital, a first step towards privatization,which took place in July 1996. A breakdown of the strategy is provided in Chapter II, pages 36-41. From the first voiturette created by Louis Renault in 1898 to the latest arrival, Vel Satis, Renault has been the source of many ground- Structure of the Renault group breaking concepts in automotive history: the 4 CV in 1946; the Renault is the parent company of the Renault group. It is the principal Renault 4 in 1961; the Renault 16, with its rear hatch and modular operating entity for the passenger car and light commercial interior, in 1965; the Renault 5 with its polyester bumpers in 1972; vehicle businesses in France(a). Under the agreement signed with turbo-poweredvehicles starting in 1980; the Espace in 1984; Twingo in 1993; and Mégane Scénic in 1996 are just some of the models Volvo in July 2000 and which came into effect on January 2, 2001, that have contributed to the company's tradition of innovation. truck operations will no longer be shown in the accounts. Renault's 1999 marked the start of a new era in Renault's history with the equity interest in the new unit – 20% of all shares issued by AB Volvo signing of an alliance with Nissan, on March 27 in Tokyo. In the same – will be accounted for under the equity method. Group Profile 2001 Renault Financial Report chapitre 1° anglais 15/05/02 15:06 Page 3 In future, the group's activities will be organized into two main divisions: and services. It is also responsible for managing the group's cash funds. • The Automobile Division (93.1% of revenues, or d33.8 billion in 2001) is responsible for designing, manufacturing and marketing In the future, information about Irisbus (1.9% of consolidated group passenger cars and light commercial vehicles. It also handles revenues or d0.7 billion) will be contained under the item "Other" in related activities such as agricultural machinery; the financial statements. (a) In principle, to implement the plan to strengthen the Alliance which was announced on • The Finance Division (5% of revenues, or d1.8 billion in 2001) is a October 30, 2001, Renault will need to be reorganized. This is described in greater detail in Chapter II, pages 30-35. support division with financial and commercial businesses, bringing together the subsidiaries responsible for sales financing Principal consolidated data, 1997-2001 (d million) 1997 1998 1999 2000 2001 Revenues 31,696 37,187 37,592 40,175 36,351(5) Operating margin(1) 563 1,920 2,205 2,022 473 Operating income 309 1,652 1,484 1,703 704 Pre-tax income 624 1,699 1,160 1,723 1,020 Group net income 829 1,337 540 1,074 953 Renault net income 827 1,349 534 1,080 1,051 Earnings per share(2) 3.47 5.64 2.23 4.5 4.38 Share capital 914 914 914 914 923 Shareholders’ equity 6,695 7,861 8,185 9,652 10,051 Total assets 35,082 38,125 46,422 51,975 50,129 Dividends(3) 0.53 0.76225 0.76225 0.91 0.92(3) Cash flow 2,104 3,098 3,314 3,412 1,688 Investment 2,483 2,272 7,500 3,657 3,314 Net financial indebtedness of industrial and commercial activities(4) 637 (1,612) 2,700 4,793 3,928 Total workforce (number of persons) 141,315 138,321 159,608 166,114 140,417 (1) Corresponds to operating income before "other operating income and expenses". (2) In euro. (3) In accordance with the proposal of the Board of Directors subject to the decision of the Annual General Meeting of April 26, 2002. (4) New definition in 1999 including Renault's redeemable shares. The figures for 1997 and 1998 have been restated accordingly. Excluding redeemable shares, net financial indebtedness would be f2,382 million in 1999 and f4,475 million in 2000 and f3,603 million in 2001. (5) On a consistent basis with 2001, 2000 revenues come to f34,268 million. 3 chapitre 1° anglais 15/05/02 15:06 Page 4 OWNERSHIP STRUCTURE AND STOCKMARKET PERFORMANCE Principal shareholders Pursuant to the authorization granted to the Board of Directors on Pursuant to articles L 225-209 et seq. of the Commercial Code, the October 23, 2001 by the Joint General Meeting of Shareholders of Joint General Meeting of Shareholders of May 10, 2001 authorized May 10, 2001(a),a restricted share issue for Renault group the company to trade in its own shares, with a view, in particular, to employees only, was implemented. In this way, Renault's capital achieving the following (in order of priority): to transfer some or all was increased to d922,768,855.50 (nine hundred and twenty two of the shares thus acquired to employees and senior executives of million seven hundred and sixty eight thousand eight hundred and the company and the group, under the conditions and according fifty five euro and fifty cents) made up of 242,196,550 shares each to the procedures set down by law and/or to stabilize the share having a par value of d3.81.